By Randall Osborne
The already complicated fray between companies over genomics-related patents took a new twist as Affymetrix Inc. filed a patent infringement lawsuit against its joint-venture partner Incyte Pharmaceuticals Inc. and another firm, Synteni Inc., which Incyte is acquiring.
Edward Hurwitz, Affymetrix vice president and chief financial officer, said the lawsuit was strictly a strategic move, and his company hopes to keep — and possibly expand — its relationship with Incyte.
"[The lawsuit] is part of a larger chess game," Hurwitz said. "It was well thought out, and it was our only option."
Incyte, for its part, was "a bit puzzled" by the lawsuit, said Denise Gilbert, chief financial officer. "We understand there has been no contact, in the past few years since the [Affymetrix] patent was issued, with Synteni [regarding alleged infringement]," Gilbert said. "Given our relationship, we don't know what the need was to file a lawsuit."
Affymetrix, of Santa Clara, Calif., alleges Incyte and Synteni are infringing on a patent that is part of Affymetrix's 25-patent portfolio covering aspects of its GeneChip system.
The system consists of disposable DNA probe arrays with gene sequences on a chip, plus instruments to process the probe arrays and software to analyze and manage information.
Incyte, which sells genetic data to companies for use in drug discovery, entered an alliance with Affymetrix in November 1996. The partnership, designed to analyze gene expression in diseased tissues, paired Affymetrix's GeneChip system with Incyte's core database of human gene sequences, called LifeSeq. (See BioWorld Today, Nov. 20, 1996, p. 1.)
Last month, Palo Alto, Calif.-based Incyte began its takeover of Synteni, of Fremont, Calif., in an $80 million deal that includes Synteni's Gene Expression Microarray, which analyzes thousands of genes arrayed on a glass surface by probing with fluorescently tagged DNA or RNA from a biological sample. (See BioWorld Today, Dec. 30, 1997, p. 1.)
At issue in Affymetrix's lawsuit is a patent that covers arrays of 1,000 or more different pieces of DNA in a square centimeter of area, said Hurwitz.
"When [Incyte] purchased Synteni, and went out and made statements about their business strategy, they talked about putting presynthesized assays onto chips and selling the chips to customers," Hurwitz said. "It got incredibly close to what our core business is all about."
Hurwitz said Synteni, which Incyte is still in the process of taking over, was not accused of infringement earlier because the company, "as a stand-alone entity, was much less of a commercial threat."
The takeover is expected to close at the end of this month.
Affymetrix's lawsuit comes in the wake of its forming the Genetic Analysis Technology Consortium (GATC) with Sunnyvale, Calif.-based Molecular Dynamics Inc.
The idea was to create standards so that researchers can more easily process arrays made from multiple sources — thus making life less complicated for scientists, and helping to keep companies out of the courtroom. (See BioWorld Today, Dec. 8, 1997, p. 1.)
Hurwitz said he still wants to avoid a lengthy litigation. For that reason, the lawsuit was filed in U.S. District Court for Delaware, where the matter is likely to be heard in 12 to 15 months, rather than in California, where cases are backed up for three to five years.
One way to avoid extended legal dispute would be to model a licensing agreement between Incyte and Affymetrix after the deal struck between Affymetrix and Molecular Dynamics, Hurwitz said.
"They made arrays that conformed to the standards [set by GATC] and we were happy to license them under those terms," Hurwitz said. Molecular Dynamics remains the only other member of GTAC.
Gilbert said Incyte is unclear about the lawsuit's specifics. "It's a pretty basic complaint," she said. "It's hard to know what they are targeting."
But the microarray technologies offered by Synteni and those offered by Affymetrix "are quite different," Gilbert said. "It was our intent that they would coexist."
Hurwitz agreed the technologies are not the same, but said the lawsuit was necessary.
"We think the [Synteni] chips will not have the high value or quantitative information that ours will, but we feel we have intellectual property and we deserve to get a piece of that," Hurwitz said.
Affymetrix has 70 patents related to its technology still pending, Hurwitz noted, and the lawsuit could include more than is now apparent. "This is the tip of the iceberg," he said.
Negotiation, Not Litigation, Favored
Gilbert said neither company will benefit by tying the technology up in court. "We feel it's important for both of us to deal with these issues in forums other than lawsuits," she said. "We meet with them all the time as part of the ongoing collaboration."
They will meet again shortly, Hurwitz said.
"You can't really sit down and have a frank discussion with them ahead of time, and say, 'If you really want to do this, you have to get a license from us,'" Hurwitz said. "You open up a Pandora's box before you file the lawsuit, and lose some of the advantage you might have had."
Hurwitz said the case is "not sour grapes. We didn't walk in and find our spouse in bed with another man. It's big boys in business. You have to take a stand, and send a message."
Affymetrix faces a lawsuit from Hyseq Inc., of Sunnyvale, Calif., over gene sequencing by hybridization, in which Hyseq alleges Affymetrix infringed on its patent. (See BioWorld Today, Dec. 16, 1997, p. 1.)
Affymetrix's stock (NASDAQ:AFFX) closed Wednesday at $34.375, up $3. Incyte's shares (NASDAQ:INCY) closed at $40.875, down $0.125. *