Gilead v. Merck was decided on April 25, 2018 on appeal from the Northern District of California. After the jury ruled for Merck and awarded $200 million in damages, the district court held a bench trial on Gilead’s unclean hands defense. 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.” Merck appealed.
The Federal Circuit affirmed the judgment based on unclean hands.
[T]he district court made findings that have adequate support in the evidence and that, taken together, justif[ied] the equitable determination of unclean hands.” “[A] determination of unclean hands may be reached when misconduct of a party seeking relief has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation.” The “immediate and necessary relation” standard is met where “the conduct normally would enhance the claimant’s position regarding legal rights that are important to the litigation if the impropriety is not discovered and corrected.” And “the standard can cover at least some misconduct that ultimately fails to affect the litigation, as when it is discovered before it bears fruit, as long as its objective potential to have done so is sufficient.” The district court’s determination is reviewed for abuse of discretion.
The district court found “pre-litigation business misconduct attributable to Merck.” Dr. Durette, a Merck chemist, was involved in Merck’s patenting efforts for antiviral agents for Hepatitis C. Pharmasset was a pharmaceutical company later acquired by Gilead. Dr. Durette “participat[ed], at Merck’s behest, in a conference call with Pharmasset representatives,” during which he learned of Pharmasset’s compound that was active against Hepatitis C. Dr. Durette’s participation in the call “violat[ed] a clear ‘firewall’ understanding between Pharmasset and Merck that call participants not be involved in related Merck patent prosecutions.” “Merck continued to use Dr. Durette in the related patent prosecutions even after the call.”
Dr. Durette’s knowledge of Pharmasset’s compound, “acquired improperly, influenced Merck’s filing of narrowed claims.” Dr. Durette amended the Merck patent application “by canceling the broad genus claims and substituting claims that narrowed the scope to a subgenus focused on the key features of [Pharmasset’s compound].” The amendment “held the potential for expediting patent issuance and for lowering certain invalidity risks.” The district court “findings establish serious misconduct… that led to the acquisition of the less risky [asserted] patent and, thus, was immediately and necessarily related to the equity of giving Merck the relief of patent enforcement it seeks in this litigation.”
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The district court also found “litigation misconduct involving Dr. Durette as a witness and attributable to Merck.” First, Dr. Durette in his deposition testified that he did not participate in the conference 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, downplayed the role of Pharmasset’s patent application in Merck’s decision to amend the claims. The district court found this testimony “so incredible as to be intentionally false.” Downplaying the role of the Pharmasset patent application (and the conference call) “naturally served to aid Merck’s case that it did not derive the claimed inventions from Pharmasset…. In these circumstances, the district court could reasonably determine that the testimony at issue here held a significant potential to give Merck an advantage in the litigation.”
The district court did not abuse its discretion in finding that misconduct related to one patent affected another patent brought in the same lawsuit. Dr. Durette played a key role in the prosecution of both patents, and the two patents share the same specification. “More importantly, the district court…reasonably concluded that Merck’s litigation misconduct infects the entire lawsuit, including the enforceability of the [related patent.]” “The untruthful testimony offered by Dr. Durette in his deposition and at trial was … directed at and supported Merck’s validity arguments, and went to the heart of significant issues in this case. The validity issues were largely the same for the two patents.”
Gilead Scis., Inc. v. Merck & Co., 888 F.3d 1231 (Fed. Cir. 2018)