Affymetrix ( AFFX) shares surged after the leading gene-chip company won a big patent case in the U.K., assuaging investors worried about a raft of litigation surrounding the company.

Affymetrix's Thursday rally

Affymetrix shares were up $12.31, or 21%, to $72.50.

Affymetrix Thursday said the U.K. Court of Appeal unanimously agreed that the Santa Clara, Calif., biotech company has rights to patents held by a Beckman Coulter ( BEC) business it purchased in 1999. A private company named Oxford Gene Technology claimed rights to the patents, known as the Southern Patents after Oxford's founder.

"This is extremely good news," says Ellen Lubman, a Robertson Stephens analyst who has a strong buy rating on Affymetrix. "It's definitely the biggest court decision yet for Affymetrix and hopefully means it will prevail in other actions." Robbie Stephens has underwritten for Affymetrix.

The decision by the U.K.'s highest court overturns an earlier decision in April in the U.K. High Court, in a case brought by Oxford Gene. But Affymetrix is still battling the same legal fight against Oxford in a Delaware court.

"In light of this decision, Affymetrix now looks forward to a determination in the U.S. District Court in Delaware that its current products are not covered by any valid OGT claim, in which case Affymetrix may no longer need to pay royalties to OGT," said Phil McGarrigle, chief patent lawyer for Affymetrix.

Affymetrix off highs

Affymetrix has nearly 100 patents covering its technology used in scores of drug research labs involved in genetic analysis. But the stock has been depressed over worries over its intellectual property litigation with companies including Hyseq ( HYSQ), PE Biosystems ( PEB) and Incyte ( INCY). The stock continues to sell well below its 52-week high of $163.50.

And while Affymetrix was a pioneer in putting genetic information on silicon chips in its GeneChip products, it is facing new competition from companies including Agilent ( A), a spinout from Hewlett-Packard ( HWP), along with Corning ( GLW) and Motorola ( MOT). All these companies aim to jump into a fast-growing $500 million market for "microarrays."