Annual report pursuant to Section 13 and 15(d)

Contingencies

v3.10.0.1
Contingencies
12 Months Ended
Jul. 31, 2018
Loss Contingency [Abstract]  
Contingencies Disclosure [Text Block]

Note 14 - Contingencies


As of July 31, 2018, there are seven cases that are either pending or on appeal, which were originally brought by the Company in the United States District Court for the District of Delaware (“the Court”), alleging patent infringement against various companies.  On June 28, 2017, the Court issued an opinion in the Gen-Probe case, granting Gen-Probe’s motion for summary judgment that the asserted claims of the ’180 patent are invalid for nonenablement. The Court entered final judgment of invalidity of the asserted claims of the ‘180 patent on July 19, 2017 in the Gen-Probe and Hologic cases.  The Court entered partial final judgment of invalidity of the asserted claims of the ‘180 patent and stayed the remainder of the cases in the Becton Dickinson and Roche cases on July 31, 2017 and August 2, 2017, respectively.  The Company filed notices of appeal in each of the Gen-Probe, Hologic, Becton Dickinson, and Roche cases, which were docketed by the United States Court of Appeals for the Federal Circuit (“Federal Circuit”).  In the Abbott case, the parties agreed that the Court’s summary judgment ruling in the Gen-Probe case invalidated all of the ’180 patent claims asserted against the Abbott Defendants.  On August 15, 2017, the Court granted Abbott’s motion for summary judgment that the asserted claims of the ’405 patent are invalid for nonenablement.  On September 1, 2017, the Court entered final judgment of invalidity of the asserted claims of the ‘180 and ‘405 patents for nonenablement in the Abbott case.  Enzo subsequently filed a notice of appeal in the Abbott case on September 14, 2017.  The Federal Circuit docketed the appeal on September 15, 2017.  The Federal Circuit consolidated the appeals from the Abbott, Becton Dickinson, Gen-Probe, Hologic, and Roche litigations (“Consolidated Appeals”).  We disagree with the Court’s invalidity decisions regarding the ‘180 and ‘405 patents in the pending cases as set forth in our opening brief in the Consolidated Appeals pending in the Federal Circuit filed on November 28, 2017.  In the Consolidated Appeals, we have asked the Federal Circuit to reverse the Court’s grants of final and summary judgment of invalidity of the asserted claims of the ‘180 and ‘405 patents and to remand the cases against Abbott, Becton Dickinson, Gen-Probe, Hologic, and Roche to the Court.  Briefing is now complete in the Consolidated Appeals.  The parties await the Federal Circuit’s scheduling of an oral argument date for the Consolidated Appeals.  In the other two cases involving Hologic, one of the cases is stayed (Hologic II), while the other case (Hologic III) that involves the ‘581 patent is proceeding under the Court’s scheduling order.  In Hologic III, the Court granted Enzo’s motion to amend its complaint to add two new defendants, Grifols Diagnostic Solutions, Inc. and Grifols, S.A, to that case.  The parties have completed claim construction briefing and a claim construction hearing, but the Court has not issued a claim construction order.  The Court amended the scheduling order such that fact discovery will close on October 31, 2019, dispositive motions will be heard on May 7, 2019, and trial will begin on November 18, 2019.  Regarding Hologic’s petition requesting institution of an inter partes review proceeding of U.S. Patent No. 6,221,581 (“the ‘581 patent”) filed with the United States Patent and Trademark Office (“PTO”), the Patent Trial and Appeals Board (“the Board”) denied institution of Hologic’s petition on April 18, 2018.  On May 18, 2018, Hologic filed with the Board, a request for rehearing of the order denying institution of inter partes review of the ‘581 patent.  Enzo filed a brief in response to Hologic’s request for rehearing.


As of July 31, 2018, the Company and Enzo Life Sciences are engaged in litigation in the United States District Court for the Southern District of New York against Roche Diagnostic GmbH and its related company Roche Molecular Systems, Inc. (“Roche”), as declaratory judgment defendants. This case was commenced in May 2004. Roche seeks a declaratory judgment of non-breach of contract and patent invalidity against the Company and Enzo Life Sciences. Roche has also asserted tort claims against the Company and Enzo Life Sciences. The Company and Enzo Life Sciences have asserted breach of contract and patent infringement causes of action against Roche. There has been extensive discovery. In 2011, Roche moved for summary judgment of non-infringement regarding the Company’s patent claims. In 2012, the motion was granted in part and denied in part. In December 2012, Roche moved for summary judgment on the Company’s non-patent claims. Additional discovery was taken and the Company responded to the motions in May 2013. In December 2013, the Court granted in part and denied in part Roche’s summary judgment motion. In October 2014, the Court ordered that damages discovery concerning the Company’s remaining contract and patent claims and Roche’s claims should be completed by the end of January 2015, and expert discovery should be completed following the Court’s claim construction ruling concerning the Company’s patent infringement claim against Roche. Roche dropped its tort claims during damages discovery. On October 2, 2017, the Court issued its claim construction ruling. On September 8, 2018, the Court issued an order (i) directing that motions for summary judgment should be filed on October 10, 2018 and a proposed pretrial order by February 22, 2019, and (ii) scheduling an April 8, 2019 trial. The Company and Enzo Life Sciences intend to vigorously press their remaining claims and contest the claims against them.


The following legal settlements are included in the statement of operations under Legal settlements, net within the Life Science segment for the 2016 period:


The Company and the U.S. Department of Justice reached a settlement agreement to resolve an investigation focused primarily on an alleged failure to collect diagnosis codes from physicians who ordered tests through Enzo Clinical Labs, and recorded a charge of $2.0 million during fiscal year 2014. The settlement amount is being paid with interest over a five-year period. During fiscal year 2016, the Company accrued an additional $1.5 million, in the statement of operations under legal settlements, net within the Clinical Labs segment, due to the Company’s achievement of certain financial milestones. As of July 31, 2018, the total liability for this settlement is $0.4 million and is included in other current liabilities.


In June 2014, the Company, as plaintiff finalized and executed a settlement agreement with PerkinElmer, Inc., and PerkinElmer Health Sciences, Inc. (together, “PerkinElmer”). PerkinElmer paid $7.0 million in escrow pursuant to the agreement because of a former attorney’s charging lien for fees allegedly owed for past services rendered to the Company. In December 2015, the Company entered into a Settlement Agreement with the former attorney pursuant to which the Company and the former attorney resolved their respective claims against each other. In January 2016, the Company received a total of approximately $7.0 million from the escrow referred to above in accordance with the terms of the Settlement Agreement. In October 2015, the Company reached and finalized a settlement with Affymetrix, Inc. in the amount of $6.8 million, net in a patent infringement action brought by the Company.


In January 2016, the Company reached and finalized a settlement agreement with Agilent Technologies, Inc. in the amount of $6.1 million, net in a patent infringement action brought by the Company. In May 2016, the Company reached and finalized a settlement with Life Technologies Corporation in the amount of $24.3 million, net in an infringement action brought by the Company. In July 2016, the Company reached and finalized a settlement with Illumina, Inc., in the amount of $14.5 million, net in an infringement action brought by the Company.


There can be no assurance that the Company will be successful in these litigations. Even if the Company is not successful, management does not believe that there will be a significant adverse monetary impact on the Company.


The Company is party to other claims, legal actions, complaints, and contractual disputes that arise in the ordinary course of business. The Company believes that any liability that may ultimately result from the resolution of these matters will not, individually or in the aggregate, have a material adverse effect on its financial position or results of operations