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Exact Sciences Sues Johns Hopkins University for 'Improperly' Demanding Royalties

NEW YORK – Exact Sciences filed a lawsuit against John Hopkins University in the United States District Court for the Western District of Wisconsin on Monday, claiming that JHU is "improperly" demanding royalties on sales of Exact's Cologuard colorectal cancer test.

When Exact was beginning its development of Cologuard, the company's legal brief noted, it was interested in using digital amplification technology — a technique developed by Bert Vogelstein which allows for the identification of pre-defined mutations expected to be present in a minor fraction of a cell population, providing a reliable and quantitative measure of the proportion of variant sequences within any given DNA sample.

Exact learned that JHU was the assignee of many digital amplification patents and signed a deal in 2001 to license 19 patents from the university. In 2009, Exact said it decided, with JHU's consent, to sell its rights under the licensing agreement to Genzyme, which was acquired by Laboratory Corporation of America in 2010. In turn, Genzyme granted Exact an exclusive sublicense to the patents in a limited field. Further, the parties agreed that Exact would pay Genzyme any amounts due to JHU, and that Genzyme would remit the payment to JHU. 

Now, Exact alleges that JHU is demanding payment "for products and services outside of the scope of JHU's contractual and patent rights," and is asking the court to bar JHU from continuing to demand the royalty payments. "JHU's anticompetitive conduct renders the licensed patents owned by JHU unenforceable against Exact Sciences under the patent misuse doctrine," the company said, adding that the royalties "are at least partially barred by the statute of limitations."

According to the legal brief, the amounts due to JHU are based on either sales or royalties that Exact makes on diagnostic tests that use the patented technology or diagnostic tests that are sold as a product or service that use the patented technology. But the technology underlying Cologuard is unrelated to the patents in question, the company said, making the demands for payment improper.

"The only component of the Cologuard testing that involves DNA amplification is a technique called Quantitative Allele-Specific Real-time Target and Signal (QuARTS)," Exact said in its legal brief. "The QuARTS amplification technology combines the routinely used molecular biology techniques of real-time PCR and a chemistry technique to perform allele-specific amplification and detection of methylated target DNA, specific DNA point mutations, and total human DNA. Cologuard testing does not employ, inter alia, digital amplification, single-molecule PCR, oil microemulsion amplification, or any technology as claimed in the licensed patents."

Further, the company said, some of the patents at issue relate to mutations of the PIK3CA gene in human cancers, describe assays for mutations in PIK3CA, relate to the presence of genomic amplification of neugrin, describe assays for a somatic K117 mutation in KRAS, or describe the detection of a cysteine codon or residue in IDH1. But Cologuard testing doesn't involve assaying for PIK3CA, neugrin, KRAS K117, or IDH1, Exact added.

In taking these facts into account, Exact said it has never paid JHU any royalties under the terms of the agreement based on sales of Cologuard, and has paid JHU only the portion of the annual fee that is based on a set lump-sum under the terms of the agreement. In fact, Exact added, it reported its non-payments to LabCorp in 2015 as part of its reporting obligations under the licensing agreement.

Despite that, Johns Hopkins Technology Ventures wrote to LabCorp in 2019 regarding Exact's non-payments and demanded information on sales of Cologuard so it could calculate the exact amount of royalties it said Exact owed.

"Despite Exact Sciences not using the patented technology, JHU stated that the Cologuard 'sales information is still required' for the royalty calculations and that whether Cologuard practices any of the claims of the licensed patents would simply 'impact the royalty rate used in those calculations,'" Exact's legal brief claims. "Exact Sciences explained to JHU that because Cologuard did not practice the licensed patent claims, no royalty was due, and thus JHU did not require Cologuard sales information."

The university persisted in its demands, however, claiming that Exact was in breach of the licensing agreement.

Therefore, Exact is now asking the court to determine that Cologuard is not subject to the royalties provision under the agreement, and is asking for a judicial determination that it has not breached the licensing agreement.

"JHU has engaged in anticompetitive conduct by attempting to extend its patent rights over Cologuard, which does not practice the technology claimed in the JHU patents. Thus, JHU is using the agreement to extend its monopoly beyond the claims that the United States Patent Office awarded it," Exact's legal brief claims. "Consequently, JHU's actions constitute patent misuse and the JHU patents are not enforceable against Exact Sciences."

Exact is also asking the court for damages, interest, expenses, costs, and attorneys' fees.

JHU and Exact declined to comment.