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Bio-Rad Laboratories, Inc. v. 10X Genomics Inc.

United States District Court, D. Delaware

July 24, 2019

BIO-RAD LABORATORIES INC. and THE UNIVERSITY OF CHICAGO, Plaintiffs,
v.
10X GENOMICS, INC., Defendant.

          Brian E. Farnan, Michael J. Farnan, FARNAN LLP, Wilmington, DE; Edward R. Reines, Derek C. Walter, Amanda Branch, Christopher S. Lavin, WEIL, GOTSHAL & MANGES LLP, Redwood Shores, CA; Robert T. Vlasis III, WEIL, GOTSHAL & MANGES LLP, Washington, DC. Attorneys for Plaintiffs.

          Frederick L. Cottrell, III, Jason J. Rawnsley, Alexandra M. Ewing, RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; E. Joshua Rosenkranz, Melanie L. Bostwick, Elizabeth R. Moulton, ORRICK HERRTNGTON & SUTCLIFFE LLP, New York, NY; Matthew Powers, Azra Hadzimenmedovic, Robert Gerrity, TENSEGRITY LAW GROUP LLP, Redwood Shores, CA; David I. Gindler, Alan J. Heinrich, Lauren N. Drake, Elizabeth C. Tuan, IRELL & MANELLA LLP, Los Angeles, CA. Attorneys for Defendant.

          MEMORANDUM OPINION

          ANDREWS, U.S. DISTRICT JUDGE.

         Presently before the Court is Plaintiffs' post-trial motion (D.I. 512). Plaintiffs seek a permanent injunction, attorneys' fees, enhanced damages, supplemental damages, and pre- and post-judgment interest. (Id.). I have reviewed the parties' briefing and the related amicus curiae submission from the Broad Institute, Inc. (D.I. 513, 524, 536, 522). For the following reasons, Plaintiffs' motion is GRANTED with respect to the permanent injunction, supplemental damages, and pre- and post-judgment interest, and DENIED with respect to the attorneys' fees and enhanced damages.

         I. BACKGROUND

         On February 12, 2015, RainDance Technologies, Inc. and the University of Chicago filed suit against 10X Genomics, Inc. alleging infringement of several patents. On May 30, 2017, Bio-Rad Laboratories Inc. substituted for RainDance. (D.I. 180). I held a jury trial from November 5 to 13, 2018.[1] Only three patents remained at issue-U.S. Patent Nos. 8, 889, 083 ("the '083 patent"), 8, 304, 193 ("the '193 patent"), and 8, 329, 407 ("the '407 patent"). (See D.I. 499). The jury found all three patents valid and infringed, that the infringement was willful, and that Plaintiffs were entitled to $23, 930, 718 in damages. (D.I. 476).

         II. PERMANENT INJUNCTION

         Courts "may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." 35 U.S.C. § 283. "According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief." eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006). "A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." Id. "The essential attribute of a patent grant is that it provides a right to exclude competitors from infringing the patent." Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1328 (Fed. Cir. 2008).

         For the following reasons, I find that Plaintiffs have satisfied the eBay factors in support of their proposed permanent injunction. (D.I. 513, Ex. A).

         A. Irreparable Injury

         Direct competition strongly suggests the potential for irreparable harm absent an injunction. Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 702 F.3d 1351, 1363 (Fed. Cir. 2012) (vacating denial of a permanent injunction based on finding no irreparable injury because the record showed "direct and substantial competition between the parties"); see also Douglas Dynamics, LLC v. Buyers Prod. Co., Ill. F.3d 1336, 1345 (Fed. Cir. 2013) ("Where two companies are in competition against one another, the patentee suffers the harm-often irreparable-of being forced to compete against products that incorporate and infringe its own patented inventions."). A patentee may establish irreparable harm by showing "that [the parties] were competitors and that [the patentee] lost market share while [the infringer] gained it." See Broadcom Corp. v. Emulex Corp., 732 F.3d 1325, 1338 (Fed. Cir. 2013) (upholding the district court's grant of a permanent injunction).

         Plaintiffs argue that Bio-Rad and 10X are competitors in "the market for products that perform genetic analysis on a droplet platform," and within that market, they are "undisputedly head-to-head competitors with their single-cell droplet products." (D.I. 513 at 6-7). At trial, 10X's counsel stated that Bio-Rad's ddSEQ product competes directly with 10X's single cell product. Tr. at 92:3-7, 1519:4-6. Ms. Tumolo, Bio-Rad's President of Life Sciences, agreed. Id. at 168:4-8.

         10X argues that Bio-Rad is not a direct competitor. 10X has five accused product lines, [2]each of which allegedly "profiles different aspects of a sample and provides fundamentally different biological information, using different chemistries, data analysis, and visualization software." (D.I. 524 at 7). Of those five, 10X argues that the only one that may compete with Bio-Rad is the single cell product, but that customers view Bio-Rad's product as inferior. (Id. at 5, 7-8).

         I find that 10X and Bio-Rad are direct competitors in the market for products that perform genetic analysis on a droplet platform. 10X admitted at trial that its single cell product competes directly with Bio-Rad's ddSEQ. Tr. at 92:3-7. Each of 10X's products are variants of the same infringing droplet process. (See D.I. 536 at 4; D.I. 476). Regardless, 10X's single cell product accounts for over 80% of 10X's sales. (See D.I. 536 at 4; PTX 1255). The fact that customers may prefer 10X's single cell product to ddSEQ does not negate the fact that the products are competing.

         Plaintiffs argue that, as direct competitors, 10X is causing Bio-Rad lasting competitive harm by using infringing technology to gain a lead in the emerging droplet market and derail Bio-Rad's product roadmap. (D.I. 513 at 7). Ms. Tumolo testified that Bio-Rad "felt a lot of pressure to get [its single cell] product on the market because 10X had a really, really big head start, frankly we felt using our technology." Tr. at 130:3-6. Plaintiffs assert that the same head start has allowed 10X to collaborate with early adopters and key opinion leaders and develop "sticky" customer relationships. (D.I. 513 at 7-8). As a result, 10X has cultivated a market bias towards its single cell product and Bio-Rad has been forced to increase its marketing costs. (Id. at 8).

         Plaintiffs have shown that they will suffer irreparable competitive harm absent an injunction. Plaintiffs are being forced to compete with 10X's products that incorporate and infringe their own patented inventions. See Douglas Dynamics, 717 F.3d at 1345. Based on those infringing products, 10X has established a strong market lead over Bio-Rad-10X has sold over 1000 of its single cell units, while Bio-Rad has sold less than 100. (D.I. 398, Ex. Z, at K-2, J-3, J-4). It seems likely that, absent an injunction, Bio-Rad will struggle to regain its lost market share and will continue to suffer associated harms such as increased marketing costs.

         The party seeking an injunction must also show a causal nexus between the infringement and the harm. The infringing features do not need to be the "exclusive or predominant reason" that consumers buy the accused products, but there must be '"some connection' between the patented features and the demand for [the accused] products." Apple Inc. v. Samsung Elecs. Co., 809 F.3d 633, 642 (Fed. Cir. 2015). That is, "the patented features impact consumers' decisions to purchase the accused devices." Id.

         10X argues that Plaintiffs have failed to show a causal nexus because they have not proven that "simply using droplets-as opposed to other, non-patented features-drives demand for, or contributes to the success of, any 10X products." (D.I. 524 at 5). 10X applies the wrong standard. Plaintiffs need not show that the patented features drive demand, but just that they "impact consumers' decisions to purchase the accused devices." Apple, 809 F.3d at 642; Genband U.S. LLC v. Metaswitch Networks Corp., 861 F.3d 1378, 1384-85 (Fed. Cir. 2017). The patented droplet technology is the foundation of 10X's droplet products. In fact, 10X tried and failed with other methods of partitioning such as capsules and wells before moving to droplets. Tr. at 953:1-954:13; (D.I. 513 at 10). There is clearly "some connection" between the patented technology and the demand for 10X's products. Therefore, Plaintiffs have shown that they will suffer irreparable harm from 10X's infringement absent injunctive relief.

         B. Remedies Available at Law

         Damages are inadequate to compensate for loss of market share. Douglas Dynamics, l\l F.3d at 1345 ("[M]ere damages will not compensate for a competitor's increasing share of the market, a market which Douglas competes in, and a market that Douglas has in part created with its investment in patented technology."); E.I. DuPont de Nemours & Co. v. Unifrax I LLC, 2017 WL 4004419, at *5 (D. Del. Sept. 12, 2017) ("Monetary damages are inadequate to compensate Plaintiff here because Plaintiff would be forced to compete against a rival gaining market share with Plaintiffs technology."), aff'd, 921 F.3d 1060 (Fed. Cir. 2019). The underlying concerns are particularly strong here because 10X's infringement coincided with the emergence of the droplet market, thus allowing 10X to capture and define the market with its infringing technology. See Illumina, Inc. v. Qiagen, N. V., 207 F.Supp.3d 1081, 1093 (N.D. Cal. 2016) (finding the patentee would suffer irreparable harm in part because, being at a "crucial inflection point in the development of the market," the infringer would be allowed to "capture and define the market with pirated technology").

         10X argues that damages are adequate based on quantifiable licensing fees derived from Bio-Rad's internal documents. (D.I. 524 at 13). I disagree. Although Bio-Rad seems to have had some interest in licensing the asserted patents (DTX 1481 at 26), they were never actually licensed. Cf. Nichia Corp. v. Everlight Americas, Inc., 855 F.3d 1328, 1343 (Fed. Cir. 2017) ("[T]he fact of the grant of previous licenses, the identity of the past licensees, the experience in the market since the licenses were granted, and the identity of the new infringer all may affect the district court's discretionary decision concerning whether a reasonable royalty from an infringer constitutes damages adequate to compensate for the infringement.") (quoting Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1328 (Fed. Cir. 2008)).

         Therefore, I find damages inadequate to compensate for 10X's infringement.

         C. Balance of Hardships

         When assessing the balance of hardships, it is appropriate for courts to consider "the parties' sizes, products, and revenue sources." i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 862-63 (Fed. Cir. 2010), aff'd, 564 U.S. 91 (2011). Not relevant, however, are the expenses incurred in creating the infringing products and the consequences to the infringer of its infringement, such as the cost of redesigning the infringing products. Id. at 863.

         An injunction would prevent 10X from selling any of its current products. (D.I. 524 at 14). 10X thus argues that an injunction would devastate the company, possibly causing it to go out of business. It is clear, however, that 10X has been pursuing a design-around for some time. At the September 5, 2018 discovery conference, 10X's counsel represented that the components of the new design were complete but the "full commercialized product" was not. (D.I. 365 at 20:25-21:11). In January 2019, 10X's Dr. Schnall-Levin testified that 10X intended to have its redesign on sale in April 2019 and that 10X was "confident that the chip will work as well" as the existing product. (D.I. 537, Ex. 4 at 19:19-22, 25:17-25). His only caveat about an April launch was that 10X might not have "all the training materials" and "quite as much rigor around having naive users try [the product] out." (Id. at 25:25-26:7). Thus, it now being July 2019, 1 would expect 10X to be nearly ready, if not ready, to bring its design-around to market.

         On the other hand, Bio-Rad is undoubtedly a much larger operation. Bio-Rad is a multibillion-dollar company with over 9, 000 products. (D.I. 524 at 14 (citing Bio-Rad 10-Q at 29)). Bio-Rad's ddSEQ product accounted for only 0.2% of its $2 billion in sales in 2017. (Id. (citing D.I. 398, Ex. Z at J-2)). Those revenues, however, are greatly outstripped by Bio-Rad's investments in its droplet business. Ms. Tumolo testified that Bio-Rad has spent over half a billion dollars to develop its droplet products, including acquisitions and $20 to $25 million a year on research and development. Tr. at 121:6-22, 125:23-126:5.

         "[O]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected." Windsurfing Int'l Inc. v. AMF, Inc., 782 F.2d 995, 1003 (Fed. Cir. 1986). The fact that 10X has gained commercial success from its infringing products and thus risks losing that success does not shield 10X from injunctive relief. See i4i, 598 F.3d at 863 (finding the defendant "not entitled to continue infringing simply because it successfully exploited its infringement"); Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 704 (Fed. Cir. 2008) (same). Regardless, given that 10X has a design-around that is complete or very close to complete, I do not think 10X is likely to be "devastated" if enjoined from selling its existing products. On the other hand, although Bio-Rad's ddSEQ currently accounts for only a fraction of Bio-Rad's revenues, Bio-Rad has invested substantial resources in developing its droplet business. Therefore, I find the balance of hardships weighs in favor of granting injunctive relief, or, at minimum, is neutral.

         D. Public Interest

         It is generally in the public interest to uphold patent rights. Broadcom, 543 F.3d at 704 (citing Rite-Hite Corp. v. Kelley Co.,56 F.3d 1538, 1547 (Fed. Cir. 1995)). However, "[i]f a patentee's failure to practice a patented invention frustrates an important public need for the invention, a court need not enjoin infringement of the patent. Accordingly, courts have in rare instances exercised their discretion to deny ...


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