Antitrust Law Daily Wrap Up, ANTITRUST—D. Del.: Partial dismissal of counterclaims recommended in spatial transcriptomics patent infringement case, (Jan 30, 2025)

By Martin A. Steinberg, J.D.

Biotechnology research companies allegedly filed a patent infringement suit with the intent to drive competitors out of the relevant spatial transcriptomics market.

A magistrate judge for the federal district court in Wilmington, Delaware recommended partial dismissal of the counterclaims filed in a patent infringement action filed by 10x Genomics, Inc. (10x) and Prognosys Biosciences, Inc. (Prognosys) against biotechnology company Curio Biosciences, Inc. (Curio). After 10x filed an infringement suit against Curio, Curio countered that 10x and Prognosys attempted to monopolize and conspired to monopolize the emerging market for spatial transcriptomics. The court recommends that the conspiracy to monopolize claims under the Sherman Act and California Cartwright Act be dismissed for failure to plead the existence of an actionable agreement between 10x and Prognosys. However, the court recommends that the attempted to monopolize claim be allowed to move forward (10x Genomics, Inc. v. Curio Biosciences, Inc., No. 1:23-cv-01375-MN (D. Del. Jan. 29, 2025)).

10x and Prognosys are biological research companies specializing in spatial transcriptomics, which studies RNA molecules in a cell and the distinct locations of those molecules within the tissue. Prognosys owns a family of patents for “Spatially Encoded Biological Assays,” invented by its former CEO and CSO Mark S. Chee, Ph.D. 10x is the exclusive licensee of the Chee patents and owns and licenses various other intellectual property. In 2019, after acquiring Spatial Transcriptomics AB, 10x launched its Visium Platform with the Visium Spatial Gene Expression Solution. This commercial product preserves spatial information through spatially barcoded capture probes at known locations.

Curio is an early-stage biotechnology company aimed at “providing accessible research tools to the life sciences industry.” In February 2023, it announced the launch of its Curio Seeker Kit, which would compete with 10x’s Visium product line. The Seeker Kit allows spatial mapping of an entire transcriptome of fresh-frozen tissues, such that users can capture and spatially index mRNA and prepare a sequencing library.

In 2022, 10x and Prognosys brought patent infringement suits against competing companies, including suits filed against Vizgen, Inc. (Vizgen), NanoString Technologies, Inc. (NanoString), and Parse Biosciences, Inc. (Parse). In the NanoString case, a jury found that the defendant infringed seven Prognosys patents related to the asserted patents here and found that those patents were valid, awarding Plaintiffs over $31 million in damages. As a result, NanoString filed for Chapter 11 bankruptcy protection.

10x and Prognosys then filed suit against Curio, alleging that the Curio Seeker Kit and associated products infringed five patents relating to spatially encoded biological assays. Curio filed its four antitrust counterclaims: (1) conspiracy to monopolize against 10x and Prognosys, (2) attempted monopolization against 10x, (3) violation of the California Cartwright Act against 10x and Prognosys, and (4) violation of the California Unfair Competition Law against 10x and Prognosys.

Conspiracy to monopolize. Curio alleged that 10x and Prognosys have “engaged in an illegal conspiracy to monopolize the emerging market for spatial transcriptomics” in violation of Section 2 of the Sherman Act. The court recommended that the motion be granted without prejudice as to this counterclaim because the Answer did not sufficiently plead the existence of an actionable agreement between 10x and Prognosys.

Generally, separately controlled legal entities like Plaintiffs are typically understood to have distinct interests and thus capable of taking concerted action. Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 195 (2010). The relevant question was not “whether the defendant is a legally single entity or has a single name” nor whether “parties involved ‘seem’ like one firm or multiple firms in any metaphysical sense.” Instead, under the relevant legal doctrine known as the “Copperweld doctrine,” the key question is whether the entities alleged to have conspired, under the circumstances at issue, amount to “separate decisionmakers” that are “‘separate economic actors pursuing separate economic interests,’... such that the agreement ‘deprives the marketplace of independent centers of decisionmaking[.]’” Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 779 (1984).

Courts have suggested that if a patentee and exclusive licensee prosecute an alleged sham patent litigation, and if the circumstances of the patentee/licensee relationship are such that the licensee seems to have driven the decision to litigate—with the patentee having little participation and/or say in the matter due to the nature of the patentee/licensee relationship—then any allegations of an antitrust conspiracy between the two entities will not have sufficiently described how they amount to separate economic actors pursuing separate economic interests. Conversely, courts have found that a patentee and exclusive licensee allegedly engaging in sham patent litigation can amount to two separate economic actors pursuing separate economic interests—so long as there are at least some allegations explaining why.

The difficulty for Defendant was that its allegations regarding the sham litigation did not portray Prognosys as a separate, independent economic actor with separate economic interests compared to 10x. Instead, in reasonably straightforward, consistent, and evocative terms, the Answer depicted this litigation and the alleged misuse of the Chee patents as being driven by 10x. Prognosys’ role was described as being little more than a required participant. For example, the Answer repeatedly and consistently frames the instant lawsuit as being brought by 10x and fueled by 10x’s decisions, plans, and overall anti-competitive scheme.

The court noted, however, that it seemed that Plaintiff might be able to remedy this deficiency by filing an amended complaint that better addressed the nature of 10x’s and Prognosys’ economic interests regarding the assertion of the patents-in-suit. Thus, the court recommended that the First Counterclaim be dismissed without prejudice.

Attempted monopolization. The Second Counterclaim alleged attempted monopolization against 10x only. The court recommended that the motion be denied as to the Second Counterclaim. According to Section 2 of the Sherman Act, it is unlawful for one to monopolize or attempt to monopolize interstate or international commerce.

Anticompetitive conduct is generally defined as conduct to obtain or maintain monopoly power due to competition on some basis other than on the merits. This includes conduct that harms the competitive process by impairing the opportunities of rivals either unnecessarily restrictively or without furthering competition on the merits. A patent, however, is an exception to the general rule against monopolies and the right to access the free and open market. The Noerr-Pennington doctrine immunizes from antitrust liability those who petition the government for redress. The institution of patent infringement litigation generally cannot violate antitrust laws unless one of two narrow exceptions apply. One exception is when the anticompetitive conduct takes the form of a sham petition, such as filing sham patent litigation.

Courts generally apply one of two standards depending on whether there is a single legal proceeding or multiple proceedings. Because the parties utilized the two-part test that typically applies when there is only one alleged sham litigation, the court applied this standard. This test requires a showing that the lawsuit is objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. The court concluded that Defendant had sufficiently pled that 10x’s instant patent infringement lawsuit is objectively baseless and that no reasonable litigant could realistically expect success on the merits.

The court recognized that the Plaintiffs firmly contested the merit of these allegations. Patent litigation, however, often involves complex questions of fact unsuitable for resolution at the pleading stage when the court must take Plaintiff’s well-pleaded assertions as true. If one takes Defendant’s sham litigation allegations as true, then the court could not conclude that those allegations are implausible at this early stage.

Further, Defendant claimed in its Answer that 10x filed the instant litigation with the intent to harm Defendant and drive it out of the relevant market by (1) requiring it to disclose to actual and potential investors and customers that this litigation implicated its products; (2) interfering with its ability to raise funding; and (3) wrongfully creating fear amongst its customers that if they purchased Defendant’s product, they would be “left without access to the product” shortly thereafter. Defendant also alleged facts indicating that the cost to litigate Plaintiffs’ infringement claims far exceeds any recovery that Plaintiffs could reasonably obtain. This demonstrated why 10x’s subjective motivation focuses on harming Curio’s business versus not winning a patent infringement suit on the merits. These allegations, taken in context with the remainder of the allegations in the Answer as to 10x’s anticompetitive actions and motives, amount to plausible allegations which, at the pleading stage, suffice to meet the second part of this test.

Monopoly power is the power to control prices or exclude competition. 10x failed to demonstrate that this is an atypical case where the antitrust claim can be dismissed at the pleading stage on this ground. As an initial matter, Defendant did plead facts plausibly asserting that 10x has a dominant market share in the relevant spatial transcriptomics field, has significant barriers to entry, and uses its market position to eliminate new rivals. Defendant also pled that there are substantial barriers to entry to the market for Next Generation Sequencing, or ‘NGS’-based spatial transcriptome mapping,” including “high startup costs in research and development, lack of manufacturing capability or infrastructure, lack of established distribution channels, business unwillingness to invest in expensive systems that are incompatible with others, as well as Plaintiffs’ use of sham litigation” to eliminate competitors.

State law claims. The Third and Fourth Counterclaims will fail under California antitrust law to the same extent that the First and Second Counterclaims fail under federal antitrust law. Therefore, the court recommended dismissal without prejudice of the Third Counterclaim, alleging that Plaintiffs violated California’s Cartwright Act by conspiring to form an unlawful trust because it relies on the conspiracy-related allegations in the First Counterclaim, which the court had found deficient. Concerning the Fourth Counterclaim, the court recommended that Plaintiffs’ Motion be granted-in-part and denied-in-part. Specifically, the court recommended that the Motion be denied as to the portion of this counterclaim that relies on “attempted monopolization in violation of 15 U.S.C. § 2” and that the Motion be granted without prejudice as to those portions of the Fourth Counterclaim that rely on the conspiracy-related allegations implicated in the First and Third Counterclaims.

Stay and bifurcation. Lastly, Plaintiffs moved to bifurcate any of the surviving antitrust Counterclaims from Plaintiffs’ infringement claims and then to stay those Antitrust Counterclaims, which the court declined to address at this time. Plaintiffs failed to meet and confer with Defendant about this bifurcation/stay issue before filing the Motion, in violation of the District Judge’s procedures and District of Delaware Local Rule 7.1.1. Because these bifurcation and stay decisions are discretionary, the court recommended that (1) after the instant Motion is finally resolved, the parties be ordered to meet and confer regarding these matters and (2) they be required to provide a status letter updating the Court on how the resolution of the Motion and their meet and confer discussions have impacted their positions on bifurcation/stay issues.

The Case is No. 1:23-cv-01375-MN.

Judge: Burke, C.

Attorneys: Frederick L. Cottrell, III (Richards, Layton & Finger, PA) for 10X Genomics, Inc. Andrew Krause (Irell & Manella LLP) for Curio Bioscience, Inc.

Companies: 10X Genomics, Inc.; Curio Bioscience, Inc.

Cases: Antitrust DelawareNews GCNNews