1013-00005 · Genome Dx Therapeutics Inc · Damages

veridian-license-comparability-memo.docx DOCUMENT Litigation

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MEMORANDUM

FROM: Peter Vassiliev, Calderwood & Harkness LLP, 555 Mission Street, Suite 3100, San Francisco, CA 94105

TO: Catherine Bloom, Responsible Partner, intellectual Property, Calderwood & Harkness LLP

CC: Alan Ngo, Billing Partner; Wendy Schultz, Working Associate

DATE: February 2026

RE: Comparability Analysis of GenomeDx–Veridian Molecular Labs License Agreement (dated April 3, 2022) for Use in Damages Theories — Genome Dx Therapeutics Inc. v. Helios Precision Diagnostics, Inc., Case No. 3:25-cv-01847-JWL (N.D. Cal.)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work-product doctrine. It has been prepared in anticipation of litigation and reflects the mental impressions, conclusions, and legal theories of counsel. This memorandum should not be disclosed to any third party without the prior written authorization of Catherine Bloom, Responsible Partner.

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I. EXECUTIVE SUMMARY

This memorandum analyzes the non-exclusive license agreement dated April 3, 2022 between Genome Dx Therapeutics Inc. ("GenomeDx" or "Licensor") and Veridian Molecular Labs, Inc. ("Veridian" or "Licensee"), covering U.S. Patent Nos. 10,438,271 (the "'271 Patent") and 11,204,893 (the "'893 Patent"), and evaluates its comparability to a hypothetical negotiation between GenomeDx and Helios Precision Diagnostics, Inc. ("Helios") for purposes of a reasonable-royalty damages analysis under 35 U.S.C. § 284 in the above-captioned matter.

After a thorough factor-by-factor analysis under the framework established by Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), our conclusion is that the Veridian license is the most probative comparable license in GenomeDx's portfolio, and indeed the only executed license under the patents-in-suit. However, material differences between the circumstances of the Veridian license and the circumstances of a hypothetical negotiation between GenomeDx and Helios warrant an upward adjustment from the Veridian license's 15% running royalty rate. These material differences are principally threefold:

1. Field-of-use limitation. The Veridian license is limited to bladder cancer diagnostics, a field in which Veridian does not compete with GenomeDx. By contrast, Helios directly competes with GenomeDx in prostate cancer genomic prognostic testing — GenomeDx's core commercial market and the application that drives the vast majority of GenomeDx's $387.6 million in annual revenue.

2. Non-litigation negotiation context. The Veridian license was negotiated as a voluntary, arm's-length commercial arrangement with no pending or threatened litigation between the parties. Under the hypothetical negotiation framework, the negotiation with Helios is deemed to occur against the backdrop of an assumption that the patents are valid and infringed, which materially alters the bargaining dynamic and supports a premium over the Veridian rate.

3. Absence of the '647 Patent. The Veridian license covers only the '271 Patent and the '893 Patent. The '647 Patent (U.S. Patent No. 11,891,647) had not yet issued when the Veridian license was executed and therefore was not included. The '647 Patent, which issued on February 6, 2024, covers the integration of genomic risk scores with clinical covariates — a feature that Helios's ProstaSignal™ Genomic Classifier expressly practices — and has a longer remaining patent life (expiring September 9, 2041). The inclusion of this additional patent in any hypothetical license to Helios increases the value of the licensed rights and supports an incremental royalty adjustment.

Taking these differences into account, we propose an adjusted royalty rate of 18% for the hypothetical negotiation between GenomeDx and Helios, representing the midpoint of a defensible range of 17.5% to 19.0%. This adjusted rate, when applied to the estimated ProstaSignal™ revenue from October 2024 through March 2025, yields a reasonable-royalty damages figure as follows:

• Royalty base: $32,088,000 (8,400 ProstaSignal™ tests × $3,820 average reimbursement per test)

• Proposed royalty rate: 18%

• Reasonable royalty damages (through March 2025): $5,775,840

The Veridian license analysis feeds directly into Georgia-Pacific factor 12 (the portion of profit customarily allowed in the particular business for the use of the invention or analogous inventions) and establishes the reasonable-royalty floor of $5,775,840. This figure represents the minimum damages to which GenomeDx is entitled under 35 U.S.C. § 284 and will continue to accrue as Helios's ProstaSignal™ sales continue post-March 2025.

It bears emphasis that the lost-profits theory remains GenomeDx's primary damages theory, yielding a damages figure of $18,490,320 (calculated as 6,100 diverted tests × $4,210 per-test revenue × 72% incremental margin). The reasonable-royalty analysis set forth in this memorandum serves as the alternative measure under 35 U.S.C. § 284 and establishes the floor below which damages cannot fall, even if the fact-finder determines that GenomeDx is not entitled to lost profits for all or a portion of the accused sales.

II. BACKGROUND

A. The Veridian License Agreement

The Veridian License Agreement was executed on April 3, 2022 between GenomeDx, as licensor, and Veridian Molecular Labs, Inc., as licensee. Veridian is a Delaware corporation headquartered in Research Triangle Park, North Carolina, specializing in molecular diagnostic assays for urological cancers, with a particular focus on bladder cancer detection and monitoring.

The material terms of the Veridian license are as follows:

Licensed Patents. The license covers two of the three patents-in-suit: the '271 Patent (U.S. Patent No. 10,438,271, titled "Methods and Systems for Multi-Gene Expression Profiling in Urological Cancer") and the '893 Patent (U.S. Patent No. 11,204,893, titled "Machine-Learning Classifier for Genomic Prognostic Testing in Urological Malignancies"). Critically, the '647 Patent (U.S. Patent No. 11,891,647, titled "Integrated Genomic-Clinical Prognostic Model for Cancer Risk Stratification") was not included in the Veridian license because it had not yet issued at the time of execution. The '647 Patent issued on February 6, 2024, nearly two years after the Veridian license was executed. The absence of the '647 Patent from the Veridian license is a material point of distinction for purposes of the comparability analysis, as discussed in detail in Section IV.B.2 below.

License Type. The license is non-exclusive. GenomeDx retained the right to license the same patents to other parties and to practice the patented technology itself in all fields.

Scope and Field of Use. The license is expressly limited to bladder cancer diagnostics. Section 2.1 of the agreement defines "Licensed Field" as "the development, manufacture, use, sale, offer for sale, and importation of diagnostic products and services for the detection, characterization, staging, prognosis, and monitoring of bladder cancer (urothelial carcinoma) in human patients." The license does not extend to prostate cancer or any other urological cancer application. This field-of-use restriction is a critical distinguishing factor between the Veridian license and the hypothetical license that would be negotiated with Helios, as discussed in Section III.C and Section IV.A.1 below.

Financial Terms. The Veridian license provides for a running royalty of 15% of net revenues from licensed products, as defined in the agreement. "Net revenues" is defined as gross revenues less returns, allowances, discounts, and rebates, consistent with standard industry practice. In addition to the running royalty, the agreement provides for a minimum annual royalty of $500,000 regardless of actual sales of licensed products. This minimum annual royalty ensures that GenomeDx receives meaningful compensation for the use of its patented technology even in years where Veridian's bladder cancer diagnostic sales are below the threshold that would generate $500,000 at a 15% rate (i.e., below approximately $3.33 million in net revenues).

Term. The license term is co-extensive with the life of the licensed patents. Both the '271 Patent and the '893 Patent share the same priority chain and have an expiration date of June 14, 2036. Accordingly, the Veridian license will remain in effect through June 14, 2036, absent earlier termination for breach or other specified events.

Negotiation Context. The Veridian license was negotiated as an arm's-length commercial arrangement between two sophisticated parties represented by experienced intellectual property counsel. There was no pending or threatened litigation between GenomeDx and Veridian at the time of negotiation or execution. The negotiation was initiated by Veridian, which sought access to GenomeDx's patented gene expression profiling and machine-learning classifier technology for application in its bladder cancer diagnostic pipeline. The non-litigation, voluntary nature of the Veridian negotiation is another material point of distinction from the hypothetical negotiation framework applicable to the Helios damages analysis.

B. The Hypothetical Negotiation Framework

Under the reasonable-royalty framework established by Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), and refined by the Federal Circuit in cases including Rite-Hite Corp. v. Kelley, Inc., 56 F.3d 1538 (Fed. Cir. 1995) (en banc), Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009), and VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014), a reasonable royalty is determined by reference to a hypothetical negotiation between a willing licensor and a willing licensee at the time the infringement began.

The parameters of the hypothetical negotiation in this case are as follows:

Hypothetical Negotiation Date. October 7, 2024, the date of ProstaSignal™'s commercial launch and the date on which infringement of the patents-in-suit commenced. All facts known or reasonably foreseeable as of that date are deemed available to the hypothetical negotiating parties, including the commercial traction of GenomeDx's Decipher® test, GenomeDx's market share in the prostate cancer genomic prognostic testing market, the existence and scope of the three patents-in-suit, and the competitive landscape.

Hypothetical Negotiation Parties. GenomeDx, as willing licensor, and Helios, as willing licensee. Both parties are assumed to be reasonable business persons seeking to reach a mutually acceptable agreement. GenomeDx is assumed to be willing to grant a license at a reasonable royalty rather than forgo licensing altogether, and Helios is assumed to be willing to pay a reasonable royalty rather than forgo the use of the patented technology.

Hypothetical License Scope. The hypothetical license would need to convey rights under all three patents-in-suit — the '271 Patent, the '893 Patent, and the '647 Patent — for use in prostate cancer genomic prognostic testing. This is broader than the Veridian license in two respects: (1) it includes the '647 Patent, which was not part of the Veridian license, and (2) it covers prostate cancer, rather than bladder cancer, as the licensed field of use.

Governing Legal Framework. The fifteen-factor analysis set forth in Georgia-Pacific, 318 F. Supp. at 1120, provides the governing analytical framework. As the Federal Circuit has emphasized, this framework is not a rigid checklist but rather a flexible tool that permits the factfinder to consider all relevant evidence bearing on the reasonable royalty determination. See Uniloc USA, Inc. v. Kestrel Partners LLC, 632 F.3d 1292, 1317 (Fed. Cir. 2011). The analysis must be grounded in the facts of the case and must avoid the use of arbitrary benchmarks or rules of thumb. See id. at 1315 (rejecting the "25 percent rule of thumb" as a basis for reasonable royalty opinions).

Book of Wisdom. In addition to facts known at the hypothetical negotiation date, the parties are permitted to consider certain post-negotiation developments under the "book of wisdom" doctrine, which allows consideration of events that actually occurred and shed light on what the parties would have anticipated at the time of the hypothetical negotiation. See Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698 (1933); Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1575 (Fed. Cir. 1988). Here, the actual commercial performance of ProstaSignal™ through March 2025 — including its test volume, revenue, and impact on GenomeDx's market share — may be considered as evidence of what a reasonable licensee would have been willing to pay at the time of the hypothetical negotiation.

C. The Accused Product

Helios's ProstaSignal™ Genomic Classifier is a 24-gene expression-based prognostic test for prostate cancer patients following radical prostatectomy. ProstaSignal™ was commercially launched on October 7, 2024, and is designed to assess the risk of biochemical recurrence, clinical metastasis, and cancer-specific mortality in post-prostatectomy patients.

The key technical and commercial characteristics of ProstaSignal™ are as follows:

Technical Architecture. ProstaSignal™ measures the expression levels of 24 genes from formalin-fixed paraffin-embedded (FFPE) prostate cancer tissue specimens and processes these expression values through a gradient-boosted decision tree classifier to generate a numerical risk score designated "ProstaScore." The ProstaScore is then combined with Gleason grade group and pre-operative PSA level to produce a final composite risk assessment. Nineteen of ProstaSignal™'s 24 genes overlap with GenomeDx's patented gene set, representing a 79% overlap. The integration of the genomic risk score (ProstaScore) with clinical covariates (Gleason grade group and pre-operative PSA) maps directly onto the claim limitations of the '647 Patent, which covers integrated genomic-clinical prognostic models.

Commercial Performance. From its commercial launch on October 7, 2024 through March 2025, ProstaSignal™ achieved approximately 8,400 tests with an average reimbursement per test of $3,820. This yields estimated ProstaSignal™ revenue for the six-month period of approximately $32,088,000 (8,400 tests × $3,820 per test). Helios obtained its own Molecular Analysis for Therapy Choice (MAAA) code — 0239M — from the American Medical Association in September 2024, one month before commercial launch. GenomeDx's Decipher® test uses MAAA code 0047M.

Competitive Impact. ProstaSignal™ is marketed by Helios as a direct competitor to GenomeDx's Decipher® Prostate Genomic Classifier. Prior to the launch of ProstaSignal™, GenomeDx held approximately 74% of the genomic prostate cancer prognostic testing market. Following ProstaSignal™'s launch, GenomeDx's market share declined to approximately 68%, representing a loss of approximately six percentage points. Based on market analysis, an estimated 6,100 of the 8,400 ProstaSignal™ tests performed during the October 2024 through March 2025 period represent tests that would have been ordered as GenomeDx Decipher® tests absent the availability of ProstaSignal™. The remaining approximately 2,300 tests are attributable to market expansion — i.e., patients and physicians who would not have ordered any genomic prognostic test in the absence of the ProstaSignal™ alternative.

III. GEORGIA-PACIFIC FACTOR-BY-FACTOR ANALYSIS OF THE VERIDIAN LICENSE AS A COMPARABLE

The following analysis addresses each of the fifteen Georgia-Pacific factors in the context of evaluating the Veridian license's comparability to the hypothetical negotiation between GenomeDx and Helios. This section identifies the ways in which the Veridian license supports the proposed reasonable-royalty rate and the ways in which adjustments are warranted. The detailed adjustment analysis is set forth in Section IV.

A. Factor 1 — Royalties Received by the Patentee for Licensing the Patent in Suit

Georgia-Pacific factor 1 considers "the royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty." 318 F. Supp. at 1120.

The Veridian license is the only executed license under the '271 Patent and the '893 Patent — two of the three patents-in-suit. No other license under these patents has been granted, a fact that will be confirmed through the testimony of Victoria Sung, GenomeDx's General Counsel. Accordingly, the Veridian license provides the most direct — and indeed the only — evidence of what GenomeDx has historically been willing to accept as compensation for a third party's use of its patented gene expression profiling and machine-learning classifier technology.

The Veridian license establishes a running royalty rate of 15% of net revenues from licensed products, together with a minimum annual royalty of $500,000. This rate was the product of arm's-length negotiations between sophisticated parties, each represented by experienced counsel, and reflects the parties' considered judgment of the value of the licensed technology in the bladder cancer diagnostic field.

While the Veridian license does not rise to the level of an "established royalty" within the meaning of Georgia-Pacific factor 1 — which typically requires a showing of multiple licenses at a consistent rate, see Monsanto Co. v. McFarling, 488 F.3d 973, 979 (Fed. Cir. 2007) — it is nonetheless highly probative evidence of what a willing licensor would demand and what a willing licensee would pay for the right to practice the patented technology. The 15% rate, along with the $500,000 minimum annual royalty, provides a concrete, real-world benchmark against which the hypothetical negotiation can be measured.

Two important limitations on the probative value of the Veridian license under this factor must be noted. First, the Veridian license does not cover the '647 Patent, which adds claims directed to the integrated genomic-clinical prognostic model — a feature that ProstaSignal™ practices through its combination of ProstaScore with Gleason grade group and pre-operative PSA. Because the hypothetical Helios license would need to cover all three patents-in-suit, the Veridian rate understates the value of the hypothetical license and therefore establishes a floor rather than a ceiling for the royalty negotiation. Second, the Veridian license was limited to bladder cancer diagnostics, a field in which Veridian does not compete with GenomeDx. The competitive dynamics of a license in the prostate cancer field — GenomeDx's core market — would be materially different and would support a higher rate.

Assessment under Factor 1: This factor strongly supports the use of the Veridian 15% rate as a starting point for the reasonable-royalty analysis, with the understanding that adjustments are warranted to account for the broader patent coverage and competitive dynamics of the hypothetical Helios license.

B. Factor 2 — Rates Paid by the Licensee for the Use of Other Patents Comparable to the Patent in Suit

Georgia-Pacific factor 2 considers "the rates paid by the licensee for the use of other patents comparable to the patent in suit." 318 F. Supp. at 1120.

Discovery on this factor is ongoing. Helios's licensing history will be explored through the depositions of Dr. Nathan Ashford, Helios's Chief Scientific Officer, and Sara Whitmore, Helios's Vice President of Business Development, as well as through document requests for production. Requests for Production Nos. 1 through 47 were served on Helios on January 27, 2026, and include specific requests for all license agreements to which Helios is a party involving genomic diagnostic technology, molecular classifier technology, or gene expression profiling. Interrogatories Nos. 1 through 15, served on February 10, 2026, include interrogatories directed to Helios's licensing history and royalty payment history.

To date, no evidence has been produced or otherwise identified suggesting that Helios has previously licensed comparable genomic classifier technology from any third party. If it is confirmed through discovery that Helios has no history of licensing comparable technology, this factor is either neutral or slightly favors GenomeDx, as there would be no lower benchmark from Helios's own licensing history against which to measure the proposed royalty rate. The absence of comparable licenses taken by Helios also undercuts any argument that the genomic classifier technology at issue is widely available from alternative sources at lower royalty rates.

Assessment under Factor 2: Neutral to slightly favoring GenomeDx, pending completion of discovery. This memorandum will be updated as additional evidence is obtained.

C. Factor 3 — Nature and Scope of the License

Georgia-Pacific factor 3 considers "the nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold." 318 F. Supp. at 1120.

The Veridian license is non-exclusive and is restricted to a specific field of use — bladder cancer diagnostics. Veridian does not have the right to practice the licensed technology in any other therapeutic area, including prostate cancer. This field-of-use restriction is the most significant scope distinction between the Veridian license and the hypothetical Helios license.

A hypothetical license to Helios would need to cover prostate cancer genomic prognostic testing — the exact same clinical application as GenomeDx's Decipher® test. This is a fundamentally different commercial proposition from the Veridian license. Under the Veridian license, GenomeDx granted rights in a therapeutic area where it does not compete and where the licensee's commercial activities do not detract from GenomeDx's revenue or market position. Under a hypothetical Helios license, GenomeDx would be granting rights in the very therapeutic area that constitutes its core business and primary revenue driver. The field-of-use difference is not merely a technical distinction; it reflects a qualitative difference in the competitive harm that would flow from the license.

It is well established in the licensing literature and in judicial opinions that a license to a direct competitor in the same therapeutic area commands a higher royalty to compensate the licensor for the competitive harm that will result from the licensee's use of the patented technology. See, e.g., Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078–79 (Fed. Cir. 1983) (recognizing that the nature and scope of the license is relevant to the royalty determination); see also Robert Goldscheider et al., Use of the 25 Per Cent Rule in Valuing IP, 37 les Nouvelles 123 (2002) (discussing the impact of competitive considerations on royalty rates). A rational licensor in GenomeDx's position — holding a dominant market position with approximately 74% market share — would demand a significant premium for granting a license that would enable a direct competitor to erode that market share.

The hypothetical Helios license would also likely be non-exclusive, as GenomeDx would have no rational basis for granting exclusivity to a competitor in its core market. Accordingly, the exclusivity dimension of this factor does not require adjustment. However, the field-of-use dimension supports a substantial upward adjustment from the Veridian rate.

Assessment under Factor 3: Strongly supports upward adjustment from the Veridian 15% rate.

D. Factor 4 — Licensor's Established Policy of Maintaining Its Patent Monopoly

Georgia-Pacific factor 4 considers "the licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly." 318 F. Supp. at 1120.

GenomeDx has demonstrated a clear and consistent policy of maintaining its patent monopoly in the prostate cancer genomic prognostic testing market. Several facts support this conclusion:

First, this lawsuit itself is direct evidence of GenomeDx's willingness to vigorously enforce its patent rights against competitors that enter the prostate cancer market without authorization. GenomeDx filed suit against Helios promptly after the commercial launch of ProstaSignal™, demonstrating that GenomeDx does not tolerate unauthorized use of its patented technology by competitors in the prostate cancer space.

Second, the structure of the Veridian license is revealing. GenomeDx was willing to grant a license under the '271 and '893 Patents — but only in a non-competing therapeutic area (bladder cancer). GenomeDx did not grant Veridian any rights in the prostate cancer field. This field-of-use restriction demonstrates that GenomeDx's licensing policy is carefully calibrated to preserve its competitive position in the prostate cancer market. GenomeDx is not a company that freely licenses its core technology to all comers; it is a company that grants targeted licenses in non-competing fields while zealously guarding its patent monopoly in its primary market.

Third, GenomeDx has built a comprehensive intellectual property portfolio, comprising 47 issued U.S. patents, 12 pending U.S. patent applications, and 19 international family members. The breadth and depth of this portfolio indicate that GenomeDx has invested heavily in developing and protecting its proprietary technology and has adopted a strategic approach to intellectual property management that is consistent with a policy of maintaining its patent monopoly.

The combination of GenomeDx's litigation posture, its restrictive licensing practices, and its comprehensive patent portfolio establish that GenomeDx has a well-defined policy of maintaining its patent monopoly in the prostate cancer prognostic testing market. In a hypothetical negotiation, this policy would give GenomeDx significant leverage to demand a premium royalty rate as a condition of granting any license to a direct competitor.

Assessment under Factor 4: Strongly supports upward adjustment from the Veridian 15% rate.

E. Factor 5 — Commercial Relationship Between the Parties

Georgia-Pacific factor 5 considers "the commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promoter." 318 F. Supp. at 1120.

This factor presents one of the most significant distinctions between the Veridian license and the hypothetical Helios license.

GenomeDx and Veridian. GenomeDx and Veridian do not compete with each other. GenomeDx's primary commercial product is the Decipher® Prostate Genomic Classifier, which is focused on prostate cancer prognostic testing. Veridian focuses on bladder cancer diagnostics — a related but distinct urological cancer application. At the time the Veridian license was negotiated and executed, the parties viewed their relationship as complementary rather than competitive. GenomeDx had no commercial interest in bladder cancer diagnostics, and Veridian had no commercial interest in prostate cancer diagnostics. The Veridian license was thus negotiated in the context of a cooperative, non-threatening commercial relationship.

GenomeDx and Helios. GenomeDx and Helios are direct competitors in the genomic prostate cancer prognostic testing market. Helios's ProstaSignal™ Genomic Classifier is positioned as a direct alternative to GenomeDx's Decipher® test. Both products target the same patient population (post-radical prostatectomy prostate cancer patients), the same referring physician base (urologists and radiation oncologists), and the same payer population (commercial insurers and Medicare). The competitive impact of ProstaSignal™ on GenomeDx's business has been significant: GenomeDx's market share declined from approximately 74% prior to ProstaSignal™'s launch to approximately 68% after launch — a loss of approximately six percentage points in only six months.

The financial implications of this competitive dynamic underscore the qualitative difference between the Veridian and Helios commercial relationships. GenomeDx's FY 2024 revenue was $387.6 million, the vast majority of which was generated by the Decipher® test. Helios's FY 2024 revenue was $71.2 million, with ProstaSignal™ contributing approximately $32.1 million in its first six months of commercial availability. GenomeDx's dominant market position is directly threatened by Helios's entry, and any license that enables Helios to continue competing in the prostate cancer market would come at a substantial cost to GenomeDx.

In a hypothetical negotiation, this competitive dynamic would have a powerful effect on the royalty rate. A rational licensor facing the prospect of licensing a direct competitor in its core market would demand a premium that compensates not only for the use of the patented technology but also for the competitive harm that would flow from granting the license. The fact that the Veridian license was negotiated in a non-competitive context means that the 15% rate does not incorporate any competitive premium; the hypothetical Helios rate must include such a premium.

Assessment under Factor 5: Strongly supports upward adjustment from the Veridian 15% rate.

F. Factor 6 — Effect of Selling the Patented Specialty in Promoting Sales of Other Products

Georgia-Pacific factor 6 considers "the effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales." 318 F. Supp. at 1120.

The Decipher® test is GenomeDx's flagship product and primary revenue driver, accounting for the vast majority of GenomeDx's $387.6 million in FY 2024 revenue. The Decipher® test also serves as a gateway to GenomeDx's broader product ecosystem, including its tissue-based genomic services, its patient management platform, and its data analytics offerings. The commercial success of the Decipher® test drives physician engagement, institutional adoption, and payer coverage decisions that benefit GenomeDx's entire product portfolio.

Any license that enables a competitor to offer a competing product in the prostate cancer prognostic testing market would directly undermine GenomeDx's sales engine. If physicians and institutions adopt ProstaSignal™ as a substitute for Decipher®, GenomeDx loses not only the revenue from the diverted tests but also the ancillary benefits of physician engagement and institutional relationships.

By contrast, the Veridian license in bladder cancer diagnostics has minimal impact on GenomeDx's prostate cancer revenue or physician relationships. Veridian's bladder cancer products do not substitute for GenomeDx's prostate cancer products, and physicians who order Veridian's bladder cancer tests are not thereby diverted from ordering GenomeDx's prostate cancer tests.

This distinction further supports an upward adjustment from the Veridian rate. The hypothetical Helios license would directly undermine GenomeDx's core commercial engine in a way that the Veridian license does not.

Assessment under Factor 6: Supports upward adjustment from the Veridian 15% rate.

G. Factor 7 — Duration of the Patent and Term of the License

Georgia-Pacific factor 7 considers "the duration of the patent and the term of the license." 318 F. Supp. at 1120.

The '271 Patent and the '893 Patent — the two patents covered by the Veridian license — share the same priority chain and have an expiration date of June 14, 2036. As of the hypothetical negotiation date of October 7, 2024, these patents had approximately 11 years and 8 months of remaining patent life. The Veridian license is co-extensive with the life of these patents, i.e., it runs through June 14, 2036.

The '647 Patent, which was not part of the Veridian license, has a different priority chain and an expiration date of September 9, 2041. As of the hypothetical negotiation date, the '647 Patent had approximately 16 years and 11 months of remaining patent life — more than five additional years beyond the expiration of the '271 and '893 Patents.

A hypothetical license to Helios would need to cover all three patents-in-suit, including the '647 Patent. This means that the effective duration of the hypothetical license would extend through September 9, 2041, approximately five years beyond the expiration of the Veridian license. The longer effective duration of the hypothetical license increases its value relative to the Veridian license and supports an incremental royalty adjustment. A licensee obtaining rights that extend through 2041, rather than 2036, is receiving additional years of patent protection during which it may practice the patented technology without risk of infringement claims, and this additional value should be reflected in the royalty rate.

Assessment under Factor 7: Supports upward adjustment from the Veridian 15% rate, particularly in connection with the inclusion of the '647 Patent.

H. Factor 8 — Established Profitability of the Product, Its Commercial Success, and Its Current Popularity

Georgia-Pacific factor 8 considers "the established profitability of the product made under the patent; its commercial success; and its current popularity." 318 F. Supp. at 1120.

GenomeDx's Decipher® Test. GenomeDx's Decipher® test is a well-established commercial success in the genomic prostate cancer prognostic testing market. In FY 2024, GenomeDx generated revenue of $387.6 million, with an EBITDA margin of approximately 14.0% ($54.3 million). The Decipher® test commands an average reimbursement of $4,210 per test, reflecting its position as a premium clinical tool with strong payer support. GenomeDx's incremental margin on Decipher® tests is approximately 72%, reflecting the high-margin nature of genomic diagnostic testing once fixed costs are absorbed.

The commercial success of the Decipher® test is attributable in significant part to the patented technology at its core — the multi-gene expression profiling and machine-learning classifier methods covered by the patents-in-suit. The Decipher® test has been adopted into multiple clinical practice guidelines, including those issued by the National Comprehensive Cancer Network (NCCN) and the American Urological Association (AUA), and has been the subject of numerous peer-reviewed clinical validation studies. This clinical adoption and payer coverage further confirm the established profitability of products made under the patents.

Helios's ProstaSignal™. ProstaSignal™ is in the early stages of its commercial life, having been launched only six months before the end of the current damages period. Nevertheless, its early commercial traction is significant: approximately 8,400 tests in the first six months, with estimated revenue of $32,088,000. This level of early adoption demonstrates the commercial viability and market demand for genomic prostate cancer prognostic tests utilizing the patented technology.

The established profitability and commercial success of products incorporating the patented technology strengthens GenomeDx's negotiating position in the hypothetical negotiation. A patentee whose technology has been validated by the market is in a stronger position to demand a premium royalty rate than a patentee whose technology is unproven or speculative.

Assessment under Factor 8: Supports a royalty rate at or above the Veridian 15% baseline.

I. Factor 9 — Utility and Advantages of the Patent Property Over Old Modes or Devices

Georgia-Pacific factor 9 considers "the utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results." 318 F. Supp. at 1120.

Prior to the development of the patented technology, prostate cancer recurrence risk assessment after radical prostatectomy relied primarily on clinical and pathological variables — Gleason score, pre-operative PSA level, surgical margin status, and pathological stage. While these variables provided some prognostic information, they were limited in their ability to stratify patients into clinically meaningful risk categories and to identify patients at high risk of metastasis or cancer-specific mortality who might benefit from adjuvant therapy.

GenomeDx's patented methods represent a substantial advance over these prior approaches by integrating multi-gene expression profiling with machine-learning classifiers to provide a more precise and clinically actionable prognostic tool. The key advantages of the patented technology include:

• The ability to measure the expression levels of multiple genes simultaneously and to derive a composite genomic risk score that captures biological information not available from clinical and pathological variables alone.

• The use of machine-learning classifiers (including random-forest classifiers, as covered by the '271 Patent and '893 Patent claims) trained on large clinical datasets to identify non-linear relationships among gene expression variables and to generate robust, validated prognostic models.

• The integration of genomic risk scores with clinical covariates (as covered by the '647 Patent) to produce a multi-modal prognostic model that outperforms either genomic or clinical variables alone.

The patented technology has been adopted into clinical practice guidelines, has been validated in multiple independent clinical studies, and has achieved broad payer coverage — all confirming its utility and advantages over prior methods. The '647 Patent is of particular significance in this regard, as it covers the specific innovation of integrating genomic and clinical data into a unified prognostic model, which is precisely the approach that ProstaSignal™ employs.

Assessment under Factor 9: Strongly supports a royalty rate at or above the Veridian 15% baseline.

J. Factor 10 — Nature of the Patented Invention and Its Relation to the Accused Product

Georgia-Pacific factor 10 considers "the nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention." 318 F. Supp. at 1120.

This factor examines the relationship between the patented invention and the accused product — in this case, the relationship between the methods covered by the '271, '893, and '647 Patents and Helios's ProstaSignal™ Genomic Classifier.

The patents-in-suit cover the core methodology of ProstaSignal™:

• Multi-gene expression profiling. The '271 Patent covers methods of measuring the expression levels of a defined set of genes in cancer tissue specimens and using those expression levels for prognostic classification. ProstaSignal™ measures 24 genes, 19 of which overlap with GenomeDx's patented gene set — a 79% overlap.

• Machine-learning classification. The '271 Patent and '893 Patent cover the use of trained machine-learning classifiers (including the broadly claimed "trained machine-learning classifier" limitation) to process gene expression data and generate a risk classification. ProstaSignal™ uses a gradient-boosted decision tree classifier — a machine-learning method that falls within the scope of the patented claims, either literally or under the doctrine of equivalents.

• Risk stratification. The '893 Patent covers methods of stratifying patients into risk categories based on the output of the machine-learning classifier. ProstaSignal™ generates a ProstaScore that stratifies patients into low, intermediate, and high-risk categories.

• Integration with clinical variables. The '647 Patent covers the integration of a genomic risk score with clinical covariates (including Gleason score and PSA) to produce a combined prognostic model. ProstaSignal™ combines ProstaScore with Gleason grade group and pre-operative PSA to generate its final risk assessment — mapping directly onto the '647 Patent's claim limitations.

The patents are not peripheral to ProstaSignal™; they cover its fundamental diagnostic methodology. Without the patented technology, ProstaSignal™ could not perform its core function of genomic risk stratification. This close relationship between the patented invention and the accused product supports a royalty rate at the high end of the range, as the patented technology is essential to the commercial value of the accused product.

Assessment under Factor 10: Strongly supports a royalty rate at the high end or above the Veridian 15% rate.

K. Factor 11 — Extent to Which the Infringer Has Made Use of the Invention

Georgia-Pacific factor 11 considers "the extent to which the infringer has made use of the invention; and any evidence probative of the value of that use." 318 F. Supp. at 1120.

Helios has made substantial use of the patented invention. ProstaSignal™ has been commercially available since October 7, 2024, and approximately 8,400 tests have been performed through March 2025, generating estimated revenue of $32,088,000. Helios is actively marketing ProstaSignal™ as a direct competitor to GenomeDx's Decipher® test, targeting the same physician base, the same patient population, and the same payer population.

The substantial volume of tests performed and the significant revenue generated by ProstaSignal™ demonstrate that Helios has made extensive use of the patented invention and has derived significant commercial benefit from that use. This level of use supports a meaningful royalty that reflects the value Helios has extracted from the patented technology.

Moreover, Helios's use of the patented technology is not incidental or peripheral; it is central to ProstaSignal™'s value proposition. Every ProstaSignal™ test that is performed relies on the patented multi-gene expression profiling and machine-learning classifier methodology. There is no evidence that Helios could offer a commercially viable prostate cancer prognostic test without practicing the patented methods.

Assessment under Factor 11: Supports a meaningful royalty at or above the Veridian 15% rate.

L. Factor 12 — Portion of Profit Customarily Allowed in the Particular Business for Use of the Invention

Georgia-Pacific factor 12 considers "the portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions." 318 F. Supp. at 1120.

This is the central factor for the Veridian comparability analysis. The Veridian license established a 15% running royalty on net revenues from licensed products — a rate that was negotiated at arm's length between sophisticated parties and that represents the most direct evidence of the customary royalty rate for the patented technology in the molecular diagnostics industry. The $500,000 minimum annual royalty further confirms the significant value that GenomeDx places on any use of its patented technology, regardless of the licensee's sales volume.

The 15% rate is consistent with royalty rates observed in the molecular diagnostics industry for licenses involving core diagnostic methodology. While a comprehensive survey of industry licensing practices is beyond the scope of this memorandum (and will be developed in Dr. Tremaine's expert report), the 15% rate is within the range that would be expected for a license covering the fundamental methodology of a genomic diagnostic test.

However, as discussed throughout this memorandum, the Veridian license was negotiated in circumstances that differ materially from the hypothetical Helios negotiation. The Veridian license was limited to bladder cancer diagnostics (a non-competing field), covered only two of the three patents-in-suit, and was negotiated in a voluntary, non-litigation context. Each of these differences supports an upward adjustment from the 15% baseline. The detailed adjustment analysis is set forth in Section IV below.

Assessment under Factor 12: Establishes a 15% floor, with upward adjustment warranted.

M. Factor 13 — Portion of Realizable Profit Attributable to the Invention vs. Non-Patented Elements

Georgia-Pacific factor 13 considers "the portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer." 318 F. Supp. at 1120.

Helios's ProstaSignal™ test relies heavily on the patented methods. The genomic classifier methodology — including the multi-gene expression profiling, the machine-learning classification, and the integration with clinical covariates — is the core value proposition of ProstaSignal™. It is the genomic risk score that distinguishes ProstaSignal™ from conventional clinical and pathological assessments and that drives physician adoption, patient demand, and payer reimbursement.

The non-patented elements of ProstaSignal™ — including laboratory processing of tissue specimens, sample logistics and handling, report formatting and delivery, and customer support — are commoditized components that are common to all molecular diagnostic laboratories and do not contribute meaningfully to ProstaSignal™'s competitive differentiation or premium reimbursement. While these components involve real costs and operational expertise, they are not the source of ProstaSignal™'s commercial value. Any competent molecular diagnostic laboratory could perform these functions; what distinguishes ProstaSignal™ is its patented genomic classifier methodology.

Helios may argue that its five proprietary genes (the five genes in its 24-gene panel that do not overlap with GenomeDx's patented gene set) represent a non-patented improvement that should reduce the portion of profit attributable to the patented invention. However, this argument is undermined by the fact that 19 of 24 genes (79%) overlap with the patented gene set, and the overall genomic classifier methodology — including the machine-learning framework and the clinical integration approach — is covered by the patents-in-suit regardless of which specific genes are included in the panel.

A significant portion of ProstaSignal™'s value is attributable to the patented technology, supporting a royalty rate at or above 15%.

Assessment under Factor 13: Supports a royalty rate at or above the Veridian 15% baseline.

N. Factor 14 — Opinion Testimony of Qualified Experts

Georgia-Pacific factor 14 considers "the opinion testimony of qualified experts." 318 F. Supp. at 1120.

GenomeDx is in the process of retaining two experts whose testimony will be central to the damages analysis:

Dr. Louise Tremaine, Managing Director, Ashworth Economics Group LLC. Dr. Tremaine is being retained as plaintiff's damages expert and will be responsible for developing the full reasonable-royalty and lost-profits damages analyses in her expert report. Dr. Tremaine has extensive experience in intellectual property damages analysis in the life sciences and medical device industries, including multiple engagements involving genomic diagnostic technology. Her expert report, which is due May 15, 2026, will incorporate the Veridian comparability analysis set forth in this memorandum, along with her independent assessment of the Georgia-Pacific factors and the appropriate royalty rate.

Dr. Franklin Ogawa, Professor of Computational Oncology, Stanford University School of Medicine. Dr. Ogawa is being retained as plaintiff's technical expert and will provide testimony on the technical comparability of the Veridian licensed use (bladder cancer diagnostics) and the accused ProstaSignal™ use (prostate cancer diagnostics), as well as the centrality of the patented methods to the ProstaSignal™ test. Dr. Ogawa's testimony will support the Veridian comparability analysis by establishing that the patented technology is equally fundamental to genomic diagnostic testing in both bladder cancer and prostate cancer and that the field-of-use distinction does not diminish the technological comparability of the two applications.

Expert opinions will further support the Veridian comparability analysis at trial and will be developed in coordination with the legal analysis set forth in this memorandum.

Assessment under Factor 14: Expert testimony will support the use of the Veridian license as a comparable and the proposed 18% adjusted rate.

O. Factor 15 — Amount That a Prudent Licensor and Licensee Would Have Agreed Upon at the Time of the Hypothetical Negotiation

Georgia-Pacific factor 15 is the ultimate synthesizing factor: "the amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement." 318 F. Supp. at 1120.

Synthesizing the analysis under all fourteen preceding factors, the Veridian 15% rate is a probative starting point, but the hypothetical negotiation between GenomeDx and Helios would result in a higher rate. The key factors driving the upward adjustment are:

1. Direct competition in prostate cancer. Unlike Veridian, which operates in the non-competing bladder cancer field, Helios directly competes with GenomeDx in the genomic prostate cancer prognostic testing market. A license to a direct competitor that would erode GenomeDx's approximately 74% market share commands a significant premium over a license to a non-competitor (Factors 3, 5, and 6).

2. Inclusion of the '647 Patent. The hypothetical Helios license would cover all three patents-in-suit, including the '647 Patent, which was not part of the Veridian license and which adds claims directed to the integrated genomic-clinical prognostic model — a key feature of ProstaSignal™. The '647 Patent also has a longer remaining patent life (through September 9, 2041, versus June 14, 2036 for the other two patents) (Factors 1 and 7).

3. GenomeDx's dominant market share at risk. GenomeDx held approximately 74% of the genomic prostate cancer prognostic testing market prior to ProstaSignal™'s launch, and this market share declined to approximately 68% after launch. A rational licensor facing the prospect of further market share erosion would demand a premium royalty to compensate for this competitive harm (Factor 5).

4. Litigation context. The hypothetical negotiation is deemed to occur against the assumption that the patents are valid and infringed. This is a fundamentally different negotiating dynamic from the voluntary Veridian negotiation. The licensee (Helios) is negotiating to avoid an injunction and ongoing damages liability, not merely acquiring optional technology for a new product line. Courts routinely recognize that this dynamic supports a premium over voluntarily negotiated licenses (Factor 15 generally).

5. GenomeDx's established policy of protecting its patent monopoly. GenomeDx has demonstrated a clear policy of restricting licenses in the prostate cancer market and enforcing its patent rights against competitors. This policy gives GenomeDx significant bargaining leverage in the hypothetical negotiation (Factor 4).

Taking all of these considerations into account, a prudent licensor (GenomeDx) and a prudent licensee (Helios) would have agreed upon a royalty rate in the range of 17.5% to 19.0%, with a proposed rate of 18% (the midpoint of the adjusted range).

Assessment under Factor 15: Supports a proposed royalty rate of 18%.

IV. ADJUSTMENT ANALYSIS: FROM 15% (VERIDIAN) TO 18% (PROPOSED HYPOTHETICAL RATE)

This section sets forth the detailed adjustment analysis that bridges the gap between the Veridian license's 15% running royalty rate and the proposed 18% rate for the hypothetical negotiation between GenomeDx and Helios. The analysis identifies three principal factors warranting upward adjustment, addresses potential downward adjustments, and arrives at a net adjustment of +3.0 percentage points (from 15% to 18%).

A. Factors Warranting Upward Adjustment

1. Direct Competitive Overlap (Estimated Premium: +1.5–2.0 Percentage Points). The single most significant distinction between the Veridian license and the hypothetical Helios license is the competitive relationship between the licensor and the licensee. Veridian used the licensed technology for bladder cancer diagnostics — a therapeutic area in which it does not compete with GenomeDx. Helios uses the infringing technology for prostate cancer diagnostics — the same therapeutic area as GenomeDx's Decipher® test, and GenomeDx's core commercial market.

The competitive harm caused by ProstaSignal™ is not theoretical; it is documented. GenomeDx's market share in the genomic prostate cancer prognostic testing market declined from approximately 74% prior to ProstaSignal™'s launch to approximately 68% after launch — a loss of approximately six percentage points in the first six months of ProstaSignal™'s commercial availability. Based on market analysis and the estimated substitution rate, approximately 6,100 of Helios's 8,400 ProstaSignal™ tests during the October 2024 through March 2025 period represent tests that would have been ordered as GenomeDx Decipher® tests absent the availability of ProstaSignal™. At GenomeDx's average reimbursement rate of $4,210 per test, these 6,100 diverted tests represent lost revenue of approximately $25,681,000 (6,100 × $4,210).

A rational licensor facing this level of competitive harm would demand a premium that compensates for the direct erosion of its market share and revenue. In the licensing literature and in judicial practice, competitive overlap is recognized as one of the most significant factors driving royalty rates upward in the context of a hypothetical negotiation. The Veridian 15% rate, which was negotiated in the absence of any competitive threat, does not incorporate any competitive premium. An adjustment of +1.5 to +2.0 percentage points is warranted to account for the direct competitive overlap between GenomeDx and Helios.

2. Broader Patent Coverage — Inclusion of the '647 Patent (Estimated Premium: +0.5–1.0 Percentage Point). The Veridian license covers two patents: the '271 Patent and the '893 Patent. It does not cover the '647 Patent (U.S. Patent No. 11,891,647), because the '647 Patent had not yet issued at the time the Veridian license was executed on April 3, 2022. The '647 Patent issued on February 6, 2024, nearly two years after the Veridian license was signed.

The '647 Patent covers a particularly significant aspect of the patented technology: the integration of a genomic risk score with clinical covariates — specifically, Gleason score, PSA level, surgical margin status, and pathological stage — to produce a combined prognostic model that provides more accurate risk stratification than either the genomic score or the clinical variables alone. This is precisely the methodology that ProstaSignal™ employs. ProstaSignal™ combines its genomic risk score (ProstaScore) with Gleason grade group and pre-operative PSA level to generate its final composite risk assessment. The '647 Patent's claims thus map directly onto a core feature of ProstaSignal™'s value proposition.

In addition to covering a key aspect of ProstaSignal™'s methodology, the '647 Patent has a significantly longer remaining patent life than the other two patents. The '647 Patent expires on September 9, 2041, approximately five years after the June 14, 2036 expiration date of the '271 and '893 Patents. A hypothetical license covering the '647 Patent would therefore extend the licensee's rights through 2041, providing additional years of freedom from infringement claims under the integrated genomic-clinical prognostic method.

The inclusion of a third patent in the licensed portfolio, particularly one that covers a critical aspect of the accused product's methodology and that extends the effective duration of the license by approximately five years, increases the value of the hypothetical license relative to the Veridian license. An incremental adjustment of +0.5 to +1.0 percentage point is warranted to account for this additional patent coverage.

3. Litigation Context — "Book of Wisdom" (Estimated Premium: +0.5–1.0 Percentage Point). The hypothetical negotiation framework mandated by Georgia-Pacific and its progeny requires that the negotiation be deemed to occur against the assumption that the patent is valid and infringed. See Georgia-Pacific, 318 F. Supp. at 1121; see also Rite-Hite Corp., 56 F.3d at 1554 n.13 ("The hypothetical negotiation requires the parties to assume that the patent is valid and infringed."). This assumption fundamentally alters the bargaining dynamics relative to a voluntary, non-litigation negotiation.

In the Veridian negotiation, there was no pending or threatened litigation between GenomeDx and Veridian. The negotiation was a voluntary commercial arrangement in which Veridian sought access to GenomeDx's technology for use in a new product line. Veridian had the option of declining to take the license and pursuing alternative technologies, and GenomeDx had no way to compel Veridian to agree to a particular royalty rate. The Veridian negotiation was, in short, a classic arm's-length commercial transaction.

By contrast, the hypothetical negotiation with Helios is deemed to occur in the shadow of litigation. Helios is assumed to know that it is infringing valid patents and that it faces the prospect of an injunction and ongoing damages liability if it does not reach an agreement with GenomeDx. This knowledge gives GenomeDx substantially more bargaining leverage than it had in the Veridian negotiation. Helios cannot simply walk away from the negotiation and pursue alternative technologies (at least not without redesigning ProstaSignal™ to avoid the patented methods, which may not be commercially feasible given the 79% gene overlap and the fundamental reliance on machine-learning classification). Helios is effectively negotiating to avoid a judicially imposed outcome that could be far more costly than a negotiated license.

Courts have recognized that the litigation context inherently produces higher royalty rates than voluntary commercial negotiations. See, e.g., Mondis Tech., Ltd. v. LG Elecs., Inc., 2011 WL 1714304, at *8 (E.D. Tex. May 4, 2011) (recognizing that a license negotiated under threat of litigation is likely to command a higher royalty than a voluntary license). Specific case law will be developed in further detail in Dr. Tremaine's expert report and in connection with motion practice. An adjustment of +0.5 to +1.0 percentage point is warranted to account for the litigation context premium.

B. Factors That Could Support Downward Adjustment (and Why They Are Unpersuasive)

It is important to anticipate and address the potential arguments that Helios may advance in support of a downward adjustment from the Veridian rate. We have identified three such arguments and explain below why none warrants a meaningful downward adjustment.

1. Non-Exclusive vs. Exclusive License. Helios may argue that the Veridian license's non-exclusive nature should be considered in the adjustment analysis. However, this argument does not support a downward adjustment because the hypothetical Helios license would also be non-exclusive. GenomeDx would have no rational basis for granting exclusivity to a competitor in its core prostate cancer market, as doing so would preclude GenomeDx from continuing to sell its own Decipher® test. The exclusivity dimension of the two licenses is therefore equivalent, and no adjustment is warranted on this basis.

2. Different Gene Panel Size. Helios may argue that ProstaSignal™'s use of a 24-gene panel (versus GenomeDx's 22-gene panel) represents a mean

MEMORANDUM
FROM: Peter Vassiliev, Calderwood & Harkness LLP, 555 Mission Street, Suite 3100, San Francisco, CA 94105
TO: Catherine Bloom, Responsible Partner, intellectual Property, Calderwood & Harkness LLP
CC: Alan Ngo, Billing Partner; Wendy Schultz, Working Associate
DATE: February 2026
RE: Comparability Analysis of GenomeDx–Veridian Molecular Labs License Agreement (dated April 3, 2022) for Use in Damages Theories — Genome Dx Therapeutics Inc. v. Helios Precision Diagnostics, Inc., Case No. 3:25-cv-01847-JWL (N.D. Cal.)
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work-product doctrine. It has been prepared in anticipation of litigation and reflects the mental impressions, conclusions, and legal theories of counsel. This memorandum should not be disclosed to any third party without the prior written authorization of Catherine Bloom, Responsible Partner.
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I. EXECUTIVE SUMMARY
This memorandum analyzes the non-exclusive license agreement dated April 3, 2022 between Genome Dx Therapeutics Inc. ("GenomeDx" or "Licensor") and Veridian Molecular Labs, Inc. ("Veridian" or "Licensee"), covering U.S. Patent Nos. 10,438,271 (the "'271 Patent") and 11,204,893 (the "'893 Patent"), and evaluates its comparability to a hypothetical negotiation between GenomeDx and Helios Precision Diagnostics, Inc. ("Helios") for purposes of a reasonable-royalty damages analysis under 35 U.S.C. § 284 in the above-captioned matter.
After a thorough factor-by-factor analysis under the framework established by Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), our conclusion is that the Veridian license is the most probative comparable license in GenomeDx's portfolio, and indeed the only executed license under the patents-in-suit. However, material differences between the circumstances of the Veridian license and the circumstances of a hypothetical negotiation between GenomeDx and Helios warrant an upward adjustment from the Veridian license's 15% running royalty rate. These material differences are principally threefold:
1. Field-of-use limitation. The Veridian license is limited to bladder cancer diagnostics, a field in which Veridian does not compete with GenomeDx. By contrast, Helios directly competes with GenomeDx in prostate cancer genomic prognostic testing — GenomeDx's core commercial market and the application that drives the vast majority of GenomeDx's $387.6 million in annual revenue.
2. Non-litigation negotiation context. The Veridian license was negotiated as a voluntary, arm's-length commercial arrangement with no pending or threatened litigation between the parties. Under the hypothetical negotiation framework, the negotiation with Helios is deemed to occur against the backdrop of an assumption that the patents are valid and infringed, which materially alters the bargaining dynamic and supports a premium over the Veridian rate.
3. Absence of the '647 Patent. The Veridian license covers only the '271 Patent and the '893 Patent. The '647 Patent (U.S. Patent No. 11,891,647) had not yet issued when the Veridian license was executed and therefore was not included. The '647 Patent, which issued on February 6, 2024, covers the integration of genomic risk scores with clinical covariates — a feature that Helios's ProstaSignal™ Genomic Classifier expressly practices — and has a longer remaining patent life (expiring September 9, 2041). The inclusion of this additional patent in any hypothetical license to Helios increases the value of the licensed rights and supports an incremental royalty adjustment.
Taking these differences into account, we propose an adjusted royalty rate of 18% for the hypothetical negotiation between GenomeDx and Helios, representing the midpoint of a defensible range of 17.5% to 19.0%. This adjusted rate, when applied to the estimated ProstaSignal™ revenue from October 2024 through March 2025, yields a reasonable-royalty damages figure as follows:
• Royalty base: $32,088,000 (8,400 ProstaSignal™ tests × $3,820 average reimbursement per test)
• Proposed royalty rate: 18%
• Reasonable royalty damages (through March 2025): $5,775,840
The Veridian license analysis feeds directly into Georgia-Pacific factor 12 (the portion of profit customarily allowed in the particular business for the use of the invention or analogous inventions) and establishes the reasonable-royalty floor of $5,775,840. This figure represents the minimum damages to which GenomeDx is entitled under 35 U.S.C. § 284 and will continue to accrue as Helios's ProstaSignal™ sales continue post-March 2025.
It bears emphasis that the lost-profits theory remains GenomeDx's primary damages theory, yielding a damages figure of $18,490,320 (calculated as 6,100 diverted tests × $4,210 per-test revenue × 72% incremental margin). The reasonable-royalty analysis set forth in this memorandum serves as the alternative measure under 35 U.S.C. § 284 and establishes the floor below which damages cannot fall, even if the fact-finder determines that GenomeDx is not entitled to lost profits for all or a portion of the accused sales.
II. BACKGROUND
A. The Veridian License Agreement
The Veridian License Agreement was executed on April 3, 2022 between GenomeDx, as licensor, and Veridian Molecular Labs, Inc., as licensee. Veridian is a Delaware corporation headquartered in Research Triangle Park, North Carolina, specializing in molecular diagnostic assays for urological cancers, with a particular focus on bladder cancer detection and monitoring.
The material terms of the Veridian license are as follows:
Licensed Patents. The license covers two of the three patents-in-suit: the '271 Patent (U.S. Patent No. 10,438,271, titled "Methods and Systems for Multi-Gene Expression Profiling in Urological Cancer") and the '893 Patent (U.S. Patent No. 11,204,893, titled "Machine-Learning Classifier for Genomic Prognostic Testing in Urological Malignancies"). Critically, the '647 Patent (U.S. Patent No. 11,891,647, titled "Integrated Genomic-Clinical Prognostic Model for Cancer Risk Stratification") was not included in the Veridian license because it had not yet issued at the time of execution. The '647 Patent issued on February 6, 2024, nearly two years after the Veridian license was executed. The absence of the '647 Patent from the Veridian license is a material point of distinction for purposes of the comparability analysis, as discussed in detail in Section IV.B.2 below.
License Type. The license is non-exclusive. GenomeDx retained the right to license the same patents to other parties and to practice the patented technology itself in all fields.
Scope and Field of Use. The license is expressly limited to bladder cancer diagnostics. Section 2.1 of the agreement defines "Licensed Field" as "the development, manufacture, use, sale, offer for sale, and importation of diagnostic products and services for the detection, characterization, staging, prognosis, and monitoring of bladder cancer (urothelial carcinoma) in human patients." The license does not extend to prostate cancer or any other urological cancer application. This field-of-use restriction is a critical distinguishing factor between the Veridian license and the hypothetical license that would be negotiated with Helios, as discussed in Section III.C and Section IV.A.1 below.
Financial Terms. The Veridian license provides for a running royalty of 15% of net revenues from licensed products, as defined in the agreement. "Net revenues" is defined as gross revenues less returns, allowances, discounts, and rebates, consistent with standard industry practice. In addition to the running royalty, the agreement provides for a minimum annual royalty of $500,000 regardless of actual sales of licensed products. This minimum annual royalty ensures that GenomeDx receives meaningful compensation for the use of its patented technology even in years where Veridian's bladder cancer diagnostic sales are below the threshold that would generate $500,000 at a 15% rate (i.e., below approximately $3.33 million in net revenues).
Term. The license term is co-extensive with the life of the licensed patents. Both the '271 Patent and the '893 Patent share the same priority chain and have an expiration date of June 14, 2036. Accordingly, the Veridian license will remain in effect through June 14, 2036, absent earlier termination for breach or other specified events.
Negotiation Context. The Veridian license was negotiated as an arm's-length commercial arrangement between two sophisticated parties represented by experienced intellectual property counsel. There was no pending or threatened litigation between GenomeDx and Veridian at the time of negotiation or execution. The negotiation was initiated by Veridian, which sought access to GenomeDx's patented gene expression profiling and machine-learning classifier technology for application in its bladder cancer diagnostic pipeline. The non-litigation, voluntary nature of the Veridian negotiation is another material point of distinction from the hypothetical negotiation framework applicable to the Helios damages analysis.
B. The Hypothetical Negotiation Framework
Under the reasonable-royalty framework established by Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970), and refined by the Federal Circuit in cases including Rite-Hite Corp. v. Kelley, Inc., 56 F.3d 1538 (Fed. Cir. 1995) (en banc), Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009), and VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir. 2014), a reasonable royalty is determined by reference to a hypothetical negotiation between a willing licensor and a willing licensee at the time the infringement began.
The parameters of the hypothetical negotiation in this case are as follows:
Hypothetical Negotiation Date. October 7, 2024, the date of ProstaSignal™'s commercial launch and the date on which infringement of the patents-in-suit commenced. All facts known or reasonably foreseeable as of that date are deemed available to the hypothetical negotiating parties, including the commercial traction of GenomeDx's Decipher® test, GenomeDx's market share in the prostate cancer genomic prognostic testing market, the existence and scope of the three patents-in-suit, and the competitive landscape.
Hypothetical Negotiation Parties. GenomeDx, as willing licensor, and Helios, as willing licensee. Both parties are assumed to be reasonable business persons seeking to reach a mutually acceptable agreement. GenomeDx is assumed to be willing to grant a license at a reasonable royalty rather than forgo licensing altogether, and Helios is assumed to be willing to pay a reasonable royalty rather than forgo the use of the patented technology.
Hypothetical License Scope. The hypothetical license would need to convey rights under all three patents-in-suit — the '271 Patent, the '893 Patent, and the '647 Patent — for use in prostate cancer genomic prognostic testing. This is broader than the Veridian license in two respects: (1) it includes the '647 Patent, which was not part of the Veridian license, and (2) it covers prostate cancer, rather than bladder cancer, as the licensed field of use.
Governing Legal Framework. The fifteen-factor analysis set forth in Georgia-Pacific, 318 F. Supp. at 1120, provides the governing analytical framework. As the Federal Circuit has emphasized, this framework is not a rigid checklist but rather a flexible tool that permits the factfinder to consider all relevant evidence bearing on the reasonable royalty determination. See Uniloc USA, Inc. v. Kestrel Partners LLC, 632 F.3d 1292, 1317 (Fed. Cir. 2011). The analysis must be grounded in the facts of the case and must avoid the use of arbitrary benchmarks or rules of thumb. See id. at 1315 (rejecting the "25 percent rule of thumb" as a basis for reasonable royalty opinions).
Book of Wisdom. In addition to facts known at the hypothetical negotiation date, the parties are permitted to consider certain post-negotiation developments under the "book of wisdom" doctrine, which allows consideration of events that actually occurred and shed light on what the parties would have anticipated at the time of the hypothetical negotiation. See Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 698 (1933); Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1575 (Fed. Cir. 1988). Here, the actual commercial performance of ProstaSignal™ through March 2025 — including its test volume, revenue, and impact on GenomeDx's market share — may be considered as evidence of what a reasonable licensee would have been willing to pay at the time of the hypothetical negotiation.
C. The Accused Product
Helios's ProstaSignal™ Genomic Classifier is a 24-gene expression-based prognostic test for prostate cancer patients following radical prostatectomy. ProstaSignal™ was commercially launched on October 7, 2024, and is designed to assess the risk of biochemical recurrence, clinical metastasis, and cancer-specific mortality in post-prostatectomy patients.
The key technical and commercial characteristics of ProstaSignal™ are as follows:
Technical Architecture. ProstaSignal™ measures the expression levels of 24 genes from formalin-fixed paraffin-embedded (FFPE) prostate cancer tissue specimens and processes these expression values through a gradient-boosted decision tree classifier to generate a numerical risk score designated "ProstaScore." The ProstaScore is then combined with Gleason grade group and pre-operative PSA level to produce a final composite risk assessment. Nineteen of ProstaSignal™'s 24 genes overlap with GenomeDx's patented gene set, representing a 79% overlap. The integration of the genomic risk score (ProstaScore) with clinical covariates (Gleason grade group and pre-operative PSA) maps directly onto the claim limitations of the '647 Patent, which covers integrated genomic-clinical prognostic models.
Commercial Performance. From its commercial launch on October 7, 2024 through March 2025, ProstaSignal™ achieved approximately 8,400 tests with an average reimbursement per test of $3,820. This yields estimated ProstaSignal™ revenue for the six-month period of approximately $32,088,000 (8,400 tests × $3,820 per test). Helios obtained its own Molecular Analysis for Therapy Choice (MAAA) code — 0239M — from the American Medical Association in September 2024, one month before commercial launch. GenomeDx's Decipher® test uses MAAA code 0047M.
Competitive Impact. ProstaSignal™ is marketed by Helios as a direct competitor to GenomeDx's Decipher® Prostate Genomic Classifier. Prior to the launch of ProstaSignal™, GenomeDx held approximately 74% of the genomic prostate cancer prognostic testing market. Following ProstaSignal™'s launch, GenomeDx's market share declined to approximately 68%, representing a loss of approximately six percentage points. Based on market analysis, an estimated 6,100 of the 8,400 ProstaSignal™ tests performed during the October 2024 through March 2025 period represent tests that would have been ordered as GenomeDx Decipher® tests absent the availability of ProstaSignal™. The remaining approximately 2,300 tests are attributable to market expansion — i.e., patients and physicians who would not have ordered any genomic prognostic test in the absence of the ProstaSignal™ alternative.
III. GEORGIA-PACIFIC FACTOR-BY-FACTOR ANALYSIS OF THE VERIDIAN LICENSE AS A COMPARABLE
The following analysis addresses each of the fifteen Georgia-Pacific factors in the context of evaluating the Veridian license's comparability to the hypothetical negotiation between GenomeDx and Helios. This section identifies the ways in which the Veridian license supports the proposed reasonable-royalty rate and the ways in which adjustments are warranted. The detailed adjustment analysis is set forth in Section IV.
A. Factor 1 — Royalties Received by the Patentee for Licensing the Patent in Suit
Georgia-Pacific factor 1 considers "the royalties received by the patentee for the licensing of the patent in suit, proving or tending to prove an established royalty." 318 F. Supp. at 1120.
The Veridian license is the only executed license under the '271 Patent and the '893 Patent — two of the three patents-in-suit. No other license under these patents has been granted, a fact that will be confirmed through the testimony of Victoria Sung, GenomeDx's General Counsel. Accordingly, the Veridian license provides the most direct — and indeed the only — evidence of what GenomeDx has historically been willing to accept as compensation for a third party's use of its patented gene expression profiling and machine-learning classifier technology.
The Veridian license establishes a running royalty rate of 15% of net revenues from licensed products, together with a minimum annual royalty of $500,000. This rate was the product of arm's-length negotiations between sophisticated parties, each represented by experienced counsel, and reflects the parties' considered judgment of the value of the licensed technology in the bladder cancer diagnostic field.
While the Veridian license does not rise to the level of an "established royalty" within the meaning of Georgia-Pacific factor 1 — which typically requires a showing of multiple licenses at a consistent rate, see Monsanto Co. v. McFarling, 488 F.3d 973, 979 (Fed. Cir. 2007) — it is nonetheless highly probative evidence of what a willing licensor would demand and what a willing licensee would pay for the right to practice the patented technology. The 15% rate, along with the $500,000 minimum annual royalty, provides a concrete, real-world benchmark against which the hypothetical negotiation can be measured.
Two important limitations on the probative value of the Veridian license under this factor must be noted. First, the Veridian license does not cover the '647 Patent, which adds claims directed to the integrated genomic-clinical prognostic model — a feature that ProstaSignal™ practices through its combination of ProstaScore with Gleason grade group and pre-operative PSA. Because the hypothetical Helios license would need to cover all three patents-in-suit, the Veridian rate understates the value of the hypothetical license and therefore establishes a floor rather than a ceiling for the royalty negotiation. Second, the Veridian license was limited to bladder cancer diagnostics, a field in which Veridian does not compete with GenomeDx. The competitive dynamics of a license in the prostate cancer field — GenomeDx's core market — would be materially different and would support a higher rate.
Assessment under Factor 1: This factor strongly supports the use of the Veridian 15% rate as a starting point for the reasonable-royalty analysis, with the understanding that adjustments are warranted to account for the broader patent coverage and competitive dynamics of the hypothetical Helios license.
B. Factor 2 — Rates Paid by the Licensee for the Use of Other Patents Comparable to the Patent in Suit
Georgia-Pacific factor 2 considers "the rates paid by the licensee for the use of other patents comparable to the patent in suit." 318 F. Supp. at 1120.
Discovery on this factor is ongoing. Helios's licensing history will be explored through the depositions of Dr. Nathan Ashford, Helios's Chief Scientific Officer, and Sara Whitmore, Helios's Vice President of Business Development, as well as through document requests for production. Requests for Production Nos. 1 through 47 were served on Helios on January 27, 2026, and include specific requests for all license agreements to which Helios is a party involving genomic diagnostic technology, molecular classifier technology, or gene expression profiling. Interrogatories Nos. 1 through 15, served on February 10, 2026, include interrogatories directed to Helios's licensing history and royalty payment history.
To date, no evidence has been produced or otherwise identified suggesting that Helios has previously licensed comparable genomic classifier technology from any third party. If it is confirmed through discovery that Helios has no history of licensing comparable technology, this factor is either neutral or slightly favors GenomeDx, as there would be no lower benchmark from Helios's own licensing history against which to measure the proposed royalty rate. The absence of comparable licenses taken by Helios also undercuts any argument that the genomic classifier technology at issue is widely available from alternative sources at lower royalty rates.
Assessment under Factor 2: Neutral to slightly favoring GenomeDx, pending completion of discovery. This memorandum will be updated as additional evidence is obtained.
C. Factor 3 — Nature and Scope of the License
Georgia-Pacific factor 3 considers "the nature and scope of the license, as exclusive or non-exclusive; or as restricted or non-restricted in terms of territory or with respect to whom the manufactured product may be sold." 318 F. Supp. at 1120.
The Veridian license is non-exclusive and is restricted to a specific field of use — bladder cancer diagnostics. Veridian does not have the right to practice the licensed technology in any other therapeutic area, including prostate cancer. This field-of-use restriction is the most significant scope distinction between the Veridian license and the hypothetical Helios license.
A hypothetical license to Helios would need to cover prostate cancer genomic prognostic testing — the exact same clinical application as GenomeDx's Decipher® test. This is a fundamentally different commercial proposition from the Veridian license. Under the Veridian license, GenomeDx granted rights in a therapeutic area where it does not compete and where the licensee's commercial activities do not detract from GenomeDx's revenue or market position. Under a hypothetical Helios license, GenomeDx would be granting rights in the very therapeutic area that constitutes its core business and primary revenue driver. The field-of-use difference is not merely a technical distinction; it reflects a qualitative difference in the competitive harm that would flow from the license.
It is well established in the licensing literature and in judicial opinions that a license to a direct competitor in the same therapeutic area commands a higher royalty to compensate the licensor for the competitive harm that will result from the licensee's use of the patented technology. See, e.g., Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078–79 (Fed. Cir. 1983) (recognizing that the nature and scope of the license is relevant to the royalty determination); see also Robert Goldscheider et al., Use of the 25 Per Cent Rule in Valuing IP, 37 les Nouvelles 123 (2002) (discussing the impact of competitive considerations on royalty rates). A rational licensor in GenomeDx's position — holding a dominant market position with approximately 74% market share — would demand a significant premium for granting a license that would enable a direct competitor to erode that market share.
The hypothetical Helios license would also likely be non-exclusive, as GenomeDx would have no rational basis for granting exclusivity to a competitor in its core market. Accordingly, the exclusivity dimension of this factor does not require adjustment. However, the field-of-use dimension supports a substantial upward adjustment from the Veridian rate.
Assessment under Factor 3: Strongly supports upward adjustment from the Veridian 15% rate.
D. Factor 4 — Licensor's Established Policy of Maintaining Its Patent Monopoly
Georgia-Pacific factor 4 considers "the licensor's established policy and marketing program to maintain his patent monopoly by not licensing others to use the invention or by granting licenses under special conditions designed to preserve that monopoly." 318 F. Supp. at 1120.
GenomeDx has demonstrated a clear and consistent policy of maintaining its patent monopoly in the prostate cancer genomic prognostic testing market. Several facts support this conclusion:
First, this lawsuit itself is direct evidence of GenomeDx's willingness to vigorously enforce its patent rights against competitors that enter the prostate cancer market without authorization. GenomeDx filed suit against Helios promptly after the commercial launch of ProstaSignal™, demonstrating that GenomeDx does not tolerate unauthorized use of its patented technology by competitors in the prostate cancer space.
Second, the structure of the Veridian license is revealing. GenomeDx was willing to grant a license under the '271 and '893 Patents — but only in a non-competing therapeutic area (bladder cancer). GenomeDx did not grant Veridian any rights in the prostate cancer field. This field-of-use restriction demonstrates that GenomeDx's licensing policy is carefully calibrated to preserve its competitive position in the prostate cancer market. GenomeDx is not a company that freely licenses its core technology to all comers; it is a company that grants targeted licenses in non-competing fields while zealously guarding its patent monopoly in its primary market.
Third, GenomeDx has built a comprehensive intellectual property portfolio, comprising 47 issued U.S. patents, 12 pending U.S. patent applications, and 19 international family members. The breadth and depth of this portfolio indicate that GenomeDx has invested heavily in developing and protecting its proprietary technology and has adopted a strategic approach to intellectual property management that is consistent with a policy of maintaining its patent monopoly.
The combination of GenomeDx's litigation posture, its restrictive licensing practices, and its comprehensive patent portfolio establish that GenomeDx has a well-defined policy of maintaining its patent monopoly in the prostate cancer prognostic testing market. In a hypothetical negotiation, this policy would give GenomeDx significant leverage to demand a premium royalty rate as a condition of granting any license to a direct competitor.
Assessment under Factor 4: Strongly supports upward adjustment from the Veridian 15% rate.
E. Factor 5 — Commercial Relationship Between the Parties
Georgia-Pacific factor 5 considers "the commercial relationship between the licensor and licensee, such as, whether they are competitors in the same territory in the same line of business; or whether they are inventor and promoter." 318 F. Supp. at 1120.
This factor presents one of the most significant distinctions between the Veridian license and the hypothetical Helios license.
GenomeDx and Veridian. GenomeDx and Veridian do not compete with each other. GenomeDx's primary commercial product is the Decipher® Prostate Genomic Classifier, which is focused on prostate cancer prognostic testing. Veridian focuses on bladder cancer diagnostics — a related but distinct urological cancer application. At the time the Veridian license was negotiated and executed, the parties viewed their relationship as complementary rather than competitive. GenomeDx had no commercial interest in bladder cancer diagnostics, and Veridian had no commercial interest in prostate cancer diagnostics. The Veridian license was thus negotiated in the context of a cooperative, non-threatening commercial relationship.
GenomeDx and Helios. GenomeDx and Helios are direct competitors in the genomic prostate cancer prognostic testing market. Helios's ProstaSignal™ Genomic Classifier is positioned as a direct alternative to GenomeDx's Decipher® test. Both products target the same patient population (post-radical prostatectomy prostate cancer patients), the same referring physician base (urologists and radiation oncologists), and the same payer population (commercial insurers and Medicare). The competitive impact of ProstaSignal™ on GenomeDx's business has been significant: GenomeDx's market share declined from approximately 74% prior to ProstaSignal™'s launch to approximately 68% after launch — a loss of approximately six percentage points in only six months.
The financial implications of this competitive dynamic underscore the qualitative difference between the Veridian and Helios commercial relationships. GenomeDx's FY 2024 revenue was $387.6 million, the vast majority of which was generated by the Decipher® test. Helios's FY 2024 revenue was $71.2 million, with ProstaSignal™ contributing approximately $32.1 million in its first six months of commercial availability. GenomeDx's dominant market position is directly threatened by Helios's entry, and any license that enables Helios to continue competing in the prostate cancer market would come at a substantial cost to GenomeDx.
In a hypothetical negotiation, this competitive dynamic would have a powerful effect on the royalty rate. A rational licensor facing the prospect of licensing a direct competitor in its core market would demand a premium that compensates not only for the use of the patented technology but also for the competitive harm that would flow from granting the license. The fact that the Veridian license was negotiated in a non-competitive context means that the 15% rate does not incorporate any competitive premium; the hypothetical Helios rate must include such a premium.
Assessment under Factor 5: Strongly supports upward adjustment from the Veridian 15% rate.
F. Factor 6 — Effect of Selling the Patented Specialty in Promoting Sales of Other Products
Georgia-Pacific factor 6 considers "the effect of selling the patented specialty in promoting sales of other products of the licensee; the existing value of the invention to the licensor as a generator of sales of his non-patented items; and the extent of such derivative or convoyed sales." 318 F. Supp. at 1120.
The Decipher® test is GenomeDx's flagship product and primary revenue driver, accounting for the vast majority of GenomeDx's $387.6 million in FY 2024 revenue. The Decipher® test also serves as a gateway to GenomeDx's broader product ecosystem, including its tissue-based genomic services, its patient management platform, and its data analytics offerings. The commercial success of the Decipher® test drives physician engagement, institutional adoption, and payer coverage decisions that benefit GenomeDx's entire product portfolio.
Any license that enables a competitor to offer a competing product in the prostate cancer prognostic testing market would directly undermine GenomeDx's sales engine. If physicians and institutions adopt ProstaSignal™ as a substitute for Decipher®, GenomeDx loses not only the revenue from the diverted tests but also the ancillary benefits of physician engagement and institutional relationships.
By contrast, the Veridian license in bladder cancer diagnostics has minimal impact on GenomeDx's prostate cancer revenue or physician relationships. Veridian's bladder cancer products do not substitute for GenomeDx's prostate cancer products, and physicians who order Veridian's bladder cancer tests are not thereby diverted from ordering GenomeDx's prostate cancer tests.
This distinction further supports an upward adjustment from the Veridian rate. The hypothetical Helios license would directly undermine GenomeDx's core commercial engine in a way that the Veridian license does not.
Assessment under Factor 6: Supports upward adjustment from the Veridian 15% rate.
G. Factor 7 — Duration of the Patent and Term of the License
Georgia-Pacific factor 7 considers "the duration of the patent and the term of the license." 318 F. Supp. at 1120.
The '271 Patent and the '893 Patent — the two patents covered by the Veridian license — share the same priority chain and have an expiration date of June 14, 2036. As of the hypothetical negotiation date of October 7, 2024, these patents had approximately 11 years and 8 months of remaining patent life. The Veridian license is co-extensive with the life of these patents, i.e., it runs through June 14, 2036.
The '647 Patent, which was not part of the Veridian license, has a different priority chain and an expiration date of September 9, 2041. As of the hypothetical negotiation date, the '647 Patent had approximately 16 years and 11 months of remaining patent life — more than five additional years beyond the expiration of the '271 and '893 Patents.
A hypothetical license to Helios would need to cover all three patents-in-suit, including the '647 Patent. This means that the effective duration of the hypothetical license would extend through September 9, 2041, approximately five years beyond the expiration of the Veridian license. The longer effective duration of the hypothetical license increases its value relative to the Veridian license and supports an incremental royalty adjustment. A licensee obtaining rights that extend through 2041, rather than 2036, is receiving additional years of patent protection during which it may practice the patented technology without risk of infringement claims, and this additional value should be reflected in the royalty rate.
Assessment under Factor 7: Supports upward adjustment from the Veridian 15% rate, particularly in connection with the inclusion of the '647 Patent.
H. Factor 8 — Established Profitability of the Product, Its Commercial Success, and Its Current Popularity
Georgia-Pacific factor 8 considers "the established profitability of the product made under the patent; its commercial success; and its current popularity." 318 F. Supp. at 1120.
GenomeDx's Decipher® Test. GenomeDx's Decipher® test is a well-established commercial success in the genomic prostate cancer prognostic testing market. In FY 2024, GenomeDx generated revenue of $387.6 million, with an EBITDA margin of approximately 14.0% ($54.3 million). The Decipher® test commands an average reimbursement of $4,210 per test, reflecting its position as a premium clinical tool with strong payer support. GenomeDx's incremental margin on Decipher® tests is approximately 72%, reflecting the high-margin nature of genomic diagnostic testing once fixed costs are absorbed.
The commercial success of the Decipher® test is attributable in significant part to the patented technology at its core — the multi-gene expression profiling and machine-learning classifier methods covered by the patents-in-suit. The Decipher® test has been adopted into multiple clinical practice guidelines, including those issued by the National Comprehensive Cancer Network (NCCN) and the American Urological Association (AUA), and has been the subject of numerous peer-reviewed clinical validation studies. This clinical adoption and payer coverage further confirm the established profitability of products made under the patents.
Helios's ProstaSignal™. ProstaSignal™ is in the early stages of its commercial life, having been launched only six months before the end of the current damages period. Nevertheless, its early commercial traction is significant: approximately 8,400 tests in the first six months, with estimated revenue of $32,088,000. This level of early adoption demonstrates the commercial viability and market demand for genomic prostate cancer prognostic tests utilizing the patented technology.
The established profitability and commercial success of products incorporating the patented technology strengthens GenomeDx's negotiating position in the hypothetical negotiation. A patentee whose technology has been validated by the market is in a stronger position to demand a premium royalty rate than a patentee whose technology is unproven or speculative.
Assessment under Factor 8: Supports a royalty rate at or above the Veridian 15% baseline.
I. Factor 9 — Utility and Advantages of the Patent Property Over Old Modes or Devices
Georgia-Pacific factor 9 considers "the utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results." 318 F. Supp. at 1120.
Prior to the development of the patented technology, prostate cancer recurrence risk assessment after radical prostatectomy relied primarily on clinical and pathological variables — Gleason score, pre-operative PSA level, surgical margin status, and pathological stage. While these variables provided some prognostic information, they were limited in their ability to stratify patients into clinically meaningful risk categories and to identify patients at high risk of metastasis or cancer-specific mortality who might benefit from adjuvant therapy.
GenomeDx's patented methods represent a substantial advance over these prior approaches by integrating multi-gene expression profiling with machine-learning classifiers to provide a more precise and clinically actionable prognostic tool. The key advantages of the patented technology include:
• The ability to measure the expression levels of multiple genes simultaneously and to derive a composite genomic risk score that captures biological information not available from clinical and pathological variables alone.
• The use of machine-learning classifiers (including random-forest classifiers, as covered by the '271 Patent and '893 Patent claims) trained on large clinical datasets to identify non-linear relationships among gene expression variables and to generate robust, validated prognostic models.
• The integration of genomic risk scores with clinical covariates (as covered by the '647 Patent) to produce a multi-modal prognostic model that outperforms either genomic or clinical variables alone.
The patented technology has been adopted into clinical practice guidelines, has been validated in multiple independent clinical studies, and has achieved broad payer coverage — all confirming its utility and advantages over prior methods. The '647 Patent is of particular significance in this regard, as it covers the specific innovation of integrating genomic and clinical data into a unified prognostic model, which is precisely the approach that ProstaSignal™ employs.
Assessment under Factor 9: Strongly supports a royalty rate at or above the Veridian 15% baseline.
J. Factor 10 — Nature of the Patented Invention and Its Relation to the Accused Product
Georgia-Pacific factor 10 considers "the nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention." 318 F. Supp. at 1120.
This factor examines the relationship between the patented invention and the accused product — in this case, the relationship between the methods covered by the '271, '893, and '647 Patents and Helios's ProstaSignal™ Genomic Classifier.
The patents-in-suit cover the core methodology of ProstaSignal™:
• Multi-gene expression profiling. The '271 Patent covers methods of measuring the expression levels of a defined set of genes in cancer tissue specimens and using those expression levels for prognostic classification. ProstaSignal™ measures 24 genes, 19 of which overlap with GenomeDx's patented gene set — a 79% overlap.
• Machine-learning classification. The '271 Patent and '893 Patent cover the use of trained machine-learning classifiers (including the broadly claimed "trained machine-learning classifier" limitation) to process gene expression data and generate a risk classification. ProstaSignal™ uses a gradient-boosted decision tree classifier — a machine-learning method that falls within the scope of the patented claims, either literally or under the doctrine of equivalents.
• Risk stratification. The '893 Patent covers methods of stratifying patients into risk categories based on the output of the machine-learning classifier. ProstaSignal™ generates a ProstaScore that stratifies patients into low, intermediate, and high-risk categories.
• Integration with clinical variables. The '647 Patent covers the integration of a genomic risk score with clinical covariates (including Gleason score and PSA) to produce a combined prognostic model. ProstaSignal™ combines ProstaScore with Gleason grade group and pre-operative PSA to generate its final risk assessment — mapping directly onto the '647 Patent's claim limitations.
The patents are not peripheral to ProstaSignal™; they cover its fundamental diagnostic methodology. Without the patented technology, ProstaSignal™ could not perform its core function of genomic risk stratification. This close relationship between the patented invention and the accused product supports a royalty rate at the high end of the range, as the patented technology is essential to the commercial value of the accused product.
Assessment under Factor 10: Strongly supports a royalty rate at the high end or above the Veridian 15% rate.
K. Factor 11 — Extent to Which the Infringer Has Made Use of the Invention
Georgia-Pacific factor 11 considers "the extent to which the infringer has made use of the invention; and any evidence probative of the value of that use." 318 F. Supp. at 1120.
Helios has made substantial use of the patented invention. ProstaSignal™ has been commercially available since October 7, 2024, and approximately 8,400 tests have been performed through March 2025, generating estimated revenue of $32,088,000. Helios is actively marketing ProstaSignal™ as a direct competitor to GenomeDx's Decipher® test, targeting the same physician base, the same patient population, and the same payer population.
The substantial volume of tests performed and the significant revenue generated by ProstaSignal™ demonstrate that Helios has made extensive use of the patented invention and has derived significant commercial benefit from that use. This level of use supports a meaningful royalty that reflects the value Helios has extracted from the patented technology.
Moreover, Helios's use of the patented technology is not incidental or peripheral; it is central to ProstaSignal™'s value proposition. Every ProstaSignal™ test that is performed relies on the patented multi-gene expression profiling and machine-learning classifier methodology. There is no evidence that Helios could offer a commercially viable prostate cancer prognostic test without practicing the patented methods.
Assessment under Factor 11: Supports a meaningful royalty at or above the Veridian 15% rate.
L. Factor 12 — Portion of Profit Customarily Allowed in the Particular Business for Use of the Invention
Georgia-Pacific factor 12 considers "the portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions." 318 F. Supp. at 1120.
This is the central factor for the Veridian comparability analysis. The Veridian license established a 15% running royalty on net revenues from licensed products — a rate that was negotiated at arm's length between sophisticated parties and that represents the most direct evidence of the customary royalty rate for the patented technology in the molecular diagnostics industry. The $500,000 minimum annual royalty further confirms the significant value that GenomeDx places on any use of its patented technology, regardless of the licensee's sales volume.
The 15% rate is consistent with royalty rates observed in the molecular diagnostics industry for licenses involving core diagnostic methodology. While a comprehensive survey of industry licensing practices is beyond the scope of this memorandum (and will be developed in Dr. Tremaine's expert report), the 15% rate is within the range that would be expected for a license covering the fundamental methodology of a genomic diagnostic test.
However, as discussed throughout this memorandum, the Veridian license was negotiated in circumstances that differ materially from the hypothetical Helios negotiation. The Veridian license was limited to bladder cancer diagnostics (a non-competing field), covered only two of the three patents-in-suit, and was negotiated in a voluntary, non-litigation context. Each of these differences supports an upward adjustment from the 15% baseline. The detailed adjustment analysis is set forth in Section IV below.
Assessment under Factor 12: Establishes a 15% floor, with upward adjustment warranted.
M. Factor 13 — Portion of Realizable Profit Attributable to the Invention vs. Non-Patented Elements
Georgia-Pacific factor 13 considers "the portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer." 318 F. Supp. at 1120.
Helios's ProstaSignal™ test relies heavily on the patented methods. The genomic classifier methodology — including the multi-gene expression profiling, the machine-learning classification, and the integration with clinical covariates — is the core value proposition of ProstaSignal™. It is the genomic risk score that distinguishes ProstaSignal™ from conventional clinical and pathological assessments and that drives physician adoption, patient demand, and payer reimbursement.
The non-patented elements of ProstaSignal™ — including laboratory processing of tissue specimens, sample logistics and handling, report formatting and delivery, and customer support — are commoditized components that are common to all molecular diagnostic laboratories and do not contribute meaningfully to ProstaSignal™'s competitive differentiation or premium reimbursement. While these components involve real costs and operational expertise, they are not the source of ProstaSignal™'s commercial value. Any competent molecular diagnostic laboratory could perform these functions; what distinguishes ProstaSignal™ is its patented genomic classifier methodology.
Helios may argue that its five proprietary genes (the five genes in its 24-gene panel that do not overlap with GenomeDx's patented gene set) represent a non-patented improvement that should reduce the portion of profit attributable to the patented invention. However, this argument is undermined by the fact that 19 of 24 genes (79%) overlap with the patented gene set, and the overall genomic classifier methodology — including the machine-learning framework and the clinical integration approach — is covered by the patents-in-suit regardless of which specific genes are included in the panel.
A significant portion of ProstaSignal™'s value is attributable to the patented technology, supporting a royalty rate at or above 15%.
Assessment under Factor 13: Supports a royalty rate at or above the Veridian 15% baseline.
N. Factor 14 — Opinion Testimony of Qualified Experts
Georgia-Pacific factor 14 considers "the opinion testimony of qualified experts." 318 F. Supp. at 1120.
GenomeDx is in the process of retaining two experts whose testimony will be central to the damages analysis:
Dr. Louise Tremaine, Managing Director, Ashworth Economics Group LLC. Dr. Tremaine is being retained as plaintiff's damages expert and will be responsible for developing the full reasonable-royalty and lost-profits damages analyses in her expert report. Dr. Tremaine has extensive experience in intellectual property damages analysis in the life sciences and medical device industries, including multiple engagements involving genomic diagnostic technology. Her expert report, which is due May 15, 2026, will incorporate the Veridian comparability analysis set forth in this memorandum, along with her independent assessment of the Georgia-Pacific factors and the appropriate royalty rate.
Dr. Franklin Ogawa, Professor of Computational Oncology, Stanford University School of Medicine. Dr. Ogawa is being retained as plaintiff's technical expert and will provide testimony on the technical comparability of the Veridian licensed use (bladder cancer diagnostics) and the accused ProstaSignal™ use (prostate cancer diagnostics), as well as the centrality of the patented methods to the ProstaSignal™ test. Dr. Ogawa's testimony will support the Veridian comparability analysis by establishing that the patented technology is equally fundamental to genomic diagnostic testing in both bladder cancer and prostate cancer and that the field-of-use distinction does not diminish the technological comparability of the two applications.
Expert opinions will further support the Veridian comparability analysis at trial and will be developed in coordination with the legal analysis set forth in this memorandum.
Assessment under Factor 14: Expert testimony will support the use of the Veridian license as a comparable and the proposed 18% adjusted rate.
O. Factor 15 — Amount That a Prudent Licensor and Licensee Would Have Agreed Upon at the Time of the Hypothetical Negotiation
Georgia-Pacific factor 15 is the ultimate synthesizing factor: "the amount that a licensor (such as the patentee) and a licensee (such as the infringer) would have agreed upon (at the time the infringement began) if both had been reasonably and voluntarily trying to reach an agreement." 318 F. Supp. at 1120.
Synthesizing the analysis under all fourteen preceding factors, the Veridian 15% rate is a probative starting point, but the hypothetical negotiation between GenomeDx and Helios would result in a higher rate. The key factors driving the upward adjustment are:
1. Direct competition in prostate cancer. Unlike Veridian, which operates in the non-competing bladder cancer field, Helios directly competes with GenomeDx in the genomic prostate cancer prognostic testing market. A license to a direct competitor that would erode GenomeDx's approximately 74% market share commands a significant premium over a license to a non-competitor (Factors 3, 5, and 6).
2. Inclusion of the '647 Patent. The hypothetical Helios license would cover all three patents-in-suit, including the '647 Patent, which was not part of the Veridian license and which adds claims directed to the integrated genomic-clinical prognostic model — a key feature of ProstaSignal™. The '647 Patent also has a longer remaining patent life (through September 9, 2041, versus June 14, 2036 for the other two patents) (Factors 1 and 7).
3. GenomeDx's dominant market share at risk. GenomeDx held approximately 74% of the genomic prostate cancer prognostic testing market prior to ProstaSignal™'s launch, and this market share declined to approximately 68% after launch. A rational licensor facing the prospect of further market share erosion would demand a premium royalty to compensate for this competitive harm (Factor 5).
4. Litigation context. The hypothetical negotiation is deemed to occur against the assumption that the patents are valid and infringed. This is a fundamentally different negotiating dynamic from the voluntary Veridian negotiation. The licensee (Helios) is negotiating to avoid an injunction and ongoing damages liability, not merely acquiring optional technology for a new product line. Courts routinely recognize that this dynamic supports a premium over voluntarily negotiated licenses (Factor 15 generally).
5. GenomeDx's established policy of protecting its patent monopoly. GenomeDx has demonstrated a clear policy of restricting licenses in the prostate cancer market and enforcing its patent rights against competitors. This policy gives GenomeDx significant bargaining leverage in the hypothetical negotiation (Factor 4).
Taking all of these considerations into account, a prudent licensor (GenomeDx) and a prudent licensee (Helios) would have agreed upon a royalty rate in the range of 17.5% to 19.0%, with a proposed rate of 18% (the midpoint of the adjusted range).
Assessment under Factor 15: Supports a proposed royalty rate of 18%.
IV. ADJUSTMENT ANALYSIS: FROM 15% (VERIDIAN) TO 18% (PROPOSED HYPOTHETICAL RATE)
This section sets forth the detailed adjustment analysis that bridges the gap between the Veridian license's 15% running royalty rate and the proposed 18% rate for the hypothetical negotiation between GenomeDx and Helios. The analysis identifies three principal factors warranting upward adjustment, addresses potential downward adjustments, and arrives at a net adjustment of +3.0 percentage points (from 15% to 18%).
A. Factors Warranting Upward Adjustment
1. Direct Competitive Overlap (Estimated Premium: +1.5–2.0 Percentage Points). The single most significant distinction between the Veridian license and the hypothetical Helios license is the competitive relationship between the licensor and the licensee. Veridian used the licensed technology for bladder cancer diagnostics — a therapeutic area in which it does not compete with GenomeDx. Helios uses the infringing technology for prostate cancer diagnostics — the same therapeutic area as GenomeDx's Decipher® test, and GenomeDx's core commercial market.
The competitive harm caused by ProstaSignal™ is not theoretical; it is documented. GenomeDx's market share in the genomic prostate cancer prognostic testing market declined from approximately 74% prior to ProstaSignal™'s launch to approximately 68% after launch — a loss of approximately six percentage points in the first six months of ProstaSignal™'s commercial availability. Based on market analysis and the estimated substitution rate, approximately 6,100 of Helios's 8,400 ProstaSignal™ tests during the October 2024 through March 2025 period represent tests that would have been ordered as GenomeDx Decipher® tests absent the availability of ProstaSignal™. At GenomeDx's average reimbursement rate of $4,210 per test, these 6,100 diverted tests represent lost revenue of approximately $25,681,000 (6,100 × $4,210).
A rational licensor facing this level of competitive harm would demand a premium that compensates for the direct erosion of its market share and revenue. In the licensing literature and in judicial practice, competitive overlap is recognized as one of the most significant factors driving royalty rates upward in the context of a hypothetical negotiation. The Veridian 15% rate, which was negotiated in the absence of any competitive threat, does not incorporate any competitive premium. An adjustment of +1.5 to +2.0 percentage points is warranted to account for the direct competitive overlap between GenomeDx and Helios.
2. Broader Patent Coverage — Inclusion of the '647 Patent (Estimated Premium: +0.5–1.0 Percentage Point). The Veridian license covers two patents: the '271 Patent and the '893 Patent. It does not cover the '647 Patent (U.S. Patent No. 11,891,647), because the '647 Patent had not yet issued at the time the Veridian license was executed on April 3, 2022. The '647 Patent issued on February 6, 2024, nearly two years after the Veridian license was signed.
The '647 Patent covers a particularly significant aspect of the patented technology: the integration of a genomic risk score with clinical covariates — specifically, Gleason score, PSA level, surgical margin status, and pathological stage — to produce a combined prognostic model that provides more accurate risk stratification than either the genomic score or the clinical variables alone. This is precisely the methodology that ProstaSignal™ employs. ProstaSignal™ combines its genomic risk score (ProstaScore) with Gleason grade group and pre-operative PSA level to generate its final composite risk assessment. The '647 Patent's claims thus map directly onto a core feature of ProstaSignal™'s value proposition.
In addition to covering a key aspect of ProstaSignal™'s methodology, the '647 Patent has a significantly longer remaining patent life than the other two patents. The '647 Patent expires on September 9, 2041, approximately five years after the June 14, 2036 expiration date of the '271 and '893 Patents. A hypothetical license covering the '647 Patent would therefore extend the licensee's rights through 2041, providing additional years of freedom from infringement claims under the integrated genomic-clinical prognostic method.
The inclusion of a third patent in the licensed portfolio, particularly one that covers a critical aspect of the accused product's methodology and that extends the effective duration of the license by approximately five years, increases the value of the hypothetical license relative to the Veridian license. An incremental adjustment of +0.5 to +1.0 percentage point is warranted to account for this additional patent coverage.
3. Litigation Context — "Book of Wisdom" (Estimated Premium: +0.5–1.0 Percentage Point). The hypothetical negotiation framework mandated by Georgia-Pacific and its progeny requires that the negotiation be deemed to occur against the assumption that the patent is valid and infringed. See Georgia-Pacific, 318 F. Supp. at 1121; see also Rite-Hite Corp., 56 F.3d at 1554 n.13 ("The hypothetical negotiation requires the parties to assume that the patent is valid and infringed."). This assumption fundamentally alters the bargaining dynamics relative to a voluntary, non-litigation negotiation.
In the Veridian negotiation, there was no pending or threatened litigation between GenomeDx and Veridian. The negotiation was a voluntary commercial arrangement in which Veridian sought access to GenomeDx's technology for use in a new product line. Veridian had the option of declining to take the license and pursuing alternative technologies, and GenomeDx had no way to compel Veridian to agree to a particular royalty rate. The Veridian negotiation was, in short, a classic arm's-length commercial transaction.
By contrast, the hypothetical negotiation with Helios is deemed to occur in the shadow of litigation. Helios is assumed to know that it is infringing valid patents and that it faces the prospect of an injunction and ongoing damages liability if it does not reach an agreement with GenomeDx. This knowledge gives GenomeDx substantially more bargaining leverage than it had in the Veridian negotiation. Helios cannot simply walk away from the negotiation and pursue alternative technologies (at least not without redesigning ProstaSignal™ to avoid the patented methods, which may not be commercially feasible given the 79% gene overlap and the fundamental reliance on machine-learning classification). Helios is effectively negotiating to avoid a judicially imposed outcome that could be far more costly than a negotiated license.
Courts have recognized that the litigation context inherently produces higher royalty rates than voluntary commercial negotiations. See, e.g., Mondis Tech., Ltd. v. LG Elecs., Inc., 2011 WL 1714304, at *8 (E.D. Tex. May 4, 2011) (recognizing that a license negotiated under threat of litigation is likely to command a higher royalty than a voluntary license). Specific case law will be developed in further detail in Dr. Tremaine's expert report and in connection with motion practice. An adjustment of +0.5 to +1.0 percentage point is warranted to account for the litigation context premium.
B. Factors That Could Support Downward Adjustment (and Why They Are Unpersuasive)
It is important to anticipate and address the potential arguments that Helios may advance in support of a downward adjustment from the Veridian rate. We have identified three such arguments and explain below why none warrants a meaningful downward adjustment.
1. Non-Exclusive vs. Exclusive License. Helios may argue that the Veridian license's non-exclusive nature should be considered in the adjustment analysis. However, this argument does not support a downward adjustment because the hypothetical Helios license would also be non-exclusive. GenomeDx would have no rational basis for granting exclusivity to a competitor in its core prostate cancer market, as doing so would preclude GenomeDx from continuing to sell its own Decipher® test. The exclusivity dimension of the two licenses is therefore equivalent, and no adjustment is warranted on this basis.
2. Different Gene Panel Size. Helios may argue that ProstaSignal™'s use of a 24-gene panel (versus GenomeDx's 22-gene panel) represents a mean

MEMORANDUM

I. EXECUTIVE SUMMARY

II. BACKGROUND

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