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With patents, Wisconsin court gaining reputation as a "rocket docket"

Madison, Wis. - Patent law is esoteric territory, but a Madison court is taking some of the mystery out of it, and in the process it might be giving smaller drug companies a chance to defend their intellectual property against pharmaceutical Goliaths.

The most recent example occurred last month. After a relatively speedy trial that began in September of 2005, a jury in U.S. District Court for the Western District of Wisconsin first confirmed the validity of a patent held by Belgian-based biopharmaceutical company Innogenetics, and then unanimously found Abbott Laboratories willfully infringed on the patent.

The patent covers a method of genotyping the Hepatitis C Virus, and to date Abbott has been directed to pay Innogenetics $7 million in infringement damages. Depending on a possible appeal and the judge's eventual ruling, that sum could triple because of the jury's determination that the violation was willful.

Compared to Abbott Labs, which reported more than $22 billion in sales and $3.4 billion in income last year, Innogenetics is like David, but it hardly is a Lilliputian. The company reported $48.6 million in revenue (European currency) in 2005.

Nevertheless, CEO Frank Morich characterized the outcome as a landmark victory for his company, and possibly for other innovators like it. "This win protects an important patent for us, and provides compensation for this major infringement," Morich said. "But perhaps just as importantly, it says that being a large, global company does not entitle you to willfully disregard intellectual property laws without consequence."
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The case begs two questions that WTN Media posed to local patent attorneys. First, how does Abbott Laboratories, with all the legal and other services available to it, not know that it is infringing on another company's intellectual property?

Second, how does this case, pitting an American pharmaceutical giant based in Abbott Park, Ill. against a European biopharm headquartered in Gent, Belgium, end up being litigated in Madison, Wis.?

Charity versus cynicism

The most charitable explanation offered for Abbott's defeat is an appalling lack of due diligence. Chris Rogers, a patent attorney with of Lathrop and Clark, said even corporate giants can learn business lessons, including overlooking risk management practices pertaining to due diligence and the freedom to operate.

"There's always some uncertainty as to whether patents will be held valid and/or infringed, but you have a lot of control over whether or not you're found to be willfully infringing," Rogers said. "If you get competent opinions from outside counsel, you can substantially minimize your risk of willful infringement."

Attorney Colin Fairman, a member of the intellectual property practice group at LaFollette, Godfrey & Kahn, chalks up Abbott's defeat to corporate hubris.

"The way these large pharmaceutical companies work is that they have really deep pockets, and they feel that they can intimidate these small pharmaceuticals by dragging them through very expensive litigation," Fairman said. "So, it's cheaper for them to just settle and make a big wad of cash and shut up.

"Innogenetics wasn't going to take it, and they won very convincingly."

Rocket docket

According to Rogers, jurisdiction is an important factor in patent cases. Some courts are more favorable to large corporations, while others are more favorable to smaller entities or individual inventors.

"For example, you'll find that in the Eastern District of Texas, a lot of patent litigation is brought on behalf of individual inventors or small entities against larger entities," he said. "The opposite is true in other jurisdictions. But I think this litigation, and I haven't looked at all the particulars, should be very humbling for Abbott to come out the way that it did."

Fairman said Innogenetics could have fought this anywhere it does business, which says a lot about the draw of the Western District Court, where federal judges Barbara Crabb and John Shabaz preside. The fact that the case took only one year to adjudicate brings down the cost of litigation for a company like Innogenetics, and Fairman said similar businesses are taking note of that.

"It is a rocket docket here," Fairman said. "I think that this case was not even a year old, whereas in California or anywhere - except for Virginia and some other docket that is equally fast - they would be sitting there for five years, maybe. And that's a lot of money."

And it's not just life science companies, as illustrated by a dispute between two prominent San Francisco-area technology companies. Apple Computer, Inc., of Cupertino, Calif., has filed suit in Wisconsin's Western District Court alleging that Creative Labs, Inc., of Milpitas, Calif., infringed on patents related to the iPod, Apple's handheld music and movie players.

Fairman said companies can file suit in any jurisdiction where "they inject themselves into commerce." Even if a company doesn't have an office or customers or suppliers here, its website is accessible worldwide, and if the business takes orders or engages in marketing or quotes prices over that website, that might be enough for a judge to establish a commercial link.

"They can choose to have their case anywhere they were in competition with, or anywhere they injected themselves into commerce," he explained, "even if they didn't sell a kit here, but in fact had 50 catalogs at the University of Wisconsin saying, `Here's my catalog and all the great stuff I sell.'"

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