Facing Down the Lab Assay Patent Monster

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PATENT ROYALTIES FOR HOMOCYSTEINE TESTING are the subject of our lead story in this issue. (See pages 2-4.) It provides an early example of how patent-protected diagnostic tests can create budget-busting problems for hospital laboratories which perform those tests.

The spectre of crushing royalty payments on a host of patent-protected diagnostic assays has loomed large over the strategic planning activities of the nation’s hospital laboratories. That spectre is fast becoming a reality. In recent months, hundreds of hospital laboratories received royalty demand letters from Competitive Technologies, Inc. (CTI). These letters ask for royalty payments to be made on all homocysteine tests performed as far back as January 1, 1998. CTI estimates that 20 million homocysteine tests will be performed this year, so the impact of royalties on these tests can be substantial for labs doing high volumes of homocysteine testing.

CTI has made efforts over the years to collect royalties from labs on homocysteine testing. But that effort intensified this summer. That’s when CTI prevailed in its lawsuit against Laboratory Corporation of America. CTI alleged several torts, including violations of a contract and infringing the homocysteine patent. The federal court ruled in CTI’s favor, and the judgement was upheld on appeal. LabCorp paid the judgement to CTI in August.

Emboldened by this court success, CTI sent another round of demand letters to hospital laboratories and independent laboratories it believes are doing homocysteine testing covered by its patent. Since the demand letter asks for royalties on tests performed since 1998, the total royalty amount for any affected laboratory could be significant, relative to its current budget.

Setting aside the validity of CTI’s patent claims on homocysteine testing, its current royalty-demand campaign puts the issue of patents on diagnostic tests front and center. As clients and regular readers of THE DARK REPORT know, literally hundreds of biotech companies are researching molecular markers for therapeutic drugs and diagnostic assays. Patent protection of their discovery is the end goal. At some future point, the laboratory industry will have to square off with the patent/royalty monster. It remains to be seen whether the monster can be tamed, or whether it will wreak havoc on the financial condition of the nation’s laboratories.

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