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Gilead Likely to Get Fees in Drug War With Merck

SAN JOSE, Calif. (CN) — A federal judge sought to button up a wild patent fight between two titans of the pharmaceutical industry Thursday, before the case over a hepatitis C drug patent is revisited in the Federal Circuit.

Lawyers for Gilead Sciences and Merck were back in front of U.S. District Judge Beth Labson Freeman on Thursday afternoon to hash out the matter of attorney's fees after the case took a stunning turn in early June.

After a jury awarded Merck a victory and $200 million in their patent fight against Gilead over a hepatitis C drug, Freeman reversed after finding that Merck's former patent lawyer at the center of the development of the contested medicine lied under oath in a deposition and that Merck was not entitled to recoup the funds.

The unethical conduct of individuals can compromise whether they are able to receive damages in a trial, typically referred to as "the unclean hands" defense.

In round 1 of the patent 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 revolutionary treatment for hepatitis C.

The jury awarded Merck $200 million in damages, derived from Gilead's sales beginning in December 2013 through the end of 2015, and found that Merck was entitled to 4 percent royalties on the drug sales.

The hepatitis C cure, marketed by Gilead under the brand names Solvadi and Harvoni, earned the company about $19 billion in sales last year.

Gilead vowed to appeal.

However, before they did so they attempted the unclean hands defense, claiming the Merck patent lawyer 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 that took place 11 years earlier during a deposition that took place five years after he left Merck.

Freeman never bought that line, saying Durette was adamant in his initial deposition that he was not on the phone call and only changed his tune after presented with evidence of another employee at Merck who took notes during the phone call.

Durrette's duplicity was enough to overturn the jury's verdict, meaning Merck is out $200 million.

On Thursday, Stanley Fisher, lawyer for Merck, argued that the economic loss meant Merck should not have to pay for Gilead's attorney's fees, which total $14 million.

"There is a lot of money at stake," he said.

However, Gilead attorney Juanita Brooks said her firm was entitled to those fees because the conduct of Durette at trial meant lawyers had to work overtime to adjust to the shifting assertions he made.

"Merck could have prevented us from running the meter by taking the right road," she said.

Freeman indicated she will award fees to Gilead, but also indicated she will wield "a scalpel" — meaning Gilead isn't likely to get the full $14 million they are asking for.

One of the other reasons she wants to settle the matter of attorney's fees is to iron out all the details for the ensuing appeal.

"I want to make sure I've done everything before this case moves on to the Federal Circuit," Freeman said.

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