Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies

Commitments and Contingencies

8.    Commitments and Contingencies

Legal Proceedings

From time to time, the Company is involved in disputes, litigation, and other legal actions, including those with respect to intellectual property, employment, testing and other matters. Such actions may include allegations of negligence, products/professional liability or other similar legal claims, and could involve claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. The Company is aggressively defending and/or prosecuting its current litigation matters, but cannot provide any assurance as to the ultimate outcome or that an adverse resolution would not have a material adverse effect on its financial condition and results of operations. There are many uncertainties associated with any litigation and these actions or other third party claims against the Company, or by the Company against third parties, may cause the Company to incur costly litigation and/or substantial settlement charges. In addition, the resolution of any intellectual property litigation may require the Company to make royalty payments, which could adversely affect gross margins in future periods. If this were to occur, the Company's business, financial condition, results of operations, and cash flows could be adversely affected.

The Company assesses legal contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. When evaluating legal contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against it may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of its potential liability. During the periods presented, the Company has not recorded any accrual for loss contingencies associated with such legal proceedings, determined that an unfavorable outcome is probable or reasonably possible, or determined that the amount or range of any possible loss is reasonably estimable.

Intellectual Property Litigation Matters.

In March 2018, Illumina, Inc., or Illumina, filed a lawsuit (the ’831 lawsuit) against the Company in the United States District Court for the Northern District of California, alleging that the Company’s Panorama test infringes certain claims of U.S. Patent No. 9,493,831 (the ’831 patent) and seeking, among other relief, damages or other monetary relief including costs and pre- and post-judgment interest, treble damages, injunctive relief, attorneys’ fees and costs. In August 2018, the Company filed a counterclaim against Illumina, alleging that certain of Illumina’s NIPT tests infringe on the Company’s U.S. Patent No. 8,682,592 (the ’592 patent) and seeking, among other relief, damages or other monetary relief including costs and pre- and post-judgment interest, treble damages, injunctive relief, attorneys’ fees and costs (together with the ‘831 lawsuit, the “Illumina Litigation”). In May 2020, the parties settled the Illumina Litigation pursuant to which all claims in the Illumina Litigation, including compulsory counterclaims, relating to NIPT and PGS/PGD activities occurring before the date of such settlement were resolved and dismissed. Separately, on December 11, 2020, the United States Patent and Trademark Office issued a final written decision affirming the validity of all claims challenged by Illumina in its inter partes review petition filed in June 2019. Illumina has affirmatively waived its right to appeal this decision, leaving the previously challenged claims of the ‘592 patent valid and fully enforceable.

The Company is involved in patent litigation against CareDx, Inc., or CareDx, in the United States District Court for the District of Delaware (“CareDx’s Patent Case”). CareDx alleges, in a complaint filed on March 26, 2019 and amended on March 23, 2020, that the Company infringed three patents. The complaint seeks unspecified damages and injunctive relief. The Company has also alleged that CareDx infringes two of Natera’s patents, seeking unspecified damages and injunctive relief. The Court has set a trial date of April 25, 2022. Natera is also opposing a European patent held by CareDx, with oral proceedings scheduled for May 11, 2021.

The Company is also the subject of a lawsuit filed by CareDx against the Company on April 10, 2019 in the United States District Court for the District of Delaware, alleging false advertising, trademark disparagement, unfair competition, and unfair or deceptive trade practices based on statements describing studies that concern the Company’s technology and CareDx’s technology (“CareDx’s Advertising Case”). The complaint seeks unspecified damages and injunctive relief. On May 30, 2019, the Company filed a motion to dismiss the entirety of CareDx’s Advertising Case for failure to state a claim. On February 7, 2020, CareDx filed an amended complaint withdrawing its trademark disparagement claim. On February 18, 2020, the Company filed a counterclaim against CareDx in the United States District Court for the District of Delaware, alleging false advertising, unfair competition and deceptive trade practices and seeking unspecified damages and injunctive relief.  On December 2, 2020 the parties cross-moved for partial summary judgment.  

The Company has filed suit against ArcherDX, Inc., or ArcherDX, in the United States District Court for the District of Delaware, alleging, in complaints filed on January 27, 2020, April 15, 2020 and August 6, 2020, that certain ArcherDX DNA oncology products infringe four of Natera’s patents.  Natera is seeking monetary damages and injunctive relief. On June 4, 2020, ArcherDX filed a motion to dismiss aspects of the Company’s case, including to invalidate several of Natera’s asserted patents. That motion was denied in its entirety on October 2, 2020. The cases were consolidated on September 25, 2020. On January 12, 2021, Company filed a second amended complaint naming an additional Archer DX entity, ArcherDx LLC, and Invitae Corp. as defendants. The second amended complaint seeks unspecified monetary damages and injunctive relief.

The Company is the subject of a lawsuit filed against it by Ravgen, Inc. on June 1, 2020 in the United States District Court for the Western District of Texas, alleging infringement of two Ravgen patents. The complaint seeks monetary damages and injunctive relief. Trial is tentatively set for December 13, 2021.

The Company filed suit against Progenity, Inc., or Progenity, in the United States District Court for the Western District of Texas on June 17, 2020 and in the United States District Court for the Northern District of Texas on June 19, 2020, in each case alleging that Progenity’s NIPT test infringes six of Natera’s patents. The complaints seek treble damages and injunctive relief. On or about July 2, 2020, Progenity filed suit against the Company in the United States District Court for the Southern District of California, seeking declaratory judgment of non-infringement of Natera’s asserted patents. Progenity has petitioned the Patent Trial and Appeal Board of the United States Patent and Trademark Office for inter partes review of Natera’s asserted patents.

On October 6, 2020, the Company filed suit against Genosity Inc., or Genosity, in the United States District Court for the District of Delaware, alleging that various Genosity oncology products infringe a Natera patent. The complaint seeks unspecified monetary damages and injunctive relief.

On January 20, 2021, the Company filed suit against Inivata, Inc. and Inivata Ltd. (collectively “Inivata”) in the United States District Court for the District of Delaware, alleging that various Inivata oncology products infringe two Natera patents. The complaint seeks unspecified monetary damages and injunctive relief.

Other Litigation Matters.

On or about August 13, 2019, a suit was filed against the Company in the Circuit Court of Cook County, Illinois by a patient alleging claims relating to a discordant test result and seeking monetary damages. 

On March 15, 2019, a purported class action lawsuit was filed against the Company in the United States District Court for the Northern District of California, alleging that the plaintiff received an unauthorized text message to her cellular telephone in violation of the Telephone Consumer Protection Act. Among other relief, the complaint sought statutory and other damages, injunctive relief, attorneys’ fees, and costs. The case was dismissed by stipulation of the parties effective November 2, 2020.

Director and Officer Indemnifications

As permitted under Delaware law, and as set forth in the Company’s Certificate of Incorporation and its Bylaws, the Company indemnifies its directors, executive officers, other officers, employees and other agents for certain events or occurrences that may arise while in such capacity. The maximum potential amount of future payments the Company could be required to make under this indemnification is unlimited; however, the Company has insurance policies that may limit its exposure and may enable it to recover a portion of any future amounts paid. Assuming the applicability of coverage, the willingness of the insurer to assume coverage, and subject to certain retention, loss limits and other policy provisions, the Company believes any obligations under this indemnification would not be material, other than an initial $2.5 million for securities related claims. However, no assurances can be given that the covering insurers will not attempt to dispute the validity, applicability, or amount of coverage without expensive litigation against these insurers, in which case the Company may incur substantial liabilities as a result of these indemnification obligations.

Third-Party Payer Reimbursement Audits

From time to time, the Company receives recoupment requests from third-party payers for alleged overpayments. The Company disagrees with the contentions of pending requests and/or has recorded an accrual when a refund is deemed to be probable and estimable for the alleged overpayments.

Contractual Commitments

The following table sets forth the material contractual commitments as of December 31, 2020 with a remaining term of at least one year:

Party	Total Commitments		Expiry Date
		(in thousands)
Laboratory instruments supplier	$	3,490	December 2021
Material suppliers		17,280	June 2026
Application service providers		39,425	January 2024
Gene sequencing reagents and kits provider		135	April 2021
Software development provider		4,000	December 2024
Other material suppliers		11,690	Various
		76,020