Federal Judge Denies Merck Jury Award in Hepatitis C Suit

Citing attorney misconduct, a California federal judge overturned a jury award decision that would have required Gilead Sciences to pay $200 million in damages to pharmaceutical giant Merck.

The case involved a patent lawsuit that claimed that Gilead had developed sofosbuvir-based hepatitis C drugs, including the block buster Sovaldi, using patents held by Merck and Ionis Pharmaceuticals. It was heard in the United States District Court North District of California in San Jose.

The court found a “pervasive pattern of misconduct by Merck and its agents constituting unclean hands,” which rendered Merck’s patents unenforceable,” US District Judge Beth Labson Freeman wrote in a 65-page ruling issued earlier this month. The court order bars Merck from asserting its two patents against Gilead and states that Merck “shall take nothing by this suit.”

In April, Merck won a $200 million jury award that covered compensation for infringement on patents through the end of last year for money made from Sovaldi and Harvoni, another Gilead hepatitis C drug. In the suit, Merck had argued that compounds and methods granted in two of its patents enabled significant advances in treatment of the hepatitis C virus. Originally, the two pharmaceutical companies went to court because Gilead filed a lawsuit in an effort to invalidate Merck’s patent and damages claims and demonstrate that Gilead had sole legal right to commercialize sofosbuvir-containing products.

In late 2013, the Food and Drug Administration granted Gilead approval for sofosbuvir, marketed as Sovaldi, which quickly became a game changer in the world of hepatitis C treatments, earning Gilead billions in profits. The drug is one of a handful of new hepatitis C drugs to hit the market that have higher cure rates and work faster with fewer serious side effects than traditional treatments.

In the latest round of the legal battle, the court found that there was attorney misconduct by Merck including instances of lying under oath at deposition and trial. The misconduct involved misuse of confidential proprietary information obtained during a phone call with employees from Pharmasset, a company acquired by Gilead.

“Candor and honesty define the contours of the legal system. When a company allows and supports its own attorney to violate these principles, it shares the consequences of those actions,” Judge Freeman wrote in the order reversing the award for patent infringement. “Here, Merck’s patent attorney, responsible for prosecuting the patents-in-suit, was dishonest and duplicitous in his actions with Pharmasset, with Gilead and with this Court, thus crossing the line to egregious misconduct. Merck is guilty of unclear hands and forfeits its right to prosecute this action against Gilead.”

Meanwhile the hepatitis C treatment race continues among pharmaceutical companies, with the recent FDA decision to approve Gilead’s Epclusa. In January, Merck was granted FDA approval for its new hepatitis C drug called Zepatier.