IP Law Daily 10X Genomics permanently enjoined from selling infringing genetic testing products
Thursday, July 25, 2019

10X Genomics permanently enjoined from selling infringing genetic testing products

By John W. Scanlan, J.D.

Because the infringing company was a direct competitor, the patent holders would be irreparably harmed without an injunction from having to compete with products incorporating and infringing their patents.

A company holding three patents on genetic testing products was entitled to a permanent injunction prohibiting a competitor found to have infringed those patents from making or selling the infringing products and requiring the competitor to provide a copy of the injunction to its customers, the U.S. District Court for the District of Delaware ruled in deciding post-trial motions following a $24 million jury verdict. While the plaintiffs also were entitled to supplemental damages and interest, they were denied enhanced damages and attorney fees (Bio-Rad Laboratories Inc. v. 10X Genomics, Inc., July 24, 2019, Andrews, R.).

RainDance Technologies, Inc. (later replaced by Bio-Rad Laboratories Inc.) and the University of Chicago brought patent infringement claims against 10X Genomics, Inc. By the time of trial, there were three patents at issue: Nos. 8,889,083 (the ’083 patent), 8,304,193 (the ’193 patent), and 8,328,407 (the ’407 patent). The jury found the patents to be valid and that 10X had willfully infringed them, and awarded Bio-Rad and the university $23.9 million in damages. The court then denied post-trial motions by 10X for judgment as a matter of law, a new trial, or remittitur. Before the court in the present proceeding were the plaintiffs’ post-trial motions for a permanent injunction, attorney fees, enhanced damages, supplemental damages, pre-judgment interest, and post-judgment interest.

Permanent injunction. The plaintiffs were entitled to a permanent injunction. The court first determined that Bio-Rad and 10X were direct competitors in the market for products performing genetic analysis on a droplet platform. 10X argued that they were not direct competitors because it had five accused product lines but only its single cell product competed with Bio-Rad, and asserted that customers viewed its product as being superior to Bio-Rad’s. However, its single cell product, which accounted for over 80 percent of 10X’s sales, did compete with Bio-Rad’s ddSEQ product, and each of 10X’s products were variants of the same infringing process. The plaintiffs would be irreparably harmed without an injunction because they would be forced to complete directly with products that infringed their own patents, and 10X had established a strong market share lead over Bio-Rad. Contrary to 10X’s argument, Bio-Rad was not required to show that the patented features drove increased demand for 10X products, but only that the features impacted consumers’ decisions to purchase them. The patented technology was the foundation of 10X’s droplet products and the company had failed with other methods before adopting the droplet technology.

Furthermore, the court found that damages would not properly compensate the plaintiffs. 10X argued that damages based on quantifiable license fees found in internal Bio-Rad documents would be adequate, but the patents were never licensed. The court observed that the infringement coincided with the development of the droplet platform and had allowed 10X to use the technology to capture and define the market, and damages would not compensate the plaintiffs for the loss of market share.

The balance of hardships favored granting the injunction or were at least neutral, the court said. 10X argued that an injunction would devastate it because it would be prohibited from selling any of its current products. However, 10X was not entitled to keep infringing simply because it had succeeded commercially in marketing the infringing products, the court reasoned. Even though Bio-Rad had $2 billion in sales of over 9,000 products in 2017, and its ddSEQ product accounted for only 0.2 percent of its sales, the company had spent more than $500 million to develop its droplet technology. The court noted that 10X had testified that it was pursuing design-around products for some time, and based upon counsel’s representations, the court believed that these products should be ready or at least nearly ready to go to market.

Finally, the public interest weighed in favor of the injunction. There is a general public interest in upholding patent rights. The plaintiffs stated that 10X’s current customers would not be prohibited from continuing to use their existing systems if 10X paid damages, and the public would not be harmed by the injunction because 10X stated that they would be releasing new design-around products soon and Bio-Rad stated that it would soon release superior products.

Injunction scope/start date. 10X was enjoined from making or selling the accused products and those no more than colorably different, and from otherwise infringing the patents at issue. 10X still will be able to sell consumables for use with existing systems at a 15 percent royalty rate. 10X also will be required to provide a copy of the injunction to all customers. The notice provision was not unduly burdensome in that 10X maintains customer lists and can make reasonable efforts to give them notice. The court declined the plaintiffs’ request to require 10X to provide notice of the injunction to future customers to whom it intends to sell the accused products because 10X will not be permitted to make any sales of these products to future customers. Although 10X argued that it should be able to sell products that do not compete against the ddSEQ product, each of its accused products uses the same infringing droplet system.

The court refused 10X’s request to stay the injunction because the plaintiffs have shown that they would be irreparably injured without an injunction and 10X is not likely to succeed on the merits on appeal. As 10X stated in January 2019 that its design-around products would ready for sale in April 2019, the court found that a sunset period was unnecessary. The effective date was delayed for two weeks in the event that there were any expedited appeals related to the denial of the stay.

Attorney fees. The court declined to award the plaintiffs attorney fees because it found after considering the totality of the circumstances that the case was not an exceptional one. The fact that 10X was found to have willfully infringed the patents was not sufficient alone. 10X’s invalidity and non-infringement defenses were not frivolous, with the court observing that the plaintiffs had not moved for summary judgment on either of them. Contrary to the plaintiff’s argument that 10X had no non-infringement defenses, 10X had presented non-infringement arguments for every accused product and asserted patent. The defenses presented by 10X were not unreasonable. The court also found that 10X had not engaged in litigation misconduct; a violation of a protective order was not done in bad faith, and the fact that the court ruled against 10X several times was an indication that 10X—like the plaintiffs—had engaged in "zealous advocacy."

Damages. The plaintiffs were not entitled to enhanced damages because the court did not find the facts of the case egregious. Considering the nine factors from the Federal Circuit’s decision in Read Corp. v. Portec, Inc., the court found that the balance weighed against enhanced damages despite the finding of willful infringement. However, as the jury’s award of damages covered sales made through July 1, 2018, the plaintiffs could receive supplemental damages for sales made from that date until the November 13, 2018 date of the judgment, based upon the 15 percent royalty rate.

This case is No. 15-cv-152-RGA.

Attorneys: Brian E. Farnan (Farnan LLP) and Edward R. Reines (Weil, Gotshal & Manges LLP) for Bio-Rad Laboratories, Inc., and University of Chicago. Frederick L. Cottrell, III (Richards, Layton & Finger, PA) and E. Joshua Rosenkranz (Orrick, Herrington & Sutcliffe LLP) for 10X Genomics Inc.

Companies: Bio-Rad Laboratories, Inc.; 10X Genomics Inc.

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