Further to my recent post about the US CAFC decision, I was asked by a few people to dig in a little more and comment on the litigation between Benitec and Nucleonics.

Benitec withdrew
their original infringement suit against Nucleonics in relation to US 6573099,
when it became clear that they would not win in light of the newly broadened
safe harbour for research which came from the US Supreme Court decision in
Merck v Integra. In withdrawing
the suit, Benitec were forced by Nucleonics and the Judge to undertake not to
sue for any activities which occurred prior to the date on which they withdrew.
At the same time, they made noises about suing in the future should Nucleonics
have a commercial product (rather than be using the technology for
research).

This is obviously a
long way short of a full undertaking not to sue. In fact, it leaves open the
possibility of further suit in relation to future research
activities.

In the meantime,
Nucleonics had commenced proceedings before the USPTO to have the patents Re-Examined and also filed counter claims seeking to invalidate Benitec’s patent
(or render it unenforceable).

As previously stated,
the CAFC decision holds that Nucleonics no longer has standing to bring the
invalidity suit before the court as the threat of infringement litigation has
dissipated. This is a little curious, especially given the comments made by
Benitec about potentially suing in the future. The dissenting Judgment by Judge
Dyk picks up and expands this point.

From an investor’s
point of view, then, Benitec has saved an enormous amount of money and
management time by ending the US infringement proceedings – which
is good. However, their patents are still at high risk of invalidation (or
substantial claim narrowing) in the ongoing Re-Examination proceedings, which
Nucleonics started, and which they have the right to participate in.

Even after
the Re-Examination result (which can be appealed), Nucleonics would have the
option of invalidating the claims in the future, if faced with a sufficient
threat, or indeed an infringement suit from
Benitec.

Note here in
particular, that according to the 20 July 2007 Court of Appeal Judgment, Benitec hasn’t fared so well in the Re-Examination proceedings
to date – all claims of the patent are currently either rejected by the Examiner, or
have been withdrawn by Benitec. I understand that Benitec have since filed a response, but that the examiner is yet to respond.

In any event, it seems that at the very least, some of
the claims asserted against Nucleonics may have been too broad, and would in
fact have been invalidated. An outcome from the Re-Examination that Nucleonics may be
seeking is that the claims are sufficiently narrowed so that Benitec can no longer sue for
infringement (as Nucleonics would be outside their scope).

On the other hand, one of the risks for
Nucleonics is that they put forward their best prior art in these Re-Examination
proceedings and the Examiner does not agree that it invalidates all of the
claims which cause potential problems for Nucleonics. This would make things
more difficult for them as they don’t have as much opportunity to fully support
their arguments with Experts and oral argument as they would in Court and once
the USPTO has reviewed prior art, the courts will assume that the patent claims
are valid in light of that art (the presumption of validity). Hence, Nucleonics
may be damaging their best case, right now.