UPDATE 2-US patent office rejects Gilead Viread patents

(Adds foundation comments, analyst comment, updates stock price, adds byline)

By Deena Beasley

LOS ANGELES, Jan 23 (Reuters) - U.S. patent officials have rejected four patents on Gilead Sciences Inc's (GILD.O) AIDS drug Viread, but the ruling is not final and the company said on Wednesday it is confident that the patents will be upheld.

The nonprofit Public Patent Foundation had challenged the Viread patents last year. The group said it submitted evidence that the scientific knowledge on which the patents were based had existed before the U.S. Patent and Trademark Office granted the patents to Gilead.

Viread, or tenofovir disoproxil fumarate, is also sold as part of Gilead's two-drug combination AIDS pill Truvada and as a component of the newer Atripla, which combines Truvada with Bristol-Myers Squibb Co's (BMY.N) Sustiva into a single pill.

Daniel Ravicher, executive director of the patent-challenging foundation, said there was no single source of the "prior art" the group says preceded Gilead's claims. "It was generally known, ubiquitous knowledge," he said.

The nonprofit group said Gilead now has the right to respond to the Patent Office's decision, adding that third-party requests for reexamination, like the ones it has filed against the four Gilead patents, are successful in causing the reviewed patents to either be revoked or changed more than two-thirds of the time.

"This is a typical step in the reexamination process," said Gilead spokeswoman Amy Flood. "The process may take some time, but we don't believe the exclusivity of our product is in jeopardy."

Morgan Stanley analyst Sapna Srivastava said invalidation of the patents "creates an overhang" for Gilead's HIV franchise.

"While, with our limited knowledge, we strongly believe that Gilead will be able to defend its patents, the PTO rejection does create some uncertainty about Gilead's core franchise. We expect it will take roughly three to four years to get a final binding decision on these patents," the analyst said in a research note.

Ravicher said his group has challenged patents from company's including Microsoft Corp (MSFT.O), Pfizer Inc. (PFE.N) and Monsanto (MON.N) for technologies ranging from stem cells to Internet technologies.

Gilead's shares fell about 20 cents to $44.00 in late-afternoon trading on Nasdaq. (Reporting by Deena Beasley; editing by Braden Reddall, Richard Chang, Gary Hill)