Merck Rebuffed in Supreme Court Bid to Revive $2.5B Verdict

(Bloomberg) -- The Supreme Court rebuffed a bid by Merck & Co.’s Idenix to revive a record verdict against Gilead Sciences Inc. in a dispute over a patent for a hepatitis C treatment.

The justices declined to hear arguments by Merck and its Italian partner, Universita Degli Studi di Cagliari, that an appeals court improperly invalidated its patent for a group of compounds that Merck’s Idenix unit contends is the basis for all major treatments for hepatitis C, including ones made by Gilead.

A jury in 2016 had sided with Merck against Gilead and awarded $2.5 billion in damages, the largest patent verdict in U.S. history. The nation’s top patent appeals court, expanding on a trial court’s findings, ruled the patent invalid in a way that Merck says has cut off legal protection on the discovery of a new genus, or class, of compounds. Merck has the backing of Amgen Inc. and GlaxoSmithKline Plc.

The ruling “threatens to devastate the incentives for companies like GSK to invest billions of dollars, and hundreds of thousands of research hours, in discovering breakthrough chemical structures,” Glaxo said in a court filing supporting Merck’s petition.

Patent owners are required to describe inventions with enough detail to allow others to replicate them without unnecessary time and effort. The U.S. Court of Appeals for the Federal Circuit, in the 2-1 decision, said some genus patents can be approved as long as other researchers can recognize the members of that genus. It likened it to blaze marks which single out particular trees in a forest to define a route.

Merck said the ruling misunderstands how research is conducted.

“The true innovation frequently consists of discovering a family of related compounds that produce a desired effect,” Merck said. “Once that foundational discovery is made, making and testing any individual chemical variant in the family for that desired effect can be routine.”

The trial court, in tossing the verdict, ruled that the patent covered so many potential compounds that it would take “excessive experimentation” to narrow them down. The Federal Circuit went further, saying it also “provides no method of distinguishing effective from ineffective compounds.”

The patent was issued in 2009. Gilead’s Sovaldi was approved by the U.S. Food and Drug Administration in 2013 and Harvoni got regulatory go-ahead a year later. Merck’s drug, Zepatier, was approved in 2016.

“Idenix discovered that a single type of modified ribonucleoside inhibits the Hepatitis C virus,” Gilead said. “Yet it sought a patent covering a vast genus of billions of untested and largely unmade compounds that might later prove to have similar effect.”

Gilead had conceded infringement of the patent, a common legal tactic that allowed it to focus on the validity issue during trial. The damage award was based on the jury’s determination it owed 10% royalties on $25.4 billion in total sales for the two drugs.

Courts have ruled other genus patents invalid for failing to describe the invention in a way others could understand. The Federal Circuit heard arguments in December on a judge’s decision to invalidate an Amgen patent for a cholesterol treatment.

“With the barriers to broad protection extending ever higher, companies will leave the high-risk business of true innovation in favor of far less economically risky ‘fast follower’ drugs that target known biological pathways,” Amgen told the court.

The case is Idenix Pharmaceuticals LLC v. Gilead Sciences Inc., 20-380.