An Inside Job at Affymetrix

The $90 million that gene chip pioneer Affymetrix Inc. wrung from rival Illumina, Inc. in a settlement in January was seen by Wall Street as a good deal for both companies. “The financial terms are fair,” says Ross Muken, an analyst for Deutsche Bank. Under the settlement, Illumina hands Affymetrix the cash in exchange for the withdrawal of all pending patent infringement suits?one in Delaware federal court that was filed in 2004, along with another round filed in October 2007 in Delaware, the United Kingdom, and Germany?without admitting liability. (The settlement also limits Affy’s ability to sue Illumina in the future.) Illumina gets out from under the threat of revenue-crimping royalties, Muken says, while Affymetrix gets certainty on the value of its IP portfolio and can invest more freely in acquisitions.

But there’s another unsung advantage for Affymetrix that is of particular interest to IP professionals. While Illumina has had to pay years of hefty legal bills to Kirkland & Ellis, winner of this year’s American Lawyer Litigation Department of the Year contest, Affymetrix just has had to pay the salaries?and bonuses, we hope?of the five in-house lawyers on its patent litigation staff. And Kirkland & Ellis, led by Mark Pals, a biophysics Ph.D and a top patent litigator, sure didn’t roll right over Affymetrix’s in-house team. Delaware federal distict court judge Joseph Farnan had divided that litigation into three parts, trying first only the issue of infringement of the six patents in question. Last spring the Affymetrix in-house team prevailed in a jury trial on that issue, winning for the company a $16 million verdict and a 15 percent royalty rate. The settlement came on the eve of the jury trial on the patents’ validity.