Merck loses appeal related to patents relating to treatments for Hepatitis C.

Merck loses its appeal:


Merck appeals the unenforceability judgment based
on unclean hands. Gilead cross-appeals the denial of
judgment as a matter of law of invalidity, but it asks us to
reach that issue only if we set aside the unenforceability
judgment. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1). We affirm the judgment based on unclean
hands, concluding that it is sufficiently supported by
findings that withstand review for clear error. We therefore
do not reach the issues raised by Gilead’s conditional
cross-appeal.



At district court:


After a bench trial on Gilead’s equitable defenses, the
district court held that Merck could not enforce the two
patents at issue here against Gilead because its conduct
gave it unclean hands. Gilead, 2016 WL 3143943, at *39.
The court rested that determination on its findings of
both pre-litigation business misconduct and litigation
misconduct attributable to Merck. Id. at *27. The court
balanced the equities and applied its determination to
both patents. Id. at *37–39.

(...)

The district court found, with adequate evidentiary
support, two related forms of pre-litigation business
misconduct attributable 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,
violating clear standards of probity in the circumstances,
that led to the acquisition of the less risky ’499
patent and, thus, was immediately and necessarily related
to the equity of giving Merck the relief of patent enforcement
it seeks in this litigation.

(...)

Those facts support the district court’s findings of serious
business misconduct. Merck sent Dr. Durette to
participate in the March 2004 call despite the clear firewall
and the fact that “Merck . . . knew that Pharmasset’s
compound was an NS5B polymerase inhibitor just like its
own compounds from the Merck-Isis collaboration.” Id. at
*28. “Dr. Durette’s involvement with Merck’s HCV patents
violated the understanding the parties had about
their firewall obligations, which excluded anyone involved
with Merck’s internal HCV program.” Id. And after the
call, it was “wrong for Merck to allow Dr. Durette to
continue to prosecute” the Merck applications: he continued
prosecution of the application that became the ’499
patent, and in 2007 he filed (and immediately amended)
the application that became the ’712 patent. Id.



Footnote 4



The court added that Merck’s own “corporate policy
forb[ade] Merck’s patent prosecutors from participating
in licensing discussions in an area related to their prosecution
work.” Id. at *9 (citing J.A. 22341 (38–39)); see id.
at *28; J.A. 22374 (170–71).



Of 30(b)(6)


In 2015, during the discovery phase of this case,
Merck designated Dr. Durette as its corporate witness
under Fed. R. Civ. P. 30(b)(6) on certain issues, even
though he had retired from Merck in 2010. Gilead, 2016
WL 3143943, at *12; J.A. 22335 (15–16), 22377 (181–84);
J.A. 22214. In particular, Merck designated him to represent
the corporation regarding the prosecution of the
application that issued as the ’499 patent. Gilead, 2016
WL 3143943, at *12; J.A. 22214–16 (¶¶ 15–21). Dr.
Durette was not Merck’s representative regarding the
2007 application that issued as the ’712 patent, id.
(¶¶ 20–21), though he filed that application.
On May 8, 2015, Gilead deposed Dr. Durette in both
his personal and his representative capacities. J.A.
22331–83. Near the end of the deposition, Dr. Durette
stated that his answers regarding the ’499 patent would
not differ according to the capacity in which he was testifying.
J.A. 22377 (183–84). Merck’s counsel represented
both Merck and Dr. Durette at the deposition. Gilead,
2016 WL 3143943, at *12; J.A. 22333 (7). Dr. Durette
testified that, in preparation for his deposition, he met
with Merck’s outside counsel for six to seven hours on
each of two days and spent eight to ten additional hours
on his own. Gilead, 2016 WL 3143943, at *12; J.A. 22334
(10–11).
Dr. Durette gave two different answers about whether
he participated in the March 17, 2004 call with Pharmasset.
Near the start of the deposition, J.A. 22336 (19), and
toward the end of the deposition, J.A. 22374–75 (172–73),
he repeatedly said that he did not recall participating.
But during a portion of the deposition not long after it
started (corresponding to about nine pages of the transcript),
Dr. Durette repeatedly stated, definitively, that he
did not participate. J.A. 22339–41 (30–38); see, e.g., J.A.
22339 (31) (“sure” that he was not involved in any discussion
with Pharmasset in March 2004 where he was told of
PSI-6130’s structure); J.A. 22341 (37) (“I never participated
in a due diligence meeting on March 17 . . . . I did not
participate in any meeting of due diligence on March 17”).
One reason that he was so sure, he said, was that it would
have violated Merck policy to allow his participation and
to keep him on the related patent prosecutions. J.A.
22341 (38–39), 22373–74 (168–72); 22382 (202). On the
basis of those definitive denials, the district court found
that “[w]hen asked about the March 17, 2004, call at the
deposition, Dr. Durette denied ever having been on such a
call. When asked whether he was sure that he was not on
the March 17, 2004, call, Dr. Durette unequivocally
answered yes.” Gilead, 2016 WL 3143943, at *12

That denial of participation was false, as came to be
undisputed by Merck, and acknowledged by Dr. Durette,
at trial. See id. at *14; J.A. 19937–38 (344–47). The
district court found the falsity of the deposition denial of
participation to be intentional. Gilead, 2016 WL 3143943,
at *29–31. We cannot deem that state-of-mind finding to
be clearly erroneous, given the district court’s direct
observation of Dr. Durette at the trial; the documentary
evidence of his participation, including pre-participation
emails (some that he reviewed during his deposition); and
the sufficiently supported findings that aspects of his
testimony were “inconsistent, contradictory, and untruthful.”
Id. at *29; see id. at *12–16.
Regarding the role of the January 2005 Clark Application
in Dr. Durette’s decision to file new claims in
February 2005, Dr. Durette downplayed that role in ways
that the district court reasonably found incredible. Most
starkly, at his deposition, he stated that he simply did not
recall whether he saw the Clark Application before filing
the February 2005 amendment and hence could not state
that it played a role in the amendment. See id. at *16;
J.A. 22343–44 (48–52), 22348–49 (66–69).
Before trial, the court denied Merck’s motion to exclude
all evidence post-dating 2002 from the jury trial
regarding invalidity—a denial not separately challenged
as incorrect here. J.A. 19220–22 (denying exclusion
because the information was relevant to invalidity issues).
Once that motion was denied, Merck itself indicated that
it would call Dr. Durette as a witness. J.A. 19404 (42)
(Merck explaining that Dr. Durette is “planning to come
and testify in our case”). Gilead then took the opportunity
to call Dr. Durette first, cross-examining him before
Merck conducted its direct examination regarding validity
issues, including the origin of the February 2005 amendment.





***
Merck’s ’499 and ’712 patents