Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jan. 31, 2020
Loss Contingency [Abstract]  
Contingencies Disclosure [Text Block]

Note 12 – Contingencies

There are currently three cases that 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. In 2017, the Court entered summary judgment against the Company that the asserted claims of the ‘180 and ‘405 Patents are invalid for nonenablement in cases involving Abbott, Becton Dickinson, Gen-Probe, Hologic, and Roche. The Company appealed the Court’s final judgment of invalidity in those cases to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”), which were subsequently consolidated (“the Consolidated Appeals”). The Federal Circuit heard oral argument in the Consolidated Appeals on January 7, 2019. In the Consolidated Appeals, the Company had 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, and Roche to the Court.  On June 20, 2019 the Federal Circuit affirmed the District Court’s grant of summary judgment of non-enablement with respect to the ’180 and ’405 patents. The Company filed a petition for rehearing and rehearing en banc on August 5, 2019. The Federal Circuit requested that the Abbott, Becton Dickinson, and Roche Defendants submit a response to that petition, which they filed on October 11, 2019. The Federal Circuit denied Enzo’s petition on October 29, 2019. On February 26, 2020, Enzo filed a petition for writ of certiorari to the United States Supreme Court, requesting review of the Federal Circuit’s decision that affirmed the district court’s rulings.

In April 2019, the Company entered into an agreement with Hologic and Grifols, resolving litigation resulting from four cases originally brought by the Company in the Court. As a result, Enzo dismissed (1) a stayed patent litigation regarding the ‘180 and ‘197 Patent against Hologic in the Court; (2) the Consolidated Appeals against Gen-Probe and Hologic resulting from two cases filed in the Court, and (3) the Company’s appeal in the litigation involving the ‘581 Patent that involved both Hologic and Grifols. As a result of the agreement with Hologic, Hologic withdrew from Enzo’s Federal Circuit appeal of the Patent Trial and Appeal Board’s adverse rulings in two inter partes review proceedings regarding the ‘197 Patent filed by Hologic and joined by Becton Dickinson (“the ‘197 PTAB Appeals”). 

Regarding the ‘197 PTAB Appeals, on August 16, 2019, the Federal Circuit affirmed the Board’s decision finding that each of the challenged claims is unpatentable as anticipated or obvious. The Company filed a petition for rehearing and rehearing en banc on October 30, 2019, which the Federal Circuit denied on December 4, 2019.

On February 5, 2020, plaintiffs Harbert Discovery Fund, LP and Harbert Discovery Co-Investment Fund I, LP (“Plaintiffs”) filed a complaint in the United States District Court for the Southern District of New York in connection with the Company’s 2020 annual meeting (the “Annual Meeting”). The Complaint names the Company, Dr. Elazar Rabbani, Barry W. Weiner, Dr. Bruce A. Hanna, Dov Perlysky and Rebecca Fischer as defendants (“Defendants”). Plaintiffs assert claims (i) against the Company and the individual defendants for alleged violations of the federal securities laws, in connection with certain of the Company’s public statements concerning the Annual Meeting; (ii) derivatively, against the individual defendants, for breach of fiduciary duty and anticipatory breach of contract; and (iii) derivatively, against the individual defendants, seeking a declaratory judgment that a certain proposal up for vote at the Annual Meeting is invalid. Plaintiffs request injunctive relief, a declaratory judgment, damages, attorneys’ fees and other unspecified relief. On February 27, 2020, the parties filed a stipulated schedule, which was entered by the Court, and which provides that Plaintiffs will file an amended complaint by March 26, 2020, and that Defendants will respond to the amended complaint by May 1, 2020. Discovery has not commenced.

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.

As described in Note 3, third-party payers, including government programs, may decide to deny payment or recoup payments for testing that they contend was improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received. During the third fiscal quarter of 2019, a significant third-party payer informed us outside of their typical business practice that they believe it overpaid the Company during certain periods of fiscal 2018. The Company disputes these claims, has formally sent legal appeal letters to the payer, and at the present time may exercise its rights under the terms of the agreement with the payer and file a notice of arbitration. At this time, the Company is unable to determine the probability of the outcome of these appeals or reasonably estimate a range of potential losses associated with this claim. During the six month 2020 period, we recorded $0.8 million in legal and related expenses as a result of reduced reimbursements this payer made to us.