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Jun 18, 2016

Ron Abrams Quoted in Law360

Ron Abrams was quoted in Ryan Davis’ Law360 article “How A Merck Attorney ‘s Lies Torpedoed A $200M Patent Verdict.” The full article can be found below.

“How A Merck Attorney’s Lies Torpedoed A $200M Patent Verdict”

By Ryan Davis | June 10, 2016, 6:27 PM ET

When officials from Merck & Co. Inc. and Pharmasset Inc. held a conference call on March 17, 2004, to discuss possible collaborations, Merck in-house patent prosecutor Philippe Durette assured Pharmasset that details he learned about the company’s “crown jewel” hepatitis C research would be kept confidential.

After Pharmasset officials discussed the structure of a promising compound for treating the disease, Durette told them that it “seems quite related to things that I’m involved with” and that he needed to have a conversation with his supervisor. He didn’t specify what he meant, but he later reiterated that the information would not be disclosed.

Merck and Pharmasset were both working on hepatitis C treatments and had signed a nondisclosure agreement aimed at keeping their research secret. To maintain confidentiality, Pharmasset agreed to provide Merck with information about its compound, but only to Merck employees who were “firewalled” — that is, those who were not working on hepatitis C projects.

And that’s when Durette, who had been a Merck in-house attorney for about a decade, uttered the first in a series of lies that would cause the unraveling this week of a $200 million patent infringement verdict Merck won at trial against Gilead Sciences Inc., which acquired Pharmasset seven years after the call.

Durette said on the call that he was firewalled. He wasn’t. He was, at the time, applying for patents on Merck’s own hepatitis C research. Not only did he not keep Pharmasset’s information secret, he used it to obtain Merck patents that were the basis of the case against its rival, a California federal judge ruled on Monday.

In wiping out the verdict, U.S. District Judge Beth Labson Freeman said Durette’s assurances on the call were just the beginning of “serious and outrageous conduct” that, in the end, left Merck with unclean hands and no right to assert the patents at issue.

Years after the conference call, Durette told another lie. During a deposition for the infringement trial, he adamantly claimed that he never participated in the call. What he didn’t know was that a Pharmasset employee had been taking notes during the call. And when those notes came to light over a decade later, Merck’s case crumbled.

‘Egregious Misconduct’

Durette, who has a doctorate from The Ohio State University, had been an organic chemist at Merck for 25 years before attending law school at Rutgers University and becoming an in-house patent prosecutor in the mid-1990s. At the time of the call with Pharmasset, Durette had filed several pending patent applications for Merck covering compounds that could be used to treat hepatitis C.

His participation in the call therefore violated not only the firewall agreement with Pharmasset but also Merck’s own policies, and it should never have been allowed to occur, Judge Freeman ruled in her 65-page opinion.

The judge said Merck and Durette knew what would be discussed on the call and that it would be improper for him to participate in it, according to a Merck email that was produced during the litigation. The email, which was circulated to several Merck employees prior to the call, stated that Pharmasset would disclose the structure of its closely guarded compound known as PSI-6130, which was similar to what Merck was working on.

“Pharmasset has not yet permitted us to review the structure of PSI-6130,” the email from Merck licensing specialist Pamela Demain read, adding that “as a first step, Phil Durette will view the structure during a patent due diligence meeting on March 17.” That meeting was the conference call, for which only firewalled employees were to be present.

The email is evidence that Merck conducted the call under false pretenses, Judge Freeman said in her ruling. This was “unacceptable business conduct” by both the company and Durette, she added, made even worse by the fact the Durette was an attorney.

“Candor and honesty define the contours of the legal system,” she wrote. “When a company allows and supports its own attorney to violate these principles, it shares the consequences of those actions. 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.”

Although Durette voiced concern during the call that he might have a conflict because Pharmasset’s compound “seems quite related” to his own work, he never disclosed that he was prosecuting Merck’s own hepatitis C patents. He and another Merck employee, Doug Pon, then falsely assured Pharmasset that they were on the right side of the firewall, the judge said.

The details of the discussions during the call come from notes taken at the time by Pharmasset’s Alan Roemer. Durette’s actions after the call suggest he was unaware that any record of the call or its participants existed.

After the call, in which he learned about the structure of Pharmasset’s PSI-6130, Durette continued to prosecute Merck’s hepatitis C patents, according to the ruling.

Months after the call, in January 2005, Pharmasset published a patent application disclosing the structure of PSI-6130. Days later, Durette canceled all the claims of Merck’s application, which had been pending for years, and replaced them with narrower claims that covered PSI-6130.

Durette waited to amend his applications until after Pharmasset’s was published “to give the appearance that he learned it from a public source,” Judge Freeman said. Thinking he was free from his obligations under the nondisclosure agreement, “Durette pounced on the opportunity to capitalize on what he improperly had learned a year earlier,” she wrote.

The amendments to Merck’s application were not related to any compounds Merck ever tested, the judge found, and were not prompted by requests from the inventors or the examiners.

Durette’s application resulted in a patent being issued to Merck in 2006 that covered the compound. The drugmaker obtained a second, related patent in 2007.

“There can be no doubt that Merck used [Pharmasset’s] highly confidential information to benefit its own prosecution of its stalled … patent application,” the judge wrote.

‘Dishonest and duplicitous’

Nearly five years after the second patent was granted to Merck, Pharmasset was acquired by Gilead. Gilead later launched the blockbuster hepatitis C drugs Sovaldi and Harvoni, which had combined sales of $19.1 billion last year. After Merck requested that Gilead license its patents, Gilead filed suit in 2013, seeking declaratory judgment that its products did not infringe and that the patents were invalid. Merck counterclaimed, alleging infringement.

Durette was deposed in the case in May 2015, about a decade after he retired from Merck. He testified under oath that he never participated in a call with Pharmasset, even saying, “I’m positive of that.” He maintained his denial even after being shown the emails indicating that Merck had chosen him to be on the call.

The attorney went so far as to say it would have been inappropriate for him to be on the call and learn about the structure of Pharmasset’s compound, “because I was prosecuting a docket which had potential a conflict with Pharmasset’s IP positions on the subject matter.”

Weeks later, Roemer was deposed by Merck’s attorneys and testified that Durette was on the call and that he had notes to prove it.

Merck’s counsel, which included attorneys from Williams & Connolly LLP, Hughes Hubbard & Reed LLP, and Durie Tangri LLP, never indicated to the court or to Gilead that Durette’s testimony was untruthful or incorrect, until their opening statement at trial nearly a year later.

An attorney for Merck told the jury that Durette was on the call but did not know that the compound Pharmasset was going to disclose was within the scope of his own work.

At trial, Durette testified that he remembered being on the call, after all. He also testified that it was fine for him to hear about Pharmasset’s compound because hepatitis C research is a “very broad area.”

Though he testified at deposition that Pharmasset’s application had no impact on his amendment of Merck’s claims, he said at trial that the Pharmasset application was a “triggering event” that led him to narrow his application in order to get a patent on the subject matter that was “most important” to Merck.

At the time of the trial, the judge had already granted Merck summary judgment that Gilead infringed the patents, leaving the focus of the trial on Gilead’s argument that the patents were invalid.

The jury found on March 22 that they were not invalid and two days later ordered Gilead to pay $200 million in damages.

Following the verdict, the judge held a bench trial on Gilead’s defense that Merck had unclean hands. Gilead then moved to reopen the record and admit further deposition testimony that Gilead said refuted Durette’s explanations at trial. The judge granted the motion, setting the stage for Monday’s ruling.

Gilead told the court that the evidence showed that Durette repeatedly lied under oath because he and Merck knew that his presence on the call was wrong and decided together to cover it up.

“This is unconscionable misconduct, and an affront to our entire judicial system,” Gilead said.

‘Numerous Unconscionable Acts’

Judge Freeman assailed the conduct of Durette and Merck in her decision, writing that any one of the transgressions they committed, including lying to Pharmasset, misusing the confidential information obtained on the 2004 conference call, breaching the firewall or lying under oath, would have been enough to knock out Merck’s verdict. Together, they “unmistakably constitute egregious misconduct,” she said.

The judge faulted Durette not only for his lies on the 2004 call, but for his “confident and sanctimonious” deposition testimony that he never participated in it, as well as his improper recantation of that claim after he learned that Pharmasset’s Roemer had taken notes that “indisputably placed him at the meeting and would expose his false testimony.”

His claim at trial that he amended the patent not because of the Pharmasset call but because he wanted to obtain patents on subject matter most important to Merck “is contrary to the evidence and is not credible because Merck never tested any of the claimed compounds,” the judge said, calling his trial testimony “contradictory and evasive.”

She also said she was troubled that Merck’s attorneys failed to tell the court when they learned of the notes.

“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,” she wrote, adding that Merck “directed, advised, guided, and covered up misconduct” by both him and the company.

The judge said that it was ironic that in the course of his “complete fabrication” during deposition about not being on the call, Durette accurately explained why his conduct was so egregious: that learning about Pharmasset’s compound would have “tainted my judgment.”

In a statement, Merck vowed to appeal, saying that the judge’s ruling “does not reflect the facts of the case.” It said that the compounds at issue in the case were significant advances in hepatitis C treatment and that “achieving these advancements required many years of research and significant investment by Merck and its partners.”

Gilead said in a statement that it “has always believed Merck’s patents are invalid and unenforceable, and we feel vindicated by today’s decision.”

Attorneys for Merck could not be reached for comment for this story. A phone call to a number listed for Durette was not answered.

Whatever comes of Merck’s appeal, the judge’s stark findings of misconduct stretching from the initial call to the jury trial are all but certain to prompt further investigation and possibly litigation against the company, experts say.

“This is truly an extraordinary case and the combination of all these facts is what led the court to reach the decision it did,” said Jason Murata of Axinn Veltrop & Harkrider LLP.

Durette will be subject to serious scrutiny by ethical authorities in jurisdictions where he still has a law license, said Robert Davis Jr., an adjunct professor at Widener University Commonwealth Law School.

“The focus would be on the fundamental dishonesty, severely complicated by the breach of duty of candor to the court,” he said, adding that “there are serious questions that need to be analyzed about the conduct of other lawyers and law firms” that represented Merck as well.

The judge’s finding that Merck used Pharmasset’s confidential information to obtain its patents could prompt more litigation, this time brought by Gilead against Merck for improperly using the patents to bring the case to begin with, said Ronald Abrams of Brutzkus Gubner Rozansky Seror Weber LLP.

“I’m sure they can get creative and think of some action to bring against Merck on this,” he said. “If the whole case was built on a fraud, they’ve got some explaining to do.”

The decision is also a severe blow to Merck’s reputation that will make it difficult for potential business partners to trust that the company would abide by nondisclosure agreements and other commitments, Abrams said.

“It’s going to have ramifications going forward,” he said. “No one is going to trust Merck now.”

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