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Merck Gilead Patent Trial 6/17/16
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Merck’s Solvaldi® Patents Unenforceable for Egregious Misconduct
Jun 13, 2016 | The National Law Review
By Warren Woessner
In Gilead Sciences, Inc. v. Merck & Co., Inc., Case No. 13-cv-04057-BLE (N.D. Cal., June 6, 2016), Judge Beth Freeman, sitting in equity, found that the record compelled a finding that Merck and its employee “D” had obtained asserted patents 7,105,499 and 8,481,712 after using inequitable conduct. Earlier, the jury had found the patents valid and awarded Merck $200 million in damages for infringement of this costly drug, that contains the active ingredient sofosbuvir or solvaldi. -
Patent Prosecution: “Unclean Hands” Doctrine Erases Merck’s Damage Award
Jun 16, 2016 | The National Law Review
By Warren Woessner
In my last post on the district court’s ruling in Gilead v. Merck, I implied that Gilead had convinced the Judge that Merck had employed inequitable conduct (“IC”) in conducting its negotiations with Pharmasset, the company Gilead later purchased to obtain the rights to the HCV drug, sofosuvir or Solvaldi®. However, I was reading and writing at an usually high speed and missed the fact that the judge’s finding was based on the pre-IC, unclean hands defense. -
Judge overturns ruling on patent after finding Merck lied to court
Jun 14, 2016 | The British Medical Journal
By Owen Dyer
Citing a “pervasive pattern of misconduct by Merck and its agents,” a California federal judge has stripped the company of its right to enforce patent claims against its rival Gilead Sciences over Gilead’s best-selling hepatitis C treatments.
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Merck’s Solvaldi® Patents Unenforceable for Egregious Misconduct
Jun 13, 2016 | The National Law Review
By Warren Woessner
In Gilead Sciences, Inc. v. Merck & Co., Inc., Case No. 13-cv-04057-BLE (N.D. Cal., June 6, 2016), Judge Beth Freeman, sitting in equity, found that the record compelled a finding that Merck and its employee “D” had obtained asserted patents 7,105,499 and 8,481,712 after using inequitable conduct. Earlier, the jury had found the patents valid and awarded Merck $200 million in damages for infringement of this costly drug, that contains the active ingredient sofosbuvir or solvaldi.
Her 65 page order (a copy along is available at the end of this post) rests on the Fed. Cir.’s Therasense decision, which redefined inequitable conduct (“IC”). While most inequitable conduct charges are based on a failure of the patentee to disclose material prior art to the PTO, the court reaffirmed other bad behavior, not necessarily involving prior art:
“Although but-for materiality generally must be proved to satisfy the materiality prong of [IC], this court recognizes an exception in cases of affirmative egregious misconduct. This exception to the general rule …incorporates elements of the early unclean hands cases before the Supreme Court, which dealt with ‘deliberately planned and carefully executed scheme[s]’ to defraud the PTO or the courts.” [Therasense, slip. op. at 29]
The judge in this case found such a scheme in spades in this case. It is not possible to summarize every salient finding made by the judge, but the general “scheme” involved Merck in-house attorney “D” who had filed and was prosecuting the application that led to the both patents in suit. Merck and Pharmasset (later acquired by Gilead) had begun discussing a collaboration in 2001, under an NDA. By 2003, Merck knew the mode of action of Pharmasset’s lead compound, PSI-6130, but not the structure.
To move the negotiations forward, Merck and Pharmasset agreed to a “firewalled” telephone conference on March 11, 2004, involving chemists who were not involved with Merck’s internal Hep-C project. Attorney “D” was asked by Merck to participate in a further firewalled due diligence conference. During the conference, he learned the structure of PSA-3160, solvaldi. While attorney D mentioned during the call that he possibly should not be in on the call but later positively stated that he was within the firewall.
After the call, attorney D continued to work on the nucleoside project. He waited until the Pharmasset application was published in January 2005. Solvaldi was disclosed in the application with many other compounds, but now attorney D knew which structure was Pharmasset’s lead compound, PSI-6130. Within a few days, he filed narrow claims in the pending application that covered the compound, and that eventually issued as the ‘499 and ‘712 patents. Merck had not been developing compounds of this type.
It is difficult to add up all the misconduct identified by the judge, both attributable to Merck and “D” relating to the call. (I counted six). You can probably add them up yourself. But wait! There’s more! During his deposition, “D” stated that he was not in on the call or of learning of the structure of PSI-6130. However, further deposition contradicted D’s version and, at trial, Merck stated that it would not dispute that D was present, but stated that D did not know beforehand that PSI-6130 was within the scope of the HBV project he was working on. The judge found this to be untrue, and criticized Merck’s attorneys’ delay in presenting this data.
The summary of D’s trial testimony was a train wreck, since he gave very specific factual accounts at some points, and retained his lack of memory about other incidences. The judge found most of D’s second round of testimony relating to the phone conference to not be credible at least four times. His testimony about his later seeing the published Pharmasset patent or recognizing its significance before he quickly amended Merck’s pending claims to protect important Merck work was also found to not be credible.
An entire section summarizing Merck’s “Litigation Misconduct” follows:
“The Court concludes that the doctrine of unclean hands also bars Merck’s recovery against Gilead…based on additional reprehensible acts by Merck and “D” amounting to litigation misconduct, including his false testimony in the case. Based on the court’s findings…the record shows that “D” presented inconsistent, contradictory, and untruthful testimony, and that testimony was sponsored by Merck. …the Court cannot interpret [“D’s”] testimony [as due to memory failure]. It is overwhelming clear to the Court that “D” sought at every turn to create the false impression that Merck’s conduct was above board.”
Merck’s best defense was that it was appropriate to amend its application to cover a competitor’s product. The judge found that Merck’s “argument glosses over the serious and outrageous conduct in this case in which Merck engaged in litigation misconduct by presenting fabricated testimony and engaging in improper business practices.” The judge distinguished Kingsdown Med. Consultants as a case in which “a patentee learns of a competitors’ product through legal and ethical means.” It goes on. The judge balanced the equities and found the patents unenforceable.
Any practitioner who thinks that Therasense killed the IC doctrine must read all 65 pages of this opinion. All practitioners who become involved in the prep/pros of “home run” patents should bind this opinion as a guide. It’s a long way from getting on base and getting home (and don’t try to steal!) Given the size of the verdict, an appeal seems inevitable but, if I were Merck, I would get out my checkbook.
13-cv-04057 – Order 13-cv-04057 – Judgement
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Patent Prosecution: “Unclean Hands” Doctrine Erases Merck’s Damage Award
Jun 16, 2016 | The National Law Review
By Warren Woessner
In my last post on the district court’s ruling in Gilead v. Merck, I implied that Gilead had convinced the Judge that Merck had employed inequitable conduct (“IC”) in conducting its negotiations with Pharmasset, the company Gilead later purchased to obtain the rights to the HCV drug, sofosuvir or Solvaldi®. However, I was reading and writing at an usually high speed and missed the fact that the judge’s finding was based on the pre-IC, unclean hands defense.
I skipped over the section on Therasense, a 2011 Fed. Cir. decision that redefined the IC doctrine, and missed the Judge’s comments distinguishing the two doctrines. In both opinions, it was noted that the unclean hands defense originated with three early S. Ct. decisions in which the “guilty parties” employed egregious misconduct to obtain their patents. The remedy in each case was to bar the wrongdoers ability to sue for infringement of the patents.
Gilead probably chose this defense because the IC doctrine has been applied in modern decisions to render patents or entire patent families unenforceable for failure of the patentee to submit relevant prior art to the PTO during prosecution. There is a specific intent requirement and a “hard but for” materiality requirement for unsubmitted art that is difficult for defendants to plead and to meet. Here is the district court’s analysis of the doctrines:
“Therasense addressed the separate defense of IC — a defense that Gilead does not assert in this case — but the Fed. Cir.’s discussions of the differences between IC and unclean hands confirmed that unclean hands remains a viable defense to patent infringement. [649 F.3d at 1285-89]. As the Fed. Cir. explained, the doctrine of IC grew from the older doctrine of unclean hands. Id. at 1287. Whereas unclean hands can involve improper conduct before either the Patent Office or the courts, IC relates solely to conduct before the Patent Office. Id. Additionally, where unclean hands can involve improper conduct before either the Patent Office or the courts, IC relates solely to conduct before the Patent Office.”
Well, not exactly. Therasense does not have a lot to say about the unclean hands doctrine, since the facts in Therasense involved a failure to disclose documentary evidence to the Patent Office, but it is clear that the Fed. Cir. did not intend to supplant the unclean hands defense promulgated by the S. Ct. to punish egregious misconduct. In fact, the Fed. Cir. added egregious misconduct to the current IC doctrine, to cover fact situations not involving withholding prior art. How this version of egregious conduct varies from the older unclean hands doctrine is not clear.
The district court judge seems to have erred when she wrote that IC is applicable only to patent prosecution. As set forth in Therasense:
“As the IC doctrine evolved from these unclean hands cases, it came to embrace a broader scope of misconduct, including not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts but also the mere nondisclosure of information to the PTO. IC also diverged from the doctrine of unclean hands by adopting a different and more potent remedy – unenforceability of the entire patent rather than mere dismissal of the instant suit.”[emphasis added]
As the dissenters wrote in Therasense: “[N]othing in this opinion rejects the application of the doctrine of IC (or “unclean hands”) as applied to other forms of misconduct, in litigation or otherwise.”[emphasis added]
So while Gilead’s “unclean hands” arguments prevailed, it appears that Gilead could have pled either doctrine and prevailed, especially since the Court found a specific intent to deceive. It is my guess that since the Gilead decision did not involve the PTO, Gilead chose to go with unclean hands, but this decision may foreshadow a revival of this defense, particularly when most of the wrong-doing involves the litigation work and not the prosecution. Stay tuned.
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Judge overturns ruling on patent after finding Merck lied to court
Jun 14, 2016 | The British Medical Journal
By Owen Dyer
Citing a “pervasive pattern of misconduct by Merck and its agents,” a California federal judge has stripped the company of its right to enforce patent claims against its rival Gilead Sciences over Gilead’s best-selling hepatitis C treatments.
The decision came just three months after Merck won a patent infringement case against Gilead, winning $200m (£140m; $180m) in damages and the potentially far more lucrative right to pursue royalties on sales of the drugs, sofosbuvir (which Gilead markets as Sovaldi) and ledipasvir with sofosbuvir (Harvoni), which so far have earned Gilead $23bn.
Merck will not now collect that money, after the US district court judge Beth Labson Freeman found that a retired Merck scientist and lawyer “intentionally fabricated testimony” and that the company supported “bad faith conduct.” The judge reopened the case after Gilead filed a defense of “unclean hands,” a legal doctrine that denies redress to plaintiffs on the grounds that they have used unethical methods in pressing their claim.
The ruling turned on “intentionally fabricated testimony” by Philippe Durette, an in-house patent lawyer at Merck who previously worked as a scientist in the company’s chemistry laboratories, the judge said. Durette learned the structure of the molecule that would become sofosbuvir in a 2004 conference call with its first developer, Pharmasset, which Merck was considering buying.
According to Merck’s corporate rules on ethics, only “firewalled” Merck employees who knew nothing of their own company’s research in the field were supposed to participate in such conference calls. But Durette had been instructed to participate, despite leading the patent filing effort for Merck’s own hepatitis C drugs then in development. During the call he assured Pharmasset executives that he was firewalled.
Soon after the call, Durette altered Merck’s own patent applications in this field, writing “claims to cover Pharmasset’s invention,” the judge said. The compounds covered in this patent application had never been made or tested in Merck’s own work on hepatitis C drugs.
When Gilead bought Pharmasset in 2011 and started marketing the drugs, Merck sued, pointing to its own patents but not disclosing how it had discovered the information that enabled it to file those patents.
In court depositions Durette testified that he had never participated in the conference call. Confronted with Merck emails and contemporaneous notes from a Pharmasset executive showing his participation, Merck’s lawyers dropped the claim of non-attendance, but Durette continued to argue in testimony that he had not known that the call would reveal the structure of sofosbuvir. Further documentary evidence undermined that claim, however.
“Dr Durette’s lying at his deposition, recanting that testimony at trial without proper prior notice to Gilead, and further untruthful testimony at trial all support the court’s conclusion that Merck did intend to deceive Gilead and the court,” the judge wrote. “Merck’s acts are even more egregious because the main perpetrator of its misconduct was its attorney.”
Merck said in a statement that it would appeal the ruling, saying that it did “not reflect the facts of the case.”
The company said, “In its decision, the jury recognized that patent protections are essential to the development of new medical treatments. The compounds and methods at issue in this case facilitated significant advances in the treatment of patients with HCV [hepatitis C virus] infection, and achieving these advancements required many years of research and significant investment by Merck and its partners.”
Gilead said that it had “always believed” that Merck’s patents were invalid and unenforceable. It said, “We are pleased the court has ruled in Gilead’s favor and determined that Merck’s patents are unenforceable against Gilead, and therefore Merck is not entitled to recover any damages.”
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