Elysium Sued for Patent Infringement
What the complaint says is that Elysium is willfully infringing both patents. ChromaDex requests a permanent injunction against further infringement, plus damages, including royalties, lost profits -- and treble damages -- and attorney fees.
We have a new law firm on this case -- welcome Covington & Burling, which is one of the world's most prestigious law firms, and Haley Giuliano, an elite patent specialty firm that spun off from Ropes & Gray.
The complaint was filed in Delaware. Why? I'll research that a bit and see if we can come up with a decent guess. Delaware isn't one of the rocket dockets known for speedy dispositions -- which we would like very much -- but has enough expertise in patent matters that it probably won't make rookie errors.
Why now? This is the question on everyone's mind, since the infringement has been going on for more than a year. There are two imminent dates -- we are close to mediation in CDCal and oral argument before the PTAB -- and it might have been seen as prudent to get these claims on the table before those events. Or it could be that activity is stalled in SDNY and before the FDA, so the company can attend to this now. Or it might be just the phasing of legal spend. Or maybe Elysium has outlived its usefulness in building the NR market -- they haven't generated any big coverage since last February's Time magazine article.
I don't think there is any special reason -- ChromaDex is pretty responsible about getting its ducks in a row before it acts, and I suspect the ducks are now lined up properly for a patent infringement lawsuit.
Points of Interest
Most of the complaint consists of boring recitations establishing the legal basis of the claim, but there is some interesting stuff. For example, here is a new list of the conditions for which NR may be beneficial, including:
mild cognitive impairment, epilepsy, neuropathies, neurodegenerative diseases, neurological injury, obesity, pain, muscular health, aging, metabolic health, mitochondrial myopathies, cardiovascular health, cognitive health, osteoporosis, cancer, intestinal diseases, kidney disease, lactation, and liver function.
And here is some artistry: This language is particularly devastating to Elysium's claims that buttermilk anticipates the NR patents:
Compositions comprising isolated NR and pharmaceutical compositions comprising NR are not compositions found in nature, nor do they have the inherent properties of any naturally occurring NR composition. Instead, compositions comprising isolated NR and pharmaceutical compositions comprising NR, when formulated in accordance with the teachings of the ’807 and ’086 patents, increase NAD+ biosynthesis upon oral administration. Isolated NR and pharmaceutical compositions comprising NR do not occur in nature. NR, as it exists in nature (in some foods), is bound to other molecules. It cannot be isolated in that bound form or formulated into oral or pharmaceutical compositions to be bioavailable, let alone to increase NAD+ biosynthesis. Isolated NR and pharmaceutical compositions comprising NR are thus new and non-obvious forms of NR, formulated in new and non-obvious compositions, to achieve new and unexpected benefits that are not possible with the bound form of NR as it exists in nature.
Predictably (and no doubt most vexing for Elysium), ChromaDex relies on the testimony of Elysium's own expert to establish the flaws in Elysium's position:
Dr. Baur on cross examination, testified that the NR that is found in nature (specifically, in milk) is bound to other molecules and that it is not known whether this binding inactivates the NR....He also testified that it is unknown whether the NR in milk contributes to NAD+ biosynthesis....By contrast, he testified that it is established that when taken orally, isolated NR does enhance NAD+ biosynthesis.
The evidence of infringement is overwhelming, and the known invalidity arguments are shamefully weak.
So what comes next?
Next, Elysium will file its answer, which is due by October 9. Expect the answer to consist of two main arguments. First, Elysium will re-assert the invalidity claims that it raised before the PTAB, as well as any invalidity claims it can think of based on grounds that were not permissible in the PTAB action. Second, Elysium will assert its Patent Misuse allegation as a defense against enforcement of the patent.
I won't guess what other kinds of invalidity claims Elysium might propose, but we can address the Patent Misuse defense right now.
First, it is important to note that there has been no finding of a Patent Misuse -- the federal court in California has only said that it will hear evidence.
Second, Elysium's mere allegation of Patent Misuse does not prevent ChromaDex from enforcing the patent. Instead, some court will have to actually find that a patent misuse actually occurred, and continues to occur, for Elysium to succeed on this affirmative defense.
Third, and most important, Elysium is not going to be able to establish its patent misuse defense That's for three reasons.
First, the alleged underlying events upon which the patent misuse defense is based -- that ChromaDex required Elysium to PAY for trademarks IN EXCHANGE FOR a license to sell NR -- did not actually occur. It's very clear from the underlying documents that payments were for sales of Niagen, not for access to the trademarks. End of story.
Second, the legal theory that Elysium builds atop these fictitious factual allegations is unprecedented and bizarre. The purpose of the patent misuse doctrine is to prevent a patent holder from extending the patent to non-patented products. So, for example, Microsoft cannot require you to buy Microsoft Office as a condition of your license to use Microsoft Windows. However, that's totally different from saying that Microsoft can't require you to license its trademarks, because the trademarks aren't a separate product with a separate market.
Judge Carney indulged Elysium's exotic proposal as a matter of legal theory -- it's not logically impossible for there to be a market in trademarks. Common sense, however, reveals that not only is there not in fact a market for ChromaDex's trademarks that could be impinged, but there also was no attempt to do so, because what REALLY happened was ChromaDex required Elysium to agree that IF it used ChromaDex's trademarks it would only use them in approved ways, which is the kind of agreement that every goods licensee must sign with every goods licensor, else Disney would not be able to prevent Mickey Mouse watches from being produced with grotesque imagery and fonts.
In retrospect, it was obviously unwise for ChromaDex's attorneys to have combined the royalty and trademark agreements into a single document, because it opened the door for a misrepresentation of the terms, but common sense will no doubt prevail in the end.
Incidentally, I don't have any special knowledge about the negotiation of the trademark and royalty agreement, and I am not privy to any of the documents produced in discovery that might shed some light on the parties' contemporaneous intentions. All I did was (1) read the actual documents, and (2) bring to bear some familiarity with standard commercial arrangements, which is all you need to unravel the mystery. And it is all that the federal courts will need, too.