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Gilead Calls Verdict|for Merck Tainted

SAN JOSE, Calif. (CN) - A federal judge on Wednesday asked two pharmaceutical heavyweights for more information as she considers whether potentially unethical attorney conduct warrants reversing a jury's verdict in their trademark fight.

U.S. District Judge Beth Labson Freeman asked Gilead Sciences and Merck to provide further case law regarding the area of patent law known as the "unclean hands" defense.

Freeman will then decide whether the duplicity of one of Merck's patent lawyers is sufficient to disqualify it from receiving royalties from future sales of rival company Gilead Science's revolutionary treatment for hepatitis C.

In Round 1of the fight, a jury found Gilead had infringed upon two of Merck's patents in its development of sofosbuvir, since Merck's discovery of a batch of nucleotides eventually led to the creation of Gilead's medication.

The jury awarded Merck $200 million in damages, derived from Gilead's sales beginning in December 2013 through the end of 2015. The hepatitis C cure, marketed by Gilead under the brand names Solvadi and Harvoni, earned the company about $19 billion in sales last year.

In court on Wednesday, Gilead argued it shouldn't have to pay Merck because the Merck engaged in unethical conduct during the process of bringing the drug to market and throughout the ensuing trademark infringement trial.

Specifically, Gilead alleges when one of Merck's patent lawyers, Phil Durette, lied under oath about how he obtained proprietary information that led to the prosecution of one of the patents at issue.

Durette was on a crucial 2004 phone call with scientists at Pharmasset, the small company that developed sofosbuvir. Gilead subsequently bought Pharmasset for $11 billion in 2011.

Gilead says Durette misrepresented his position on the phone call and also agreed to confidentiality provisions, which he subsequently violated when he prosecuted one of the patents at issue only after he realized Pharmasset was close to developing a cure for hepatitis C.

In his pretrial deposition, Durette told lawyers he was not on the phone call - an assertion he contradicted during the trial.

Gilead argues these bad-faith actions by Durette disqualify Merck from obtaining the royalties it seeks.

"We await the court's decision on our equitable defenses of unclean hands," Gilead said through a company spokesman. "We continue to believe the Merck patents are invalid."

For its part, Merck said that Durette did not lie during a deposition but simply forgot the facts, given that he was asked about events 11 years earlier during a deposition that took place five years after he left Merck.

"Gilead's equitable defenses are without merit," Merck said through a company spokesman.

However, Freeman did not buy Merck's line of defense.

The judge pointed out Durette was presented with documents that should have refreshed his memory during the deposition. Furthermore, he came up with specific alibis for why he was not on the phone call rather than simply citing a failure to recall - indicators of duplicity, Freeman said.

"I have taken great offense at the lies made by an attorney in this case," Freeman told Merck. "It's not the death knell. You have bad facts, but that doesn't mean I have decided you lose on this issue."

Freeman asked both lawyers to file briefs that explore previous case law related to unclean hands and equitable defense. In many of the cases cited, companies or individuals executed elaborate schemes, used bribes, behaved fraudulently or undertook other actions Freeman described as "odious."

Freeman said her decision would be predicated on whether Durette's actions meet the standard of unclean hands and constitute grounds for her to dismiss the jury's findings.

"I am standing on the shoulders of the jury," she said.

Should Freeman side with Merck and establish a royalties schedule, Gilead has vowed an appeal.

"Since Merck made no contribution and assumed none of the risk in the discovery and development of sofosbuvir, we do not believe Merck is entitled to any amount of damages," the company said. "In the event the judge maintains the jury's verdict on the validity of the patents, we will appeal."

Sofosbuvir has proven enormously effective at curing hepatitis C, an often fatal virus that attacks cells in the liver causing cancer, cirrhosis or liver failure.

The drug is a nucleotide, or chemical compound, which essentially prevents the virus from replicating itself in the cell division process in the liver.

Merck maintains they took out two patents that cover a group of nucleotides, which the company hypothesized would be effective after extensive research.

"In its decision, the jury recognized that patent protections are essential to the development of new medical treatments," Merck said. "The compounds and methods at issue in this case facilitated significant advances in the treatment of patients with HCV infection, and achieving these advancements required many years of research and significant investment by Merck and its partners."

Gilead refutes that it infringed the patents, which it says are too general and have nothing to do with the specific scientific breakthroughs made at Pharmasset that led to the development of the cure for hepatitis C.

Freeman gave both sides until April 22 to file their briefs.

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