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Merck Loses. Boy, Does Merck Ever Lose.

The court case between Merck and Gilead has taken the path that it appeared to be heading down after a Merck employee’s testimony was called into question: the judge has thrown out the $200 million dollar patent award to Merck. All that work for nothing, and all because the testimony of a key witness fell apart.

As mentioned in that earlier post, Phil Durette, a Merck scientist-turned-patent-attorney, testified that he was not in on a key meeting when Gilead revealed details of their compounds and research program to Merck. Gilead alleged that Durette altered Merck’s patent strategy in light of that confidential information, a contention that Merck (and Durette himself) denied in court. But it turned out that he was in on that meeting, and did have the information in question. It wasn’t just that he couldn’t remember – his detailed testimony about exactly what he was doing instead of attending that meeting was false. The judge, in this new ruling, pointed this out, as well as Merck’s backing him up all the way, and Durette’s eventual reversal of his testimony during the trial itself. He stated this multiple times during his deposition:

Q: How are you so sure 11 years later that you were never told what the structure was for the 6130 compound? A: The structure was not revealed to me by individuals at Merck or otherwise. I’m positive of that. I never saw a structure of the Pharmasset compounds until it published later on in time. . .

Q: How can you be so sure of that memory? A: Because I was not part of the patent due diligence for the structure, so I would not have been privy to any revelation of the structure to me as a patent attorney working on a related docket. So this was assigned to another person. So I would not have participated in a phone call wherein it was a potential for the revelation of the structure to Merck counsel. Q: Why would that have been inappropriate for you to have been told the structure of 6130? A: Because I was prosecuting a docket which had potential a conflict with Pharmasset’s IP positions on the subject matter.

Why yes, it would have indeed been a conflict. Durette also stated that had he known the structure, it would have tainted his judgment as to what claims to pursue in Merck’s own filings. So he definitely didn’t, and that definitely didn’t happen. Not at all. Until it turned out that it did (Pamela Demain is Merck’s Director of Corporate Licensing):

Having denied being on the March 17, 2004, due diligence call, Dr. Durette was shown Ms. Demain’s March 11, 2004 e-mail which said that he was specifically chosen by Merck to receive the structure of PSI-6130 on a March 17, 2004, patent due diligence call. . .He was asked if this refreshed his recollection. In the face of Ms. Demain’s e-mail, Dr. Durette still denied being on the call, contending “[t]hat was Pamela’s evaluation of the time, but I never participated in a due diligence meeting on March 17 because the due diligence component of this potential deal was assigned to another attorney, so there was – I did not participate in any meeting of due diligence on March 17.” 

Dr. Durette was then shown a May 20, 2004, letter and asked if that letter refreshed his recollection about the March 17, 2004, call. The May 20, 2004, letter contained a list of things Pharmasset wanted returned, including “notes from a March 17, 2004, telephone conference regarding PSI-6130 patent due diligence with [Doug Pon] and Phil Durette.” Dr. Durette still denied being on the call, stating that it was his sworn testimony that he was not made aware of the structure of PSI-6130 on the March 17, 2004, call, and that he remembered that clearly.

At the time of his deposition, no one told Dr. Durette that Pharmasset’s Alan Roemer had taken contemporaneous notes of that March 17, 2004, patent due diligence phone call. . .At Mr. Roemer’s deposition, his notes were used as an exhibit, and Gilead’s counsel asked Mr. Roemer about the call that occurred on March 17, 2004. Mr. Roemer testified that Dr. Durette participated in the call and that Dr. Durette was provided the structure of PSI- 6130 on that call. 

As the trial began, Merck’s counsel opened up by saying that Merck would not deny that Durette had been on the conference call, but that Durette did not know that Pharmasset’s disclosure was within the scope of what he had been working on. (And yes, that seems to blatantly contradict Durette’s own testimony). Interestingly, although Gilead could not subpoena Durette to appear at trial, Merck voluntarily brought him in to testify.

At trial, Dr. Durette said that his memory of the March 17, 2004, patent due diligence call became refreshed in January 2016 when he reviewed the deposition exhibits in preparation for trial. When confronted with his deposition testimony that he had not participated in the Pharmasset-Merck due diligence call, Dr. Durette said he was relying too much on his memory. Dr. Durette attempted to explain away his deposition testimony by stating that he had a lapse in memory and “over concluded” based on his memory. . .

Dr. Durette also asserted at trial that before the due diligence call, while he knew PSI-6130 was a nucleoside, he did not know that PSI-6130 was an inhibitor of the NS5B polymerase. Contrary to that testimony, Ms. Demain credibly testified that Merck and Dr. Durette did know that PSI-6130 was a nucleoside NS5B polymerase inhibitor. Dr. Durette stated at trial that he went into the March 17, 2004, call knowing that he would receive the structure of PSI-6130 but he “did not think it was going to be likely that it would be on the subject matter that was related to the – my HCV docket.” Contrary to that testimony, Dr. Durette was prosecuting patents directed to nucleoside NS5B polymerase inhibitors, and he knew going into the call that PSI-6130 was a nucleoside NS5B polymerase inhibitor.

What a mess. It goes on and on like this, by the way – I’m only including some of the problems. And the quickest way to resolve all these conflicting statements is to conclude that Durette was giving false testimony. And Judge Beth Labson Freeman is clearly not happy about that:

In this case, numerous unconscionable acts lead the Court to conclude that the doctrine of unclean hands bars Merck’s recovery against Gilead for infringement of the ’499 and ’712 Patents. Merck’s misconduct includes lying to Pharmasset, misusing Pharmasset’s confidential information, breaching confidentiality and firewall agreements, and lying under oath at deposition and trial. Any one of these acts—lying, unethical business conduct, or litigation misconduct— would be sufficient to invoke the doctrine of unclean hands; but together, these acts unmistakably constitute egregious misconduct that equals or exceeds the misconduct previously found by other courts to constitute unclean hands. Merck’s acts are even more egregious because the main perpetuator of its misconduct was its attorney.

The judge goes on to excoriate Durette, Merck, and Merck’s counsel during this case for the flagrant contradictions between Durette’s deposition and what eventually happened during the trial, and the way that Merck tried to act as if nothing was wrong. That opening statement mentioned above was not, the judge said, an appropriate time to disclose to Gilead that Durette was recanting all the major points of his prior testimony (there had been no warning beforehand).

. . .the record shows that Dr. Durette presented inconsistent, contradictory, and untruthful testimony, and that testimony was sponsored by Merck. Throughout the prosecution of this case, Dr. Durette continued to deceive Gilead and this Court. . .It is overwhelmingly clear to the Court that Dr. Durette sought at every turn to create the false impression that Merck’s conduct was above board.

So although Merck has claimed that Durette did not have an intent to deceive, the judge isn’t buying that (nor their other lines of argument in the “unclean hands” issue at stake here), and it’s hard to see how they have many arguments left after a ruling like this one. This is one of the more ticked-off court orders I’ve ever read – here, try this part out:

As explained throughout this order, Merck’s fabricated testimony was more than just an isolated incident, but happened repeatedly during Dr. Durette’s deposition. At trial, Dr. Durette continued to be evasive and told a story that was not credible. Moreover, while perhaps a common and convenient post-fabrication excuse, a memory lapse does not explain Dr. Durette’s confident and sanctimonious deposition testimony, nor does it explain Dr. Durette’s sudden moments of purported clarity at trial, when for example, he magically recalled meeting with a supervisor prior to attending the 2004 phone call with Pharmasset. As such, the present facts are significantly more disturbing than those in any of the cases cited by Merck. The evidence in this case fully supports a finding of intent to deceive.

This is a black eye for Merck and for its legal counsel. They didn’t just lose on this issue – they lost comprehensively and in several directions at once, and it’s hard to see how they shouldn’t have. A lawyer, I was once told, will do anything for you that can be done while wearing a nice suit. This does nothing to dispel that image.

 

 

The judge’s opinion was unusually blunt and outspoken:

“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 unclean hands and forfeits its right to prosecute this action against Gilead.”

 

31 comments on “Merck Loses. Boy, Does Merck Ever Lose.”

  1. Hap says:

    1) This sounds like the dictionary definition of “career-limiting move”.

    2) Maybe Merck should just consider hooking a turbine to George Merck’s body and using it to generate power for themselves.

    1. Pennpenn says:

      Ah, always great to be able to break out the ol’ thanotropic generator. At peak performance this baby can power a small town on post mortem outrage alone.

  2. skyywise says:

    Durette is probably going to get referenced to both his State Bar and the USPTO Office of Enrollment & Discipline for ethical … issues.

  3. The Aqueous Layer says:

    I’m not sure how Merck thought that this would never be discovered, especially with so much money on the line here.

    After costing the company $200M or more, wonder if Durette’s job and/or law license is in jeopardy?

  4. drsnowboard says:

    And that’s why teleconferences should always have the dull introductions at the start…

  5. Earl Boebert says:

    Oh, man, that is brutal.

    I was caught out in a similar situation. While prepping for a deposition I asserted that I had written a particular document on a particular date. I was certain of it. A paralegal went through the files and pulled metadata on the document that proved conclusively I was wrong. Luckily she was on our side. Whew. 🙂

    So Merck’s legal team didn’t find (or look for) one of *Merck’s own* emails? Unbelievable.

  6. A Nonny Mouse says:

    Reminds me of an ACE inhibitor case in Spain that I was involved with. The Merck people boasted “we buy Spanish judges by the pound”.

    They eventually lost due to bad science.

    1. Cynnical chemist says:

      They should’ve used the metric system. Might’ve helped them.

      1. what says:

        Maybe they should’ve used euros instead of pounds.

  7. watcher says:

    These are the type of errors instructed to anyone involved in sharing information across company lines. The case should be a teaching tool for anyone involved in patents, due diligence, research. There’s failure all around. Seems as if Merck should now have to pay legal fees incurred as well as a penalty for tarnishing Gillead’s image, reputation and good name.

  8. Dr. Zoidberg says:

    Durette sounds like a perfect fit as Pfizer’s next CEO.

  9. anonymous says:

    Folks, it is not as simple as that. I believe that a chemist turned patent attorney for Merck Dr. Phil Durette is a fall guy in this whole thing! The question to me is who was the Chemistry VP then? I just cannot believe that Dr. Durette walked into this whole thing and the VP of Chemistry not know about it!

  10. Sean Fearsalach says:

    How can you reveal a molecule’s structure over the phone?

    1. anonymous says:

      Read out the InChI? This compound is relatively simple, only 132 characters to get through!

      1. Lyle Langley says:

        Or, like many of these types of meetings there are slides included in the meeting to then discuss over the phone.

    2. D says:

      “It’s cytidine, but with the 2′ hydroxyl replaced with a fluorine and also methylated”.

  11. anonymous says:

    @ Sean Fearsalach….It is very simple. Now that we know what the structures of these molecules look like ( a simple one at that!)and also be aware that you are dealing with a chemist ( I am not sure about Dr. Durrett’s chemistry background) one can simply say a furanose at anomeric center bearing such and such heterocycle, phosphorylation at C-5 hydroxyl and so on. You get the point and a well trained chemist will have little or no issues! Now, if it was some kind of peptide then I am with you!

    1. Erebus says:

      If it’s a peptide it’s even easier… far easier.
      “Here’s the sequence, write this down: GSSFLSPEHQRVQQRKESKKPPAKLQPR.”

      1. Pennpenn says:

        Just don’t say it three times after midnight. We’ve lost more people to inadvertently summoning elder demons that way than our insurance will let us admit.

      2. bank says:

        For that peptide you could have easily said ghrelin/obestatin preprohormone (GHRL).

  12. Old says:

    Makes you seriously wonder about entering into a CDA with Merck if you are a small company. This behavior is so egregious and I assume would not have been tolerated in the “America’s Most Admired Company” era of Vagelos. There is a certain amount of trust that goes into working with these organizations when you are a small struggling BioPharma company. This type of behavior from the likes of Merck is very depressing and makes one wonder WTF is going on in this once proud and cutting edge company.

    1. Bob says:

      So true… they cannot be trusted. Sad thing about it is that Merck and their layers could easily push around a small biotech after stealing their IP. Thus, creating such an expensive problem for the small startup that they lose their ability and means to defend themselves. Gilead probably has the best IP lawyers money can buy and millions in resources to throw at this defense. Merck picked the wrong chump to screw with… this time.

    2. MTK says:

      Meh. Merck isn’t any different from any of the other Big Pharma or bigger fish biotechs.

      As the Athenians told the Melians “The strong do what they will and the weak accept what they must.”

      Which is why, of course, we have a legal system to try and prevent Athenian type aggression. It actually works sometimes too.

      1. anon says:

        My experience with 5 patent infringement cases has been the opposite. In the cases I have been involved with, big pharma was the innovator and some generic company or group of companies came up with bogus reasons to try to invalidate their patent. They were always hoping to get a scientifically illiterate judge, I guess, or hoping that nobody would do the experiment that proved them wrong.

        Three times I was hired as an expert on the big pharma side, twice on the generic side. The latter two instances I read all of the documents in dispute and had to say “sorry, I won’t be helpful to you, since I think that your position is incorrect”.

        One example: a claimed compound was an unnatural amino acid. There was a prior art reference describing the lactam that corresponds to cyclodehydration of that amino acid. The lactam was not made that way in that reference, however. The generic company’s argument was that if someone already knew how to make the lactam, they surely must have also known how to make the amino acid. Moreover, they said, lactams can undergo hydrolysis, so those people clearly must have made at least some of the amino acid.

        I made the lactam, was wasn’t strained at all, and exposed it to all of the reaction conditions used in that prior art paper and show that no amino acid was produced, by HPLC.

        That was the LEAST idiotic of the 5 cases, but it is the easiest to describe.

        Generics trying to rip off innovators seems to be pretty common.

        1. A-no-no says:

          My experience is similar. A major patent suffers a “death of a thousand cuts” from a hoard of generic companies, all trying to find a judge who will rule that some tiny insignificant part of a patent is wrong, which in turn makes the entire patent invalid (no matter what the actual subject matter of the patent is). And once the patent has been brought down, the innovator company loses the revenue from a product they have used a huge amount of money to develop. And the financial penalties for a lost case for the generics are relatively minor, meaning that this would appear to be a good business model for them.

        2. Anonymous says:

          Yes that’s been my experience as well. Usually there are patent lawsuits by multiple generic makers at the same time each hoping to break the patent of the pharma company. It’s definitely a business model and there are details of IP law that are exploited by the generics companies that do this sort of thing.

          1. Andy II says:

            Is it ironic to see these IP dispute between innovator and generic? Generic companies are doing these for their own profits but saying introducing generics are for patients and healthcare cost saving. Government/Law makers also encourages more generic products approved sooner. And, innovators are defending those IP challenges. Now, biosimilar cases. Those small molecule innovators are focusing on biosimilars and attacking innovators’ IP. Yes, their motivations are capturing piece of a big market for their profit.

  13. Patentguy says:

    The thing is the $200 M verdict for Merck was actually a loss already. The reasonable royalty would have been higher. Merck probably should have won somewhere between 1 and 2 B on this. The deal pencils out for Gilead with a $2B loss here. Recall they paid $11B for Pharmasset knowing they likely would have to pay Merck – this all was factored in.

    And frankly, Merck still would have covered the Pharmasset molecule even if they had to wait for the publication. Make no mistake Merck has always been aggressive in this way (even under Vagelos).

    I am not surprised that Durette didn’t remember the meeting or misremembered it. His mistake was trying to remember and being so sure about what he recalled.

    It was sloppy of Merck to have Durette prosecute the cases and do the diligence. But, had he just said, yeah I was in the meeting and saw the structure then maybe Merck would have kept the win.

  14. Oliver H says:

    Now here’s an idea – to recover the money AND get rid of the association with the incident, why not sell the company name back to EMD and start anew? 😛

    Not going to happen, of course, but hey… it would make international pharma that much less confusing…

    1. Hap says:

      They’d better do it quick – at this rate, their name won’t be worth much to almost anyone, except another pharma, to whom it will be worth even less than that.

  15. Nile says:

    I’m surprised that Gilead got this far in such a long and difficult case: a company like Merck would rely on exhausting their opponent’s financial resources to ‘win’.

    In English law, Merck would be facing a bill for Gilead’s costs, at an ‘imdemnity rate’ imposed for their improper conduct: I would be interested to hear what an American court does in this case.

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