Delaware District Court Permits NanoString’s Counterclaims that 10x Genomics and Harvard Violated the Antitrust Laws

10x and Harvard now must defend against allegations that they “are pursuing an ill-gotten monopoly by enforcing patents that are subject to a requirement that they be licensed non-exclusively”

NanoString Technologies, Inc. (NASDAQ:NSTG), a leading provider of life science tools for discovery and translational research, provided comments on yesterday’s order of the United States District Court for the District of Delaware in NanoString’s patent litigation with 10x Genomics and President and Fellows of Harvard College. In its order, the Court granted NanoString’s motion to add new counterclaims for antitrust and unfair competition violations as well as the affirmative defense of “unclean hands” by 10x and Harvard. The ruling relates to NanoString’s claim that Harvard made a non-exclusive licensing commitment in order to secure grant funding from the National Institutes of Health (NIH) for work that led to the patents at issue in the litigation.

In granting NanoString’s motion to add the antitrust counterclaims, the Court cited as plausible NanoString’s allegations that “‘10x and Harvard are pursuing an ill-gotten monopoly by enforcing patents that are subject to a requirement that they be licensed non-exclusively,’” and stated, “NanoString has also plausibly alleged that this scheme, if successful, will provide 10x and Harvard with monopoly power to ‘force customers in the single-cell spatial transcriptomics market to pay artificially inflated prices.’” The ruling follows an order by the Court in June granting NanoString’s motion for expedited production of materials relating to the NIH grant issue.

“We’re pleased that the Court rejected 10x’s and Harvard’s attempts to keep these issues surrounding the NIH grant documents and their anticompetitive conduct and effect on the market out of the case,” said Brad Gray, President and CEO of NanoString. “This is a significant development and provides NanoString with another avenue for success in the case.”

The patents asserted by 10x in the litigation with NanoString were developed in the Harvard laboratory of Dr. George Church using over $19 million of public grant funding awarded by the NIH. As NanoString has alleged, Harvard and Dr. Church committed in the grant application that technology developed under the grant would be made widely available through “open and non-exclusive licensing agreements.” The NIH awarded the grant with the explicit condition that Harvard comply with its commitments in the grant application in this regard. Each patent asserted in the litigation with NanoString confirms the claimed invention was made with government support under the NIH grant at issue.

Despite its commitments to the NIH, Harvard exclusively licensed the patents to Readcoor, a company co-founded by Dr. Church and later acquired by 10x. In contrast with the promises made in the grant application, 10x is now using the acquired Readcoor patents in lawsuits designed to reduce the scientific community’s access to innovative technologies intended for broad access.

In May 2023, NanoString filed motions with the Delaware District Court in its litigation with 10x seeking to amend its answer, to add new counterclaims relating to the NIH grant documents and licensing commitment, and to expedite discovery of documents relating to the issue.

On June 6, the Delaware District Court issued an order granting NanoString’s motion for expedited discovery related to the NIH grant documents. The Court noted NanoString’s concern that “production of certain materials relating to the NIH grant was artificially delayed by Harvard in response to earlier document requests.” The Court further stated that it was not in a position at that time to rule on the motions to amend the answer and add counterclaims. The Court returned to those motions in yesterday’s order.

On July 10, the Delaware District Court granted NanoString’s motion to add new counterclaims for antitrust and unfair competition violations as well as the affirmative defense of unclean hands by 10x and Harvard. The legal doctrine of an “unclean hands” defense provides that plaintiffs in a patent infringement suit are barred from enforcing the asserted patents if they have engaged in conduct involving deceit, unconscionability, or bad faith related to the matters at issue in the case.

The Court stated in its order that “NanoString has sufficiently alleged the existence of a contract between NIH and Harvard requiring Harvard to offer open and non-exclusive licensing agreements for patents funded by the grant.” The non-exclusive licensing commitment made in the NIH grant documents was not made publicly available by 10x and Harvard until recently. During Patent Office examination of the patent applications, truncated portions of the grant application were submitted to the US Patent Office, omitting the pages that covered the licensing commitment. Furthermore, 10x and Harvard deliberately did not produce the NIH grant documents to NanoString during document discovery, despite requests by NanoString. NanoString obtained the copy of the NIH grant documents only after the oral hearing in the patent infringement proceedings brought by 10x against NanoString in the Regional Court of Munich had closed.

The ruling also supports NanoString’s strategy in Germany and elsewhere in Europe. NanoString intends to introduce evidence with respect to the NIH grant documents and 10x’s and Harvard’s related conduct in its appeal of a May 17, 2023 decision of the Munich Court and in the proceeding with the European Unified Patent Court. Further, NanoString is also challenging the asserted patent’s validity in Germany through a parallel nullity action. A decision in the nullity action is expected following a hearing scheduled for May 2024.

About NanoString

NanoString Technologies, a leader in spatial biology, offers an ecosystem of innovative discovery and translational research solutions, empowering our customers to map the universe of biology. The GeoMx® Digital Spatial Profiler is a flexible and consistent solution combining the power of whole tissue imaging with gene expression and protein data for spatial whole transcriptomics and proteomics. The CosMx™ Spatial Molecular Imager is a single-cell imaging platform powered by spatial multiomics enabling researchers to map single cells in their native environments to extract deep biological insights and novel discoveries from one experiment. The AtoMx™ Spatial Informatics Platform is a cloud-based informatics solution with advanced analytics and global collaboration capabilities, enabling powerful spatial biology insights anytime, anywhere. At the foundation of our research tools is our nCounter® Analysis System, which offers a secure way to easily profile the expression of hundreds of genes, proteins, miRNAs, or copy number variations, simultaneously with high sensitivity and precision. For more information, visit www.nanostring.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our expectations regarding litigation and remedies, the expected timing of the ongoing litigation, the ultimate disposition of the pending litigation, and the impact of the pending litigation on our business and our operations and business outlook. Such statements are based on current assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties, many of which are beyond our control, include that we may not successfully appeal the Regional Court of Munich’s decision; we may be unsuccessful in the nullity action we are pursuing with the German Federal Patent Court; ongoing litigation may be prolonged and a final disposition may be delayed; the Delaware District Court’s granting of the motion to amend to add new counterclaims for antitrust and unfair competition violations as well as the affirmative defense of unclean hands by 10x and Harvard may not have a material impact on the ultimate outcome of the pending litigation; market acceptance of our products; adverse conditions in the general domestic and global economic markets; the effects of ongoing litigation on our business; the impact of competition; as well as the other risks set forth in our filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. NanoString Technologies disclaims any obligation to update these forward-looking statements.

NanoString, NanoString Technologies, the NanoString logo, GeoMx, CosMx, AtoMx and nCounter are trademarks or registered trademarks of NanoString Technologies, Inc. in various jurisdictions.

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