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Commitments and Contingencies
3 Months Ended
Mar. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Ariosa Litigation
In December 2011, the Company was named as a defendant in a complaint filed by plaintiff Aria Diagnostics, Inc., in the U.S. District Court for the Northern District of California. Since the complaint was filed, Aria changed its name to Ariosa Diagnostics, Inc., or Ariosa. In the complaint, the plaintiff seeks a judicial declaration that no activities related to the plaintiff's noninvasive, prenatal test using cell-free DNA circulating in the blood of a pregnant woman do or will infringe any claim of U.S Patent No. 6,258,540 entitled Noninvasive Prenatal Diagnosis, or the '540 Patent, which was exclusively in-licensed from Isis prior to September 30, 2014 when the Company purchased the patent from Isis. In March 2012, the Company filed an answer to the complaint and asserted counterclaims that Ariosa is infringing the '540 Patent and seeking unspecified damages and injunctive relief. In March 2012, Ariosa responded to the Company's answer and counterclaims and asserted affirmative defenses including invalidity of the '540 Patent under U.S. patent laws. In March 2012, the Company filed a motion against Ariosa for preliminary injunctive relief. On July 5, 2012, the Court denied the Company's motion for preliminary injunctive relief and on July 16, 2012 the Company filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC) from the order denying the preliminary injunction motion. On August 9, 2013, the CAFC vacated and remanded the District Court’s decision, ruling that the District Court incorrectly interpreted the claims of the ‘540 patent and improperly balanced factors regarding issuance of a preliminary injunction. On August 16, 2013, Ariosa filed a motion for summary judgment in favor of Ariosa on the Company's counterclaim for patent infringement on the ground that the claims of the ‘540 Patent are invalid because they are not drawn to patent-eligible subject matter under the patent code. On October 16, 2013, the District Court issued its order on the interpretation of the claims of the patent. On October 30, 2013, the District Court issued its order granting Ariosa’s motion for summary judgment, finding that the’540 Patent is invalid. The Company disagrees with the Order and has appealed the decision to the U.S. Court of Appeals for the Federal Circuit. The Company intends to vigorously defend against the judicial declarations sought by Ariosa in its complaint and intends to vigorously pursue the Company's claims against Ariosa for damages and injunctive relief. However, the Company cannot predict the outcome of this matter.
Ariosa Inter Partes Review
In addition, Ariosa has sought to invalidate the ‘540 Patent through a petition for inter parties review ("IPR") before the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office (“USPTO”).  Trial of the IPR was held before the PTAB on January 24, 2014. The PTAB issued a Decision in the IPR on September 2, 2014 invalidating some claims but upholding the validity of other claims. Both the Company and Ariosa requested reconsideration of the PTAB decision. On March 24, 2015, the PTAB denied both parties’ requests for reconsideration. Ariosa has filed a notice of intention to appeal the PTAB decision to the U.S. Court of Appeals for the Federal Circuit and we will file a notice to appeal as well.
Natera Litigation
In January 2012, the Company was named as a defendant in a complaint filed by plaintiff Natera, a Delaware corporation, in the U.S. District Court for the Northern District of California. In the complaint, the plaintiff seeks a judicial declaration that (i) activities related to the plaintiff's noninvasive, prenatal paternity test do not directly or indirectly infringe any claim of the '540 Patent, and (ii) one or more claims of the '540 Patent are invalid for failure to comply with the requirements of the patent laws of the U.S. In April 2012, the Company filed an answer to the complaint and asserted counterclaims that Natera and DNA Diagnostics Center, Inc., or DDC, are infringing the '540 Patent based on their activities relating to noninvasive prenatal paternity testing and noninvasive prenatal aneuploidy testing and seeking unspecified damages and injunctive relief. On October 16, 2013, the District Court issued its order on the interpretation of the patent claims. Many of the ‘540 Patent claims asserted against Natera are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and the Company and Natera stipulated to final judgment on the '540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit, which has consolidated the Ariosa, Natera, and Verinata case appeals. The Company intends to vigorously defend against the judicial declarations sought by Natera in its complaint and intends to vigorously pursue the Company’s claims against Natera for damages and injunctive relief. However, the Company cannot predict the outcome of this matter.
Verinata and Stanford Litigation
In February 2012, the Company was named as defendants in a complaint filed by plaintiffs Verinata Health, Inc., or Verinata, and The Board of Trustees of the Leland Stanford Junior University, or Stanford, in the U.S. District Court for the Northern District of California. Verinata was acquired by Illumina, Inc. in 2013. In the complaint (i) Verinata seeks a judicial declaration that activities related to its noninvasive prenatal test using cell-free DNA circulating in the blood of a pregnant woman do not directly or indirectly infringe any claim of the '540 Patent, which at the time was exclusively in-licensed from Isis but has since been purchased from Isis, (ii) Verinata seeks a judicial declaration that each claim of the '540 Patent is invalid for failure to comply with the requirements of the patent laws of the U.S., and (iii) Verinata and Stanford allege that the Company, by performing its noninvasive prenatal MaterniT21 test, has and continues to directly infringe U.S. Patents which have been exclusively licensed to Verinata by Stanford and seek unspecified damages. In March 2012, the Company filed an answer to the complaint and asserted counterclaims that Verinata is infringing the '540 Patent and seeking unspecified damages and injunctive relief. In June 2012, plaintiffs Verinata and Stanford amended their complaint and allege that the Company, by performing its noninvasive prenatal MaterniT21 PLUS test, has and continues to directly infringe on a patent which has been exclusively licensed to Verinata by Stanford and seek unspecified damages. In July 2012, the Company filed an answer to the complaint.
On October 16, 2013, the District Court issued its order on the interpretation. Many of the ‘540 Patent claims asserted against Verinata are the same claims that were invalidated by the same District Court on October 30, 2013 in the litigation involving Ariosa, set forth above, and the Company and Verinata stipulated to final judgment on the ‘540 patent claims in this case and have appealed the patent invalidity determination to the U.S. Court of Appeals for the Federal Circuit. The District Court set trial beginning February 23, 2015. On December 2, 2014, the Company and Verinata reached a settlement that resolved litigation between them, and all litigation between the Company and Verinata related to these patents is now dismissed. As part of that settlement the patents and pending applications, are now pooled under a Pooled Patents Agreement between the Company and Illumina (who acquired Verinata). The Company and Verinata are now licensees to the patent rights that are pooled under the Pooled Patents Agreement.
Verinata Patent Interference I
On March 12, 2013, the USPTO declared a patent interference between Verinata's patent, which Verinata had asserted against us in the litigation, and the Company's then in-licensed (from CUHK) pending patent application. Two related patent interferences were declared by the USPTO between patent applications related to the patent and application. On April 7, 2014, the USPTO concluded the interferences, ruling that Verinata’s patent lacked sufficient disclosure to meet the written description requirement for the patent claims, and entered judgment canceling all four of the patent claims in the interference and the involved claims of the related patent application. Verinata has appealed the USPTO’s decision to the U.S. District Court for the Northern District of California. The District Court had set trial beginning February 23, 2015 on the appeal but has stayed the trial indefinitely. On December 2, 2014, the involved patents and applications were added to the patent pool. The Company is not a party to the District Court proceedings.
Verinata Patent Interference II
On May 3, 2013, the USPTO declared a patent interference between Verinata's patent, which Verinata has asserted against us in the litigation, and the Company's then in-licensed (from CUHK) pending patent application. On April 7, 2014, the USPTO ruled that the pending patent application has sufficient disclosure to meet the written description requirement for the patent claims and ordered the interference to proceed to the priority phase to determine which inventors were the first to invent the subject matter of the interference and entitled to a patent on that subject matter. The Company also separately challenged the validity of Verinata’s Patent in an inter partes review proceeding before the USPTO. The USPTO recently issued a decision in the Interference and the patent IPR upholding the validity of the patent. Pursuant to the terms of its settlement with Verinata, the Company will not appeal these decisions.
EU Opposition Proceedings
On September 29, 2014, and October 1, 2014, two unknown third parties initiated Opposition Proceedings against a European Patent. This patent was previously in-licensed by the Company from CUHK but has since been added to the patent pool under the Pooled Patents Agreement. The Company has rights to this patent under the patent pool but no longer controls efforts to defend this patent in the Opposition Proceedings.
Premaitha Litigation
On March 13, 2015, Illumina and its wholly-owned subsidiary Verinata filed a patent infringement lawsuit against Premaitha Health (UK). The lawsuit was filed in the High Court of Justice, Chancery Division, Patents Court in the United Kingdom. The lawsuit alleges that Premaitha’s Iona test for fetal aneuploidy infringes two pooled patents: European Patent No. EP 0 994 963 B2 (the “ ‘963 B2 Patent”) and European Patent No. EP 1 981 995 B1. The ‘963 B2 Patent is owned by the Company. The Company is named as a plaintiff and is participating in the lawsuit as the owner of the ‘963 B2 Patent. In its Defense and Counterclaim filed on April 29, 2015, Premaitha Health denies infringement and alleges that both asserted patents are invalid.
Other
In addition, from time to time, the Company may be involved in litigation relating to employment, intellectual property and contractual matters as well as claims arising out of the Company's operations in the normal course of business, including claims related to the Company's products, tests, and services, including LDT services. These other matters are, in the opinion of management, immaterial with respect to the Company's consolidated financial position, liquidity, or results of operations.
Claim estimates that are probable and can be reasonably estimated are reflected as liabilities. Because of the uncertainties related to the Company's pending litigation, investigations, inquiries or claims, management is currently unable to predict the ultimate outcome of any litigation, investigation, inquiry or claim, determine whether a liability has been incurred, or make an estimate regarding the possible loss or range of loss that could result from an unfavorable outcome. It is reasonably possible that some of the matters, which are pending or may be asserted, could be decided unfavorably to us. An adverse ruling or outcome in any lawsuit involving us could materially affect the Company's business, liquidity, consolidated financial position or results of operations, the ability to sell one or more of the Company's products or could result in additional competition. In view of the unpredictable nature of such matters, the Company cannot provide any assurances regarding the outcome of any litigation, investigation, inquiry or claim to which the Company is a party or the impact on us of an adverse ruling of such matters.