CDEX (Old)

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Colorado firm accuses Rockville’s Cdex of patent infringement

Experian.http://www.gazette.net/stories/040706/businew184605_31950.shtml
Friday, April 7, 2006
A Rockville manufacturer of substance detection and verification systems has been hit with a patent-infringement lawsuit by a competitor over a major product.

Cdex, which formed in 2001, began selling ValiMed last year to health care facilities such as the University of Maryland Medical Center, to help protect themselves against the growing trade of counterfeit medication, as well as guard against mistakes.

But officials with Analytical Spectral Devices of Boulder, Colo., alleged in a complaint filed in March in a Denver federal court that Cdex’s ValiMed is similar to the RxSpec system that Analytical patented in 2004, because ValiMed uses a ‘‘light source” to analyze and validate medication. Analytical officials seek unspecified damages and are asking the court to make Cdex stop selling ValiMed.

Brad Wills, a spokesman for Cdex, declined to comment. In the company’s latest quarterly report filed with the U.S. Securities and Exchange Commission last month, Cdex officials acknowledged the complaint.

‘‘As a matter of company policy, Cdex does not knowingly infringe upon the valid intellectual property or patent rights of other companies,” officials said. ‘‘Cdex will investigate [Analytical’s] complaint and take any and all necessary actions to remove [the] complaint against Cdex.”

The $39 billion counterfeit medication industry is expected to increase to $75 billion by 2010, according to the Center for Medicine in the Public Interest of New York. More hospitals and pharmacies are seeking better ways to guard against dispensing or selling phony medication, as well as making mistakes when administering prescribed drugs, and that’s where systems such as Cdex’s come in.

Counterfeits Rising

Fake prescription drugs worldwide account for about 11 percent of the total medication market. That is expected to increase to about 14 percent by 2010, according to the Center for Medicine in the Public Interest of New York.
Cdex officials knew about Analytical’s patent before selling ValiMed and signing an agreement with Baxa Corp. of Denver last year to distribute ValiMed, Analytical officials alleged in the lawsuit. The case has been referred to U.S. Magistrate Judge Craig Shaffer, and a hearing has been set for May 23.

Cdex recently received a notification of allowance from the U.S. Patent and Trademark Office for a product that will detect explosives or controlled substances. Officials expect that patent to be issued this spring; Cdex has four additional patents pending in the United States, plus more internationally.

Analytical, which was founded in 1990, has received seven patents related to verification of medication, including two for its RxSpec system, company officials said. Clients include the U.S. Department of Veteran Affairs mail-order pharmacies.

Cdex, which went public on the OTC bulletin board last year, reported that revenues for fiscal 2005, which ended in October, totaled $178,607, compared with $4,069 in 2004 and $191,964 in 2003. Revenue last year was from selling ValiMed, while sales in the previous two years derived from a U.S. Department of Defense contract to study the detection of chemical and biological agents using Cdex products.

Cdex reported a net loss of $5.2 million last fiscal year, which followed losses of $6 million and $4.1 million the two previous years. The company recently named a new CEO, James O. Griffin, who joined Cdex as COO last year. He succeeded Malcolm H. Philips, who is continuing as board chairman.

Besides its Rockville headquarters, Cdex has a research and development laboratory in Tucson, Ariz.

Analytical is privately held and has about $3 million in annual revenue, according to a recent report by credit bureau