The ITC 1068 Action
As previously disclosed: (a)on July31, 2017, Bio-Rad Laboratories, Inc. (“Bio-Rad”) and Lawrence Livermore National Security, LLC filed a complaint against 10x Genomics, Inc. (the “Company”) in the U.S. International Trade Commission (“ITC”) pursuant to Section337 of the Tariff Act of 1930, accusing substantially all of the Company’s products of infringing U.S. Patent Nos. 9,089,844, 9,126,160, 9,500,664, 9,636,682 and 9,649,635 (the “ITC 1068 Action”); and (b)in September 2018, the presiding Administrative Law Judge issued an initial determination (the “Initial Determination”) (i) finding that the Company’s legacy Gel bead in Emulsion microfluidic chips (“GEM microfluidic chips”) infringe the ‘664, ‘682 and ‘635 patents but not the ‘160 patent, (ii)finding that the Company’s gel bead manufacturing microfluidic chip and new microfluidic chip (“Next GEM microfluidic chip”) do not infringe any of the patent claims asserted against them, (iii)recommending entry of an exclusion order against the Company’s legacy GEM microfluidic chips and (iv)recommending a cease and desist order that would prevent the Company from selling imported legacy GEM microfluidic chips.
On December18, 2019, the ITC issued its final determination in the ITC 1068 Action (the “Final Determination”), which was received by the Company on December19, 2019. The Final Determination affirmed the Administrative Law Judge’s ruling in the Initial Determination that the Company’s Next GEM microfluidic chips and gel bead manufacturing microfluidic chips do not infringe any of the claims asserted against them. As previously disclosed, since August28, 2019, all Chromium instruments that the Company sells and has sold operate exclusively with the Company’s Next GEM solutions and the Company believes that the Company’s Chromium products utilizing the Company’s Next GEM microfluidic chips will constitute substantially all of the Company’s Chromium consumables sales by the end of 2020.
The Final Determination affirmed the Administrative Law Judge’s ruling that the Company’s legacy GEM microfluidic chips infringe the ‘664, ‘682 and ‘635 patents but not the ‘160 patent.The ITC issued (1)a limited exclusion order prohibiting the unlicensed importation of the legacy GEM microfluidic chips into the United States and (2)a cease and desist order preventing the Company from selling such imported legacy GEM microfluidic chips in the United States.However, in response to the multiple submissions from leading researchers regarding the importance of research enabled by the Company’s products to “ameliorate [such] significant public interest concerns,” the ITC expressly allowed the importation and sale of the legacy GEM microfluidic chips for use by researchers who are using such chips as of December18, 2019, and who have a documented need to continue receiving such chips for a specific current ongoing research project for which that need cannot be met by any alternative product.
Prior to the second quarter of 2019, all of the Company’s microfluidic chips were manufactured outside of the United States, but beginning in the third quarter of 2019, the Company’s United States manufacturing facilities achieved volume production of certain of the Company’s legacy GEM microfluidic chips accounting for the majority of the Company’s United States consumable revenue in that period.
The Final Determination is subject to a 60-day presidential review period before taking effect. During the presidential review period, the Company is permitted to continue importation and sales of the legacy GEM microfluidic chips subject to payment of a bond. The ITC overturned the Administrative Law Judge’s recommendation in the Initial Determination that the bond be one hundred (100)percent of the entered value of the accused microfluidic chips (approximately $7 per microfluidic chip) (the “Entered Value”) and reduced the bond to three (3)percent of the Entered Value in the Final Determination.