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Insight & Intelligence™ : Mar 15, 2012

Filings Postponed in Promega v. Life Tech as Parties Try to Settle

Last month a jury awarded Promega $52 million in damages related to firm’s short tandem repeat technology.
  • Alex Philippidis

Lawyers for both sides in the Promega et. al. v. Life Technologies et. al. have agreed to postpone post-trial filings from today to next month. The companies are trying to settle their patent infringement case before filings are made, with discussions beginning today.

A jury last month awarded $52 million in damages to Promega three months after the U.S. District Court for the Western District of Wisconsin issued a summary judgment upholding Promega’s patents for short tandem repeat (STR) technology. The court found that Life Technologies infringed on those patents through the sale of its own STR kits.

The jury also ruled that Life Tech’s infringement was willful. That decision allows U.S. District Judge Barbara B. Crabb to triple the size of the already sizeable damages. Life Tech responded publicly February 29 by recording a $56 million charge against fourth-quarter 2011 earnings and lowering its Q4 and full-year 2011 results. For all of last year, on a GAAP basis, net income was lowered 8.5% to $377.834 million. The firm recorded $377.858 million in 2010. “The company does not expect this verdict to have a material impact on its business going forward,” Life Tech said in a March 1 statement.

More quietly since the jury verdict, Life Tech has moved to settle with Promega, according to the latest court filing. “The parties have diligently sought to reach a stipulation and agreement concerning an appropriate injunction related to sales of certain products. To that end, and in an effort to address resolution of all matters, senior officers of the parties are meeting in Madison, Wisconsin, beginning Thursday, March 15,” attorneys for Promega and co-plaintiffs as well as Life Tech and co-defendants wrote to Judge Crabb on March 12.

“The parties have met at length and have begun the process of conversion of STR purchasers consistent with the jury verdict and the Court’s holdings,” said Promega lawyer James R. Troupis of Troupis Law Office and Kristine Edde Johnson of the law firm Parsons Behle & Latimer.

The Defense

Life Technologies now has a little over two weeks, until April 2, to file post-trial arguments. Promega’s date for filing a response is April 19, and Life Tech’s reply deadline is April 30.

Life Tech's defense thus far has stated that:

  • Promega sold its technology within industry segments outside of a 2006 cross-licensing agreement with Life Tech without raising objections.
  • Promega accepted royalty payments from Life Tech despite alleging that it had infringed on Promega’s patents dating back to 2000.
  • It would have systematically recorded data on how customers used the STR kits had it known that Promega might assert that some sales were outside the scope of the cross-licensing agreement.
  • It had not infringed on Promega’s patents as a result of what it called misleading conduct by Promega.

“Life devoted resources in efforts that have now been determined by the Court to be outside the scope of the license and hence might incur damages, when Life could instead have devoted those resources to its core STR business of forensics and paternity,” Life Tech argued. “Once Promega initiated this suit, Life chose not to execute on marketing plans in the nonforensics and nonpaternity fields, despite investments in terms of market research and of resources in terms of employee time spent developing this plan.” Life Tech will still be able to sell STR kits for the forensics and paternity fields covered by the 2006 license.

Life Tech argued that Promega’s actions met the definition of “equitable estoppel,” the legal doctrine under which Promega would be barred from arguing infringement based on its own behavior. The firm also said that Promega acted unreasonably and inexcusably by delaying its lawsuit against Life Tech—“the defense of laches,” in legal terminology.

Promega sued Life Tech in May 2010, alleging that it infringed on five patents. Promega said it made the discovery while investigating claims that it owed more than $50 million in unpaid royalties, more than 20 times what it previously paid, under a 1996 license agreement with Research Genetics over one of the patents. Research Genetics later became Invitrogen, which merged with Applied Biosystems and changed its name to Life Tech. Promega also accused Life Tech of breaching its rights under the 1996 agreement, of engaging in “economic duress” against it, of breaching the 2006 agreement, and of unjust enrichment.

The patents protect technologies used in Life Tech’s AmpFISTR® COfiler®, AmpFISTR Profiler®, AmpFISTR Identifiler®, and AmpFISTR Green™ PCR amplification kits, according to Promega.

Court Findings

Promega’s STR technology is used in forensics and paternity testing as well as genetic research, cell line authentication, bone marrow transplantation monitoring, forensic training, and various types of cancer analysis. The 2006 license agreement gave Life Tech the right to make, use, sell, offer to sell, or import the STR kits in two fields: paternity determinations as well as to identify individuals; and use in or preparation for legal proceedings, including ongoing training of forensic laboratory employees and population studies undertaken to increase the accuracy of DNA matches.

“I have determined that some of the uses of the kits sold by defendants are not permitted under that license agreement because those uses are outside the particular fields,” Judge Crabb said. She noted uses including chimerism, classifying molar specimens, cell line authentication, determination of fetal sex, cancer analysis, genetic research, maternal cell contamination, sample tracking, and noncasework related forensic applications such as general research or teaching/training of people not employed in a forensics lab.

A jury ruled that Life Tech and co-defendants Invitrogen and Applied Biosystems generated more than $707.618 million in total sales between Aug 2006 and January 31 of this year. All those sales were made in the U.S. After calculating that the licensing agreement permitted $636.856 million in STR kit sales, the jury subtracted that number from the total sales to conclude that about $70.762 million in sales were impermissible. Of that figure, the jury concluded, $52.010 million constituted profit lost by Promega as a result of Life Tech’s sales.

“They’ve done a pretty good job, as near as I can figure, of tying up this fairly narrow area, but one that is clearly valuable,” Thomas Moga, a partner in the Intellectual Property section of Shook Hardy & Bacon, told GEN.

How valuable? “It’s absolutely one of our most important technologies. It makes up a significant minority of our sales and profits,” Promega general counsel Craig Christianson told the Wisconsin State Journal.

All the more reason why Promega went to the length it did to fight Life Tech in court. The $52 million judgment represents as much as 17% of the company’s 2011 annual revenue of over $300 million. It is also why Promega is in an enviable enough position that Life Tech, facing the possibility of more than $150 million in damages, opted wisely to settle the case.