IP Law Daily Ariosa Diagnostics fails to set aside $27M patent infringement verdict in prenatal screening case
Monday, July 23, 2018

Ariosa Diagnostics fails to set aside $27M patent infringement verdict in prenatal screening case

By Joseph Arshawsky, J.D.

The federal district court in San Francisco has let stand a jury’s patent infringement verdict and $27 million damage award against prenatal testing company Ariosa Diagnostics, Inc., in its post licensing dispute with patent owners Verinata Health, Inc., and Illumina, Inc. Ariosa’s renewed motions for judgment as a matter of law and a new trial were denied, as was Verinata’s motion for a permanent injunction. Ariosa’s motion as to express licensing was denied based on the court’s interpretation of the license terms. Assignor estoppel also barred Ariosa from challenging the validity of the patents-in-suit (Verinata Health, Inc. v. Ariosa Diagnostics, Inc., July 19, 2018, Illston, S.).

Plaintiff Verinata Health develops and offers non-invasive tests (such as the verifi® prenatal test) for the early identification of fetal chromosomal abnormalities. Plaintiff Illumina, Inc. develops, manufactures, and markets life science tools and integrated systems for large-scale analysis of DNA. Defendant Ariosa is a molecular diagnostics company that researches, evaluates, and develops non-invasive prenatal tests for chromosomal abnormalities in a fetus. This consolidated patent infringement action concerns the following patents: U.S. Patent Nos. 8,318,430 ("the ’430 patent") and 7,955,794 ("the ’794 patent"). Verinata owns the ’430 patent, which is directed to methods for non-invasive prenatal screening of fetal chromosomal abnormalities. Illumina owns the ’794 patent, which issued in June 2011 and is directed to methods for simultaneously detecting multiple target nucleic acids in a sample. In January 2012, Ariosa and Illumina entered into a three-year Sale and Supply Agreement ("SSA"), under which Illumina agreed to supply specific consumables, hardware, and software to Ariosa. The SSA provided Ariosa with a non-exclusive license to Illumina’s "Core IP Rights in Goods" in the "Customer Field of Use." Ariosa asserted a counterclaim for breach of contract. On January 25, 2018, the jury returned a verdict, which found that the ’794 and ’430 patents were valid and infringed by Ariosa; Ariosa did not have an express license to the ’794 patent under the SSA; and Illumina did not breach the SSA by suing Ariosa. The jury awarded plaintiffs approximately $27 million in damages, and the court entered judgment. The instant post-trial motions were granted in part and denied in part, as follows.

Express license and breach of the SSA. The trial testimony of witnesses who were parties to the SSA negotiations presented conflicting evidence, rendering the factual dispute proper for a jury’s consideration. "Accordingly, because this trial testimony is relevant to interpreting the SSA so as to give effect to the mutual intention of the parties in forming and executing the SSA, the jury’s verdict will stand. Defendant’s motion is denied." Trial testimony evidenced Illumina’s expressed intent to license solely the sequencer and not the library prep universe. Illumina’s testimony made clear that in its view, the SSA defined Core IP as related to the product being purchased (i.e., the sequencer), not Core IP in other products. "Accordingly, the Court properly submitted the question of whether the ’794 patent fell within ‘Core IP Rights in Goods’ under the SSA to the jury." Ariosa’s motion on express licensing was denied.

Invalidity of the ’794 and ’430 patents. Ariosa argued that at least the clear weight of evidence was against the jury’s findings that the ’794 patent was not invalid as anticipated by U.S. Patent Application No. 09/333,110 ("Straus") under 35 U.S.C. § 102, and that the ’430 patent was not invalid for lack of enablement under Section 112.

Anticipation of the ’794 patent by Straus. As a threshold matter, Illumina argued that Ariosa was barred from challenging the ’794 patent under the doctrine of assignor estoppel because Drs. Stuelpnagel and Oliphant were inventors of the ’794 patent, they assigned their rights to the patent to Illumina, and they were in privity with Ariosa. The court agreed with Illumina. However, even if assignor estoppel did not bar Ariosa from challenging the validity of the ’794 patent, the court found that a reasonable jury could find Ariosa did not prove by clear and convincing evidence that Straus anticipated the ’794 patent. Regardless, assignor estoppel precluded Ariosa from challenging the ’794 patent. Accordingly, the court denied Ariosa’s motion for judgment as a matter of law, or for a new trial, on its defenses.

Enablement of the ’430 patent. Ariosa argued the evidence at trial showed that the ’430 patent did not meet the enablement requirement because the patent fails to disclose an algorithm for "determining the presence or absence of a fetal aneuploidy" in the context of a targeted sequencing approach as claimed. However, a reasonable jury could have weighed the facts presented at trial to provide substantial evidence supporting its finding that Ariosa failed to show, by clear and convincing evidence, that the ’430 patent was not enabled. The court also found that the jury could weigh the conflicting testimonies to provide substantial evidence supporting its verdict. Ariosa’s motion on invalidity was denied.

Non-infringement. Ariosa moved for judgment as a matter of law, or for a new trial, on non-infringement on the grounds that plaintiffs failed to meet their burden to prove by a preponderance of the evidence that Harmony V1 and V2 perform each step of the asserted claims of the ’794 patent, or that Harmony V1 performs each step of the asserted claims of the ’430 patent. The court upheld the jury’s finding that the Harmony V2 infringes steps 1(a) and 1(b) of the ’794 patent, based on expert testimony founded upon scientific theory. In view of trial testimony, the court found the jury’s verdict should also not be disturbed as to the finding that the Harmony V2 infringes steps 1(f) and 1(g) of the ’794 patent as well. This motion was denied.

The Harmony V1 performs steps 1(a) and 1(b) of the ’794 patent in the claimed order. The evidence presented at trial was sufficient to support the jury’s finding of infringement since the simultaneous addition of the solid support, probes, and target sequences in Harmony V1 did not prevent steps 1(a) and 1(b) from occurring in the order specified by the court. Ariosa argued that no reasonable juror could find that Harmony V1 performs step 1(f) of the ’430 patent because Harmony V1 does not determine the presence or absence of a fetal aneuploidy using "enumerated sequence reads" or a "reference chromosome." Here, the court found that there was at least conflicting evidence properly before the jury, and there was substantial evidence to support the verdict. The claims of the ’430 patent require only that enumerated sequence reads be used to determine the presence or absence of fetal aneuploidy, and the use of such reads from "a" reference chromosome. The claims do not say the enumerated sequence reads cannot be transformed or normalized, and do not exclude using the test chromosome "in the denominator" as argued by Ariosa.

Damages. Illumina’s expert calculated $104.5 million in damages, while Ariosa’s expert calculated $3.3 million. The court said that it was clear the jury did not wholesale accept the theory of Illumina’s damages expert, given that that the jury only awarded approximately $27 million of the $104 million that the plaintiffs requested. The court found that there was substantial evidence to support the jury’s verdict that Harmony V2 infringed the ’794 patent. The court rejected Ariosa’s efforts to apply the "de minimis infringement" argument, because the infringements were for commercial sales.

Owing to the lack of irreparable harm and concerns for the public interest, the court denied plaintiffs’ motion for a permanent injunction.

This case is No. 3:12-cv-05501-SI.

Attorneys: Derek C. Walter (Weil, Gotshal & Manges LLP) for Verinata Health, Inc. and Illumina, Inc. David Isaac Gindler (Irell & Manella LLP) for Ariosa Diagnostics, Inc. Keith Leonard Slenkovich (Wilmer Cutler Pickering Hale & Dorr LLP) for Roche Molecular Systems, Inc.

Companies: Verinata Health, Inc.; Illumina, Inc.; Ariosa Diagnostics, Inc.; Roche Molecular Systems, Inc.

MainStory: TopStory Patent CaliforniaNews

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