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Datasci Suits Threaten Industry

By Mark D. Uehling

Oct. 16, 2006 | The U.S. Patent Office is under scrutiny in a series of lawsuits that are baffling the world of clinical trial technology. In 2002 the federal patent office awarded an obscure Maryland firm patent # 6,496,827 on a clinical trial data collection process using the internet. That patent is now owned by another relatively unknown Maryland company, Datasci.

Privately, many in the industry regard the U.S. Patent Office's decision as a surprising if not incomprehensible quirk of the overburdened, understaffed patent review process. But overturning the Datasci patent will take money and time, as Canada's RIM discovered when a "patent troll" law firm successfully separated the Blackberry developer from a stunning $613 million earlier this year. At some point, many technology companies find it safer and more expedient to settle intellectual property cases than fight them.

Datasci is currently suing several companies and has won settlements from two industry leaders. Electronic data capture (EDC) leader Phase Forward crumpled against Datasci's lawyers in February 2006, settling with the tiny Maryland company for $8.5 million. The Phase Forward settlement then bankrolled Datasci's attack on the rest of the industry. Last month, another company, DataLabs, settled with Datasci.

In a written statement, CEO William E. Maya said: "DataLabs' primary concern was the possibility of our customers being drawn into the suit. By quickly settling this pending litigation, each of our valued customers can be assured that all DataLabs products are free of any '827 patent issues."

Nick Richards, DataLabs' chief operating officer, said that the company was served with papers in mid-July, and had followed Phase Forward's capitulation by late August. Richards declined to state the size of the settlement. "They are fairly aggressive," he says of Datasci. "As their war chest grows, they will become more powerful."

New Targets
A key question hanging over the industry is not only which other technology vendors will be sued - that list could include any major or minor EDC supplier. (The final target, with the deepest pockets, might be Oracle.) The real quandary is whether large sponsors of clinical trials will continue to be dragged into the legal festivities.

In its case against Phase Forward, after all, Datasci also threatened a customer of Phase Forward, Quintiles. That may have raised the stakes on the lawsuit to an uncomfortable degree.

Whatever the final targets of Datasci, the cases could raise the price of EDC for the industry at large. They could also have a destabilizing effect on EDC vendors that are in a vulnerable legal or financial position. Although unlikely, it is possible that ongoing clinical trials might be affected if a smaller EDC firm were destabilized by a lawsuit.

Another EDC leader, etrials, appears to be considering its options. In a written statement, John Cline, etrials CEO, said: "We understand that Datasci has filed similar complaints recently against at least three other industry competitors. We believe complaints of this nature are just a cost of doing business in our industry. Our leadership position in the eClinical space is founded upon our ability to meet the needs of our world-class customers. With our unique eClinical technology platform, we are confident that this suit will not threaten our ability to continue to provide our clients with unprecedented insight into all aspects of their clinical trials, accelerating their drug development timelines. We will aggressively defend our right to deliver all elements of our eClinical suite and will work diligently to prevail."

And at Philadelphia's DSG, a saddened Tony Varano said he is not certain how the legal negotiations will play out. An ex-Marine, CEO Varano founded his EDC company in 1992, several years before the patent office says Datasci invented using the internet in clinical trials.

Varano says one issue facing any target of the Datasci legal assault is the state of the target's (and the industry's) technology in 1996 and 1997. Is there prior art? It's a tricky legal question. Presumably, it was one that lawyers for Phase Forward and DataLabs did not want to entrust to a jury.

Varano himself, it turns out, is trying to prove to Datasci that DSG is not violating the company's patent. Varano has turned over user manuals and documentation to Datasci lawyers in a good-faith attempt to show that DSG uses other methods to collect data in clinical trials. "It's a matter of where the server validation occurs," he notes of the DSG technology.

For other EDC companies, however, Varano agrees that legal settlements could divert internal company funds away from discretionary budget items like research and development. Speaking of the targets of Datasci, Varano says: "It's taking that money out of R&D, out of the company - and shifing it to the patent holder. Money that would have been spent on new enhancements, new designs, is going to lawyers and to this DataSci entity." 



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