No Arbitration for Biotechs’ Patent Feud

SAN FRANCISCO (CN) - A company that sued a former business partner for infringing prenatal test patents cannot compel arbitration in a breach of contract counterclaim, a federal judge ruled Monday.

Illumina Inc. first sued Ariosa Diagnostics Inc. in April 2014, claiming Ariosa's non-invasive Harmony prenatal test for Down syndrome infringed its patents.

Both parties had entered into a sales and supply agreement in January 2012 in which, Ariosa claims, Illumina granted it an express or limited license for one of the disputed patents.

Ariosa contends that agreement forbids Illumina from suing it over infringement claims for that particular patent, and that Illumina breached the contract by filing suit.

Illumina, in turn, pointed to another clause in the contract stating that both parties must submit to arbitration to settle any contract disputes.

U.S. District Judge Susan Illston found Ariosa's claims "clearly relate to issues of patent infringement" and therefore fall outside the provisions of the agreement's arbitration clause.

"Because Ariosa's breach counterclaims unambiguously relate to issues of patent infringement, the counterclaims are outside of the scope of the arbitration agreement," Illston wrote in the Aug. 31 ruling.

Illumina had previously appealed the court's denial of its motion to dismiss the counterclaim, but the Ninth Circuit declined to hear the matter due to lack of jurisdiction this past June.

The judge also denied both parties' motions to seal parts of documents and exhibits recently submitted to the court. Illston scolded both parties for repeatedly failing to meet the "narrowly tailoring requirement" in their requests to seal documents from the public.

"This deficiency is especially troubling given that the parties have filed dozens of motions to seal in this action and related actions, and have been reminded of their failure to comply with the narrow tailoring requirement on many occasions," Illston wrote.

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