Dave,
Thanks for the advice. I have some money from a stock option plan at my former employer which I would like to reinvest. I have worked in the biotechnology sector for a number of years, and have heard people talk about a few biotech companies, such as KDUS, as undervalued. Hence, my new interest in KDUS and my due diligence which has, undoubtedly, been done by many others.
As for calling the companies, thanks but no thanks. I am not interested in a "he said -she said" session.
However, I have talked to a patent attorney friend of mine at a big NY law firm about the litigation. In addition to my own questions, I sent my friend your posting. Here was her answer
>>Dave said> As I understand it, for one, there are several companies (and Institutions ?) whose work would also be considered infringing on the alleged patent. Remark: this is irrelevant to the suit at best, or hurts Cadus at worst. First, it suggests that they may have been targeted in order to set an example for the rest of the industry. This is possibly working as 4+ companies have now signed licenses. Second, this observation may enhance an argument for SIBIA that their invention has been met with commercial success -- a so-called secondary consideration for obtaining a patent.
>>Dave said> in the worst case scenario, will Cadus cease to exists ? Remark: I don't know how dependent Cadus is, if at all, on the technology vis-a-vis whether an injunction would kill the company. However, an adverse judgment in this case could financially break the company. The early press releases in this litigation suggest that SIBIA was seeking a $10 million license. If Cadus were to lose and were found to be a willful infringer, they could be looking at a treble (triple) damage award, and possibly attorney fees. If SIBIA were to convince the court that the $10M price was a reasonable royalty, then the damage award could be as high as $30M, plus a few million for attorney fees. The last 10Q filing indicates that Cadus has some $38.1M in cash and cash equivalents. An award of that size would likely break this company.
As far whether $10M is a reasonable royalty, you should look at the terms of the other SIBIA licenses for these patents, as well as how far the negotiations went between the companies prior to the suit.
I thought the countersuit was interesting, but brings up many questions of proof to the jury. According to the August 12, 1996 BioWorld Article, the Cadus IPO was priced "on one of the most volatile trading days since the October 1987 market crash".
As for the firms representing each party, SIBIA is represented by Stephen P. Swinton and Raquel M. Prieguez of Cooley, Godward, Castro, Huddleson & Tatum in San Diego. Cadus is represented by David C. Doyle of Baker & McKenzie in San Diego and Ralph A. Loren of Lahive & Cockfield in Boston. Cooley, Godward has a decent patent litigation reputation. I had never heard of Lahive & Cockfield, and, honestly, am baffled by this choice. From what I can tell, they have litigated only a dozen or so patent cases in the last fifteen years, and no biotech cases. That being said, they did win a recent decision in the case to have a protective order modified -though this does not rise to even the level of a "battle" in this war. Baker & McKenzie is apparently just local counsel. Somebody should have picked an NYC firm!!
As for the Cadus prospectus, it could argue that the risk was disclosed in the paragraph
"The patent holder of an aspect of drug screening techniques that is widely used by many companies in the biotechnology industry has recently filed a patent infringement action against the Company seeking injunctive relief and monetary damages. If injunctive relief is granted, certain aspects of the drug discovery and development efforts of the Company and its collaborative partners could be delayed. If monetary damages are awarded, the business, financial condition and results of operations of the Company could be materially adversely affected. The costs of and the diversion of Company resources associated with infringement litigation could have a material adverse effect on the business, financial condition and results of operations of the Company". |
