On Apr. 25, 2018, Court of Appeals for the Federal Circuit (CAFC) affirmed unenforceability of both the Merck’s patents based on unclean hands.
This case involves two patents relating to treatments for Hepatitis C. Merck & Co., Inc. and Ionis Pharmaceuticals, Inc. (formerly Isis Pharmaceuticals, Inc.) collaborated on research in the area and eventually obtained U.S. Patent Nos. 7,105,499 and 8,481,712. The patents, whose specifications are materially the same for present purposes, describe and claim classes of compounds, identified by structural formulas, and the administration of therapeutically effective amounts of such compounds. Gilead Sciences, Inc., developed its own Hepatitis C treatments—marketed now as Solvadi® and Harvoni®, both based on the compound sofosbuvir.
Previously, Gilead filed action against Merck & sought a declaratory judgment that Merck’s ’499 and ’712 patents are invalid and that Gilead is not infringing by its activities involving its sofosbuvir products. Merck counterclaimed for infringement. Gilead eventually stipulated to infringement based on the district court’s claim construction, which was not challenged on appeal. A jury trial was held on Gilead’s challenges to the patents as invalid for lack of both an adequate written description and enablement. The jury ruled for Merck and awarded damages. The district court then held a bench trial on Gilead’s equitable defenses, including unenforceability against Gilead based on the allegation that Merck had unclean hands regarding the patents. The district court ruled for Gilead, finding both pre-litigation business misconduct and litigation misconduct attributable to Merck, and it barred Merck from asserting the patents against Gilead. The court also awarded attorney’s fees, relying on the finding of unclean hands.
Merck appealed the unenforceability judgment based on unclean hands. Gilead cross-appealed the denial of judgment as a matter of law of invalidity, but it asked to reach that issue only if court set aside the unenforceability judgment.
CAFC agreeing with the district court found, with adequate evidentiary support, two related forms of pre-litigation business misconductattributable to Merck. First, Dr. Durette learned of Pharmasset’s PSI-6130 structure by participating, at Merck’s behest, in a conference call with Pharmasset representatives, violating a clear “firewall” understanding between Pharmasset and Merck that call participants not be involved in related Merck patent prosecutions. Second, Merck continued to use Dr. Durette in the related patent prosecutions even after the call. The district court also found, with adequate evidentiary support, a direct connection to the ultimate patent litigation involving sofosbuvir. Thus, Dr. Durette’s knowledge of PSI-6130, acquired improperly, influenced Merck’s filing of narrowed claims, a filing that held the potential for expediting patent issuance and for lowering certain invalidity risks. Those findings establish serious misconduct.
The district court also found, with adequate evidentiary support, essentially two forms of litigation misconduct involving Dr. Durette as a witness and attributable to Merck. First, in his deposition, where he appeared partly as Merck’s corporate witness on issues to which the March 2004 call was relevant, Dr. Durette gave testimony that he did not participate in the March 2004 call— testimony that was later conceded to be false and that the court found to be intentionally so. Second, both in the deposition and then at trial, Dr. Durette, in support of Merck’s validity positions, gave testimony about the role the January 2005 Clark Application played in Dr. Durette’s filing of the February 2005 amendment that the court found so incredible as to be intentionally false. CAFC said that the intentional testimonial falsehoods qualify as the kind of misconduct that can, in these circumstances, support a determination of unclean hands.
CAFC saw no reversible error in the district court’s balancing of the equities. As to the ’499 patent, the equity balance follows directly from the determinations already described: the misconduct leading to the February 2005 amendment and the misconduct involved in the litigation defense of the resulting patent claims. CAFC also saw no abuse of discretion in the district court’s conclusion that the unclean hands defense extends to the ‘712 patent as well. More importantly, the district court, turning from the business misconduct to the litigation misconduct, reasonably concluded that “Merck’s litigation misconduct infects the entire lawsuit, including the enforceability of the ’712 Patent.” “[T]he untruthful testimony offered by Dr. Durette in his deposition and at trial was not incidental, but rather was directed at and supported Merck’s validity arguments, and went to the heart of significant issues in this case.” Thus, the litigation misconduct “infected this entire case, covering both patents-in-suit.”
Therefore, finally CAFC concluded that district court did not abuse its discretion in applying the doctrine of unclean hands & affirmed the unenforceability judgment.