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Personal Genome Diagnostics Alleges Patent Fraud by Guardant Health in Countersuit

NEW YORK (GenomeWeb) – The litigants in an intellectual property lawsuit over liquid biopsy technology have each levied misconduct allegations against the other.

Personal Genome Diagnostics (PGDx) has alleged that Guardant Health improperly obtained at least three patents for liquid biopsy technology. And Guardant has suggested that PGDx's "infringement of the patents-in-suit is deliberate and willful and constitutes egregious misconduct."

The allegations are contained in court documents filed in the last month and obtained by GenomeWeb. The suit, filed by Guardant in 2017 in the US District Court for the District of Delaware, alleges that PGDx's PlasmaSelect 64 test infringes upon four Guardant patents (Guardant also sued Foundation Medicine in the same court for infringement of the same patents.) PGDx has now countersued and has asked the court to declare Guardant's patents invalid as well as unenforceable for inequitable conduct.

In two documents, PGDx attorneys alleged that Guardant CEO and Cofounder Helmy Eltoukhy should have been named an inventor on three patents. What's more, the lawyers alleged that he was deliberately left off.

Jacob Sherkow, a professor at New York Law School and an expert on patent law, reviewed the court documents for GenomeWeb.

"If you commit what's called inequitable conduct – if you lie to the patent office for the sake of getting a patent granted – then, depending on the circumstances, that may render the patent not enforceable," Sherkow said. "You can have the patent but it makes it economically worthless."

"If PGDx ends up proving it, they will do an incredible amount of damage to Guardant's patent estate," Sherkow said. "At the same time, it's very difficult to prove. The number of cases that have found it over the past couple years are very scant."

Meantime, if Guardant can get the willful infringement allegation added to its complaint, and prove them, PGDx could face paying enhanced damages. However, Sherkow called the allegation "pure bluster."

Guardant's suit alleges that PGDx's PlasmaSelect 64 test and underlying targeted error correction sequencing (TEC-Seq) technology infringes upon four patents (US Patent Nos. 9,598,731; 9,834,822; 9,840,743; and 9,902,992). Guardant President, COO, and Cofounder AmirAli Talasaz is listed as the sole inventor on the '731, '822, and '743 patents. Eltoukhy and Talasaz are both listed as the inventors for the '992 patent.

According to court documents, PGDx's fraud allegations stem from information obtained in Eltoukhy's deposition, taken April 8.

"Eltoukhy's deposition revealed that he fraudulently concealed from the United States Patent and Trademark Office ("USPTO") that he was a co-inventor of the patents-in-suit," attorneys for PGDx alleged in an April 19 letter to Judge Christopher Burke. The Guardant cofounders allegedly "filed patent applications that fraudulently identified Talasaz as the sole inventor to obtain exclusive rights to the patents-in-suit … [redacted]," the attorneys wrote.

Furthermore, in its updated response to Guardant's complaint, filed April 30, PGDx alleged: "On March 23, 2017 Guardant filed declarations from Eltoukhy and Talasaz in which they both swore under oath that they were inventors" of the '743 patent, but that "on July 20, 2017, Eltoukhy and Talasaz caused to be submitted a request [...] to 'name only the actual inventors' and to 'delete' Eltoukhy as an inventor."

However, the specifics about what Eltoukhy allegedly revealed, why PGDx believes he should have been listed as an inventor, and how that allegation helps its defense are unclear. Parts of the letter were redacted. PGDx provided more information about the allegations in the response to Guardant's complaint; however, much of that document was also redacted.

A spokesperson for Guardant told GenomeWeb, "The company believes the counterclaims are baseless and completely without merit."

In a statement, PGDx said the filing is redacted "as is standard in intellectual property cases." The firm added it is "confident in its intellectual property estate" and is "vigorously defending this lawsuit." A spokesperson for PGDx said that the company declined to provide additional comment at this time.

Sherkow said that while the redactions make it tough to evaluate PGDx's allegations, inventorship is a clear-cut concept. "If you have contributed to the definite and permanent conception of at least one element [of a patent], then you are an inventor," he said. And inventorship is not something that can be waived. "You can waive your rights as an inventor, but you cannot waive being an inventor," he said. "It's like being pregnant or dead: you either are or are not."

Now, Guardant is asking to again amend its complaint and add an allegation of willful infringement. In a May 7 letter to the judge, Guardant attorneys wrote:

"For over a year, PGDx has claimed that it only learned of the patents-in-suit on the day that the respective complaints were filed [...] However, as the testimony of [PGDx CEO Douglas] Ward and [PGDx cofounder Victor] Velculescu plainly shows, this was false [...] PGDx had full knowledge of the [patents] months before the original complaint was filed. Despite this actual knowledge, PGDx continued to willfully develop and launch its infringing products even after the suit was filed. PGDx's concealment of its knowledge and continual infringement constitutes egregious misconduct."

In a statement, PGDx said that it "has been forthright at all times" and has "consistently denied any knowledge of the asserted patents in the suit until the complaint was filed."

Why PGDx believes Eltoukhy's alleged inventorship is important to the case remains unclear.

"My assumption is the founder had some arrangement or deal that any IP he was named inventor of would accrue to some patent Personal Genome Diagnostics has rights in," Sherkow said. "To a certain extent that explains why those provisions are redacted. They probably concern the license and any confidential provisions of the license."

Sherkow added that the case has some similarities to an earlier case, Burroughs Wellcome Co. v. Barr Laboratories, Inc. That case concerned IP for the HIV antiviral drug Zidovudine (azidothymidine, or AZT.) "Barr was trying to make a generic AZT and in order to escape Burroughs' infringement allegations, Barr was trying to correct the inventorship on Burroughs' patents to include inventors from whom Barr had a license," Sherkow said. "It's one way to defeat a patent suit." (Barr was unsuccessful in adding inventors to the patent, but in at least one case, a company was able to convince a court to add an inventor to a patent and, following that, dismiss the infringement suit.)

Before joining Guardant as CEO, Eltouky worked as senior director of advanced technology research at Illumina. In 2016, PGDx partnered with Illumina to develop two in vitro diagnostics for cancer. Court documents also show that PGDx subpoenaed Illumina to appear for a deposition on Wednesday.  Illumina declined to comment on the subpoena and PGDx and its attorneys did not respond to request for comments about it.

PGDx has requested that the judge dismiss Guardant's suit. Its countersuit also alleges Guardant has engaged in anticompetitive practices. PGDx has requested that the court declare that the firm has not infringed the four Guardant patents and award it costs, attorneys' fees, and damages.

Guardant's proposed third amended complaint suggested that PGDx's countersuit is not its first attempt at invalidating the '822 and '743 patents.

"On March 28, 2018, [PGDx] filed two petitions for post-grant review with the US Patent and Trademark Office in an attempt to invalidate the '822 and '743 patents. Before a decision was reached by the Patent Office even to institute the review, [PGDx] moved to withdraw the petitions and terminate the proceedings. [PGDx] never filed petitions for post-grant review or inter partes review of the '731 and '992 patents. [...] Velculescu submitted declarations asserting that claims of the patents were invalid."

PGDx noted in a statement that "after re-evaluation and based on the strength and merit of PGDx's legal positions, PGDx opted to challenge the patents in the district court rather the patent office and thus withdrew the post-grant reviews. PGDx believes that the consolidation of all of the issues before the district court will be more efficient and effective."

Guardant had previously disclosed the post-grant review petitions in a November 2018 filing with the Securities and Exchange Commission.

PGDx said it expects a trial to start in June 2020.

additional reporting by Molika Ashford

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