ChromaDex Sues Thorne for Patent Infringement
ChromaDex this week filed a patent infringement lawsuit against health supplement maker Thorne Research. You can read the complaint here:
CDXC's Patent Infringement Lawsuit Against Thorne
The complaint itself is unremarkable -- the familiar two patents are invoked, '807 and '086.
ChromaDex points out that Thorne was a licensed distributor of Niagen starting in July 2013. Thorne was required to mark its packaging with a notice of ChromaDex's patents, and still did so as recently as March 2021. That matters because ChromaDex will argue that the patent infringement was "willful," which could warrant treble damages.
The complaint says that Thorne on September 28, 2020, gave notice that it was terminating the supply agreement effective December 31, 2020. Then, ChromaDex alleges, "on March 15, 2021, Thorne began to sell infringing dietary supplements containing isolated NR not supplied by ChromaDex, including the accused NiaCel® products, with full knowledge that such products fall within the claims of the ’807 and ’086 patents. Despite switching to an alternative source of isolated NR, on information and belief, Thorne continues to promote and market the accused NiaCel® products with reference to the results of clinical trials and studies conducted using ChromaDex-sourced NIAGEN® NR."
ChromaDex requests a declaration of infringement, an injunction, infringement damages, enhanced damages, and attorney fees.
It's interesting that the lawsuit is filed in the Southern District of New York, which is and has always been the best federal court in the nation. The prior patent infringement lawsuit, against Elysium was filed in Delaware. At that time, Delaware was considered a premier court for patent litigation, and you could expect your case to be handled by judges who were especially familiar with patent law.
That proved not to be true, when the case was assigned to a brand new Trump appointee, Colm Connolly, with no prior patent law experience, who had previously been blocked from the federal bench by then Delaware Senator Joe Biden for reasons we know not. Judge Connolly then stayed the case for more than a year for no good reason, and finally lifted the stay even though the original weak justification for the stay had not really changed. Then Judge Connolly dismissed most of ChromaDex's damages from the case on the grounds that he couldn't make any sense of the patent standing jurisprudence from the Court of Appeals, and would craft his own bright-line rule without regard for the purposes of patent standing jurisprudence. Then Judge Connolly split the baby on claim construction, accepting three of ChromaDex's constructions and three of Elysium's, even though some of Elysium's were far-fetched. When ChromaDex pointed out the error of Judge Connolly's patent standing ruling -- that the factual predicate for the ruling was gone -- instead of taking the opportunity to correct his mistake, Judge Connolly relied on a procedural interpretation to avoid considering the question. I think it highly likely that ChromaDex will be appealing the Delaware ruling and that the Court of Appeals for the Federal Circuit will have a lot to say about it, and this time they won't be laughing.
With that background, it makes perfect sense that ChromaDex's legal team would retreat to the last bastion of competent jurisprudence, the SDNY. Judges McMahon and Liman have been smart, savvy, no-nonsense jurists -- with apologies to Judge Carney, I would also characterize these Judges as "street-smart" -- and that is exactly what we need.
The case was assigned to Judge Edgardo Ramos, appointed to the bench about ten years ago by Barack Obama. Judge Ramos got his BA at Yale, his JD at Harvard, worked at a large law firm, then became an Assistant US Attorney prosecuting white collar crime and public corruption.
That ought to do.
Probably the Thorne matter will go to trial in 2-3 years.
Another question is whether W.R. Grace, which holds the patents on the crystalline forms of NR, will be next to sue Thorne for patent infringement. We'll see.
Of course, there is back-story here. On December 2, 2020, Thorne asked the USPTO to institute a streamlined proceeding called "Inter Partes Review" to invalidate one of the patents that ChromaDex says Thorne is infringing, and Thorne challenged the other on February 1, 2021.
Thorne said in its IPR petition that it had new arguments that Elysium did not think of or discover in Elysium's prior failed bid to invalidate the patents. On its face, that seems highly unlikely, because Elysium had plenty of incentive to dig up every conceivable argument. And they were willing to run with some marginal ones. I don't care for Elysium's team at Foley Hoag, but nobody says they're incompetent.
One of the new arguments that Thorne proposed was that a graduate student (now a professor) working with Dr. Brenner, who co-authored an article with Dr. Brenner, somehow tipped the beans about the invention in a way that made it unpatentable. That argument seems to have collapsed -- Thorne apparently cancelled its attempt to depose Dr. Brenner on the issue. I won't be surprised if the PTAB refuses to hear either of Thorne's petitions.
I mostly stopped blogging the litigation because I think the legal play-by-play serves no good purpose. As I detailed here, I have come to believe that the litigation will continue indefinitely: as long as ChromaDex has valuable intellectual property to defend, it will come under attack. And ChromaDex has world class legal teams to handle it. What's more important, I think, is how the science pans out, and whether consumers begin to take seriously the opportunity to replenish NAD via a simple, safe vitamin supplement.
But today somebody lit up the Litigation Blogger Bat Signal, and I got the following note:
Shelly, It’s overwhelming all this legal stuff. Is Chromadex looking like we will win and prevail or is this going to drag on forever!
My current take on the litigation is that it's going very well in California. It's going pretty well in New York, too: Not only has Elysium lost a number of discovery disputes, but the Judge specifically stated about one of Elysium's filings that it "smacks of bad faith," which gives me the sense that the Judge has figured out -- faster than Judge Carney did -- exactly what this litigation is about.
The New York case should go to trial in a few months. The Judge has told the parties to be ready for trial in August.
The California case should go to trial in September. Judge Carney has shown a strong commitment to getting this case off his docket.
I don't think the Delaware case is going as well, but it's too technical to really understand the implications of the various rulings, and we don't know what counter-moves the parties are planning in response. But the Delaware case, too, is scheduled to go to trial in September, and the Court has so far resisted multiple efforts to postpone that day of judgment.
So in one sense, the litigation is going to end soon, because all three trials are likely to occur in the second half of this year.
But in another sense, the litigation is absolutely going to drag on forever, because appeals are possible in every case (highly likely, in Delaware), and new cases will emerge, like the one that is the subject of this blog post -- a brand new patent infringement case against Thorne, which, if it does not settle, might not go to trial for years. And if NR becomes increasingly important over time, new infringers will likely emerge, and new patent infringement suits. So, yes, the litigation "is going to drag on forever".
And therefore, someone who thinks that ChromaDex's fate turns on how well the civil justice system adjudicates any particular dispute might not like the stock.
By contrast, someone else might think that the civil justice system, after all the appeals have run their course, mostly gets it right, and that ChromaDex has the resources it needs to adequately navigate the system, and that ChromaDex has lots of patents, not just two, and that the value of ChromaDex's intellectual property will increase over time as the fruits of its many research agreements manifest as more and more patents stretching far into the future. That person might like the stock.
I don't know what anyone should do -- there's no investment advice on this blog. But it's not worth it to me to blog the litigation, so I am going to continue to not do that -- except for occasional updates -- although for people who want to follow the litigation themselves, I will continue to post the documents here.