Illumina, BGI litigation not yet at risk of getting drawn into U.S.-China dispute

Developments to watch for include any emerging lawsuits in Chinese courts or unusual rulings

Despite the high-profile nature of the patent dispute between Illumina and Chinese competitor BGI Genomics, two of the largest players in next-generation sequencing, there is no reason to believe it will become embroiled in the ongoing U.S.-China trade war.

Illumina Inc. (NASDAQ:ILMN) has won the first salvo after the U.S. District Court for Northern California issued a preliminary injunction on June 16 that prevents U.S. subsidiaries of BGI Genomics Co. Ltd. (SZSE:300676) from marketing their sequencing instruments and related reagents in the U.S.

BGI has previously found itself entangled in politics following its 2013 acquisition of U.S. sequencing company Complete Genomics Inc. in which it beat out competing bidders including Illumina.

A 2018 USTR Section 301 report on Chinese activities cited the acquisition as an example of Chinese firms targeting the U.S. genomics sector and the theoretical national security risk that entailed.

That report played at least some part in triggering U.S. lawmakers to expand the role of the Committee on Foreign Investment in the United States (CFIUS). While the committee’s remit ostensibly permits review of any foreign investor gaining ability to influence a company in a sector that falls within the U.S. national interest, the expansion was primarily targeted at what was perceived to be aggressive Chinese investments into sensitive sectors such as tech and biotech (see “CFIUS Waiting Game”).

“When you compare the nature of the lawsuits between Illumina and BGI and that between Illumina and Qiagen -- what’s the difference?”

Tony Chen, Jones Day

But according to Jones Day patent attorney Tony Chen, the ongoing patent dispute with Illumina is a different situation and there’s little reason, at least at this point, to expect the dispute to get entangled in U.S.-China political tensions.

“This litigation is very much in the vein of companies in a highly competitive industry and how they use their IP rights to protect their business enterprise,” Chen told BioCentury.

Chen noted that Illumina doesn’t appear to be unfairly singling out BGI. Since 2012, Illumina has had an ongoing patent dispute with its largest European competitor, Qiagen N.V. (NYSE:QGEN; Xetra:QIA), in a bid to prevent the Dutch company from marketing its GeneReader NGS system in the U.S. A 2017 settlement prevented the sale of GeneReader in the U.S. using legacy chemistry processes, but it is available using a new chemistry process covered by different IP.

“When you compare the nature of the lawsuits between Illumina and BGI and that between Illumina and Qiagen -- what’s the difference?” Chen said.

Chen added that he wouldn’t expect either the U.S. or Chinese government to intervene unless there was something unusual or exceptional about the court decision. “I haven’t seen it in this case,” he said.

The preliminary injunction, however, is by no means the end of the dispute between the two sequencing giants. The case is expected to go to trial next May.

In addition, BGI’s Complete Genomics subsidiary countersued Illumina in September, alleging that Illumina’s sequencing instruments infringe Complete Genomics’ IP covering patterned array technology.

According to Chen, what will be important to watch for are any emerging lawsuits around next-generation sequencing IP in Chinese courts.

On a conference call with investors in January, Illumina’s President and CEO Francis deSouza said that Illumina and BGI each have roughly half of the market share in China for NGS systems.

Illumina recorded 2019 revenues of $372 million in China -- about 10% of its $3.5 billion in worldwide revenues. More than half of the company’s 2019 revenues came from the U.S.

Illumina did not respond to questions regarding any ongoing litigation with BGI in China.

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