Gilead Scis., Inc. v. Merck & Co.

• Decision Date: 06 June 2016
• Docket Number: Case No. 13-cv-04057-BLF
• Court: U.S. District Court — Northern District of California
• Parties: GILEAD SCIENCES, INC., Plaintiff, v. MERCK & CO, INC., et al., Defendants.

GILEAD SCIENCES, INC., Plaintiff, v. MERCK & CO, INC., et al., Defendants.

Case No. 13-cv-04057-BLF

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

June 6, 2016

ORDER REGARDING NON-JURY LEGAL ISSUES

[Re: ECF 407, 411]

Plaintiff Gilead Sciences, Inc. ("Gilead") seeks to bar Defendants Merck & Co., Merck Sharp and Dohme Corp., and Isis Pharmaceuticals, Inc., (collectively "Merck") from maintaining their suit based on the equitable defenses of waiver and unclean hands. At trial, the jury determined that Merck's patents-in-suit are not invalid and awarded damages to Merck for infringement. Gilead's equitable defenses, however, are the province of the Court to decide.

After a thorough review of the evidence submitted at trial and in post-trial submissions, the Court finds Gilead has not shown that Merck waived its right to enforce the '499 and '712 Patents against Gilead. The record, however, reflects a pervasive pattern of misconduct by Merck and its agents constituting unclean hands, which renders Merck's '499 and '712 Patents unenforceable against Gilead.

I. BACKGROUND

On December 6, 2013, Gilead received approval from the Food and Drug Administration to market and sell Sovaldi®, an orally-administered prescription drug containing the active ingredient sofosbuvir, to treat chronic Hepatitis C (HCV) infection in patients. Order Construing Claims at 2, ECF 140. Sofosbuvir is a prodrug that is inactive and has little to no therapeutic effect until transformed by enzymes in the body into an active form. Id. Once inside a liver cell, sofosbuvir is converted into three analogs, each with different structures: a monophosphate analog, a diphosphate analog, and a triphosphate analog. Id. The triphosphate analog is the therapeutically effective form that can target and cure HCV infection in patients. Id.

Merck asserts that two of its patents, U.S. Patent No. 7,105,499 and U.S. Patent No. 8,481,712, cover sofosbuvir, and that Gilead's sales of Sovaldi® and Harvoni®, which contain the active ingredient sofosbuvir, induce and contribute to the infringement of these patents. Merck Mot. for SJ, ECF 167. The operative filing date of the '499 and '712 Patents is January 18, 2002. Exh. 22 to Gilead Mot. for SJ at Interrog. No. 1, ECF 164-16.

The '712 Patent is directed to compounds having a specific structural formula, Exh. 16 to Gilead Mot. for SJ at 143:1-146:60, ECF 165-11, while the '499 Patent relates to methods for treating HCV by administering a therapeutically effective amount of those compounds either alone or in combination with another HCV treatment. Exh. 1 to Gilead Mot. for SJ at 137:1-138:25 (claims 1 and 2).

At summary judgment, Gilead argued that the asserted claims were invalid but conceded that if they were not invalid, it infringed them. The Court denied Gilead's summary judgment motion of invalidity and granted Merck summary judgment of infringement. ECF 214. On March 20, 2016, after an eight-day trial, the jury found that the '499 and '712 Patents were not invalid. Following a three-day trial on damages, the jury awarded Merck $200 million in damages for sales of Sovaldi® and Harvoni® through December 31, 2015. Verdict Phase 2, ECF 392. On March 30, 2016, the Court held a bench trial on Gilead's equitable defenses of unclean hands and waiver. ECF 401. On April 22, 2016, Gilead filed a motion to re-open the record and allow additional evidence. ECF 410. On April 29, 2016, the Court held a hearing on Gilead's motion where the Court granted the motion and also allowed Merck to supplement the record. ECF 418.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 52(a) requires district courts to make findings of fact in an action "tried on the facts without a jury or with an advisory jury." Fed. R. Civ. P. 52(a)(1). The Court is required to "find facts specially and state its conclusions of law separately." Id. "One purpose behind Rule 52(a) is to aid the appellate court's understanding of the bases of the trialcourt's decision." Simeonoff v. Hener, 249 F.3d 883, 891 (9th Cir. 2001) (internal citations omitted). The Court is not required to make findings on each and every fact presented at trial. Id. Conflicting testimony must be resolved on relevant issues. Zivkovic v. Southern California Edison, Co., 302 F.3d 1080, 1090 (9th Cir. 2002).

III. FINDINGS OF FACT

Gilead argues that Merck waived its rights to enforce the '499 and '712 Patents, or alternatively, that these patents are unenforceable by virtue of the doctrine of unclean hands. Gilead Trial Br., ECF 368; Gilead Supp. Trial Br., ECF 408. Gilead claims Merck impliedly waived its patent rights by attempting to license or acquire from Pharmasset, Gilead's predecessor-in-interest, its confidential compound, PSI-6130 from 2003 to 2011. Gilead Trial Br. 8-9, ECF 368. Next, Gilead argues Merck's unclean hands bars enforcement of the patents against it because Merck improperly obtained the structure of PSI-6130 from Pharmasset, drafted patent claims covering PSI-6130, and then lied about its conduct during this proceeding. Gilead Trial Br. 2-8, ECF 368. Merck responds that it never explicitly or implicitly indicated that it would not enforce the '499 and '712 Patents against Gilead. Merck Tr. Br. 5-6, ECF 370. Merck also argues the jury's rejection of Gilead's invalidity defense forecloses Gilead's unclean hands defense and even if it did not, Merck's actions do not warrant a finding of unclean hands. Merck Trial Br. 1-6, ECF 370; Merck Supp. Trial Br., ECF 409. With that brief overview of the parties' arguments, the Court makes the following findings of fact and conclusions of law.¹

A. The Parties

1. Plaintiff Gilead Sciences, Inc. ("Plaintiff" or "Gilead") and Defendants Merck & Co., Inc. ("Merck & Co."), Merck Sharp & Dohme Corp. ("MSD Corp."), and Ionis Pharmaceuticals, Inc., formerly known as Isis Pharmaceuticals, Inc. ("Ionis" or "Isis"), (collectively, "Defendants" or "Merck") are the parties in this action. Compl., ECF 1.

2. Gilead is a company organized and existing under the laws of the State of Delaware with its principal place of business at 333 Lakeside Drive, Foster City, California 94404. Compl.

¶ 2, ECF 1.

3. Merck & Co. is a company organized under the laws of the State of New Jersey with its principal place of business at One Merck Drive, P.O. Box 100, Whitehouse Station, NJ 08889-0100. Compl. ¶ 3, ECF 1; Ans. ¶ 3, ECF 62.

4. MSD Corp. is a company organized under the laws of the State of New Jersey with its principal place of business at One Merck Drive, P.O. Box 100, Whitehouse Station, NJ 08889-0100. Compl. ¶ 4, ECF 1; Ans. ¶ 4, ECF 62.

5. MSD Corp. is a subsidiary of Merck & Co. Compl. ¶ 5, ECF 1; Ans. ¶ 5, ECF 62.

6. Ionis is a company organized under the laws of the State of Delaware with its principal place of business at 2855 Gazelle Court, Carlsbad, CA 92010. Compl. ¶ 6, ECF 1; Ans. ¶ 6, ECF 62.

B. General Background of the Litigation

7. The patents-in-suit are U.S. Patent Nos. 7,105,499 (the "'499 Patent") and 8,481,712 (the "'712 Patent"). Compl. ¶¶ 62-77, ECF 1. On August 30, 2013, Gilead filed its complaint for declaratory judgment of non-infringement and invalidity of the '499 and '712 Patents. Compl. ¶ 1, ECF 1.

8. On November 22, 2013, Merck filed its answer and amended counterclaims. Ans., ECF 62. Merck denied all allegations involving non-infringement and invalidity, id. at ¶¶ 66-77, and counterclaimed for a declaratory judgment of infringement of the '499 and '712 Patents, id. at ¶¶ 11-34.

9. On November 28, 2014, Merck filed its second amended and supplemental counterclaims. Second Am. Countercl., ECF 98. Merck repeated its previous counterclaims seeking declaratory judgment of infringement of the '499 and '712 Patents, and added additional counterclaims for infringement of the '499 and '712 Patents based on the fact that Gilead began commercially selling sofosbuvir on or about December 6, 2013. Id. at 1 n.1.

10. On December 15, 2014, Gilead filed its answer to Merck's second amended and supplemental counterclaims. Ans. to Second Am. Countercl., ECF 101. Gilead denied all pertinent allegations regarding infringement and invalidity, id. at ¶¶ 11-43, and assertedaffirmative defenses based on invalidity, laches, estoppel, waiver, and unclean hands, id. at 6.

11. Merck moved for summary judgment that Gilead's products (Sovaldi® and Harvoni®) that contain the active pharmaceutical ingredient "sofosbuvir" infringe the asserted claims. Merck's Mot. for SJ, ECF 167. Gilead argued that the asserted patents are invalid but conceded that if they are not invalid, then it infringes the asserted claims. Gilead's Opp. to SJ at 1, ECF 175. On February 1, 2016, the Court granted as unopposed Merck's motion for summary judgment that the sale by Gilead of Sovaldi® and Harvoni® infringes the asserted claims. Summary Judgment Order at 8, ECF 214. The Court left to a jury trial the issue of whether the asserted patents are invalid. Id. at 9.

12. At trial, Merck asserted claims 1 and 2 of the '499 Patent and claims 1, 2, 3, 5, 7, 9, 10 and 11 of the '712 Patent. Joint Pretrial Stmt. at 3, ECF 254.

13. From March 7-16, 2016, the Court held an eight-day jury trial on Gilead's invalidity defenses under 35 U.S.C. § 112 (lack of written description and enablement) and § 102 (derivation and prior invention). ECF 305, 306, 307, 324, 325, 327, 348, 349.

14. On March 22, 2016, the jury reached a verdict, finding the '499 and '712 Patents were not invalid. Verdict Phase 1, ECF 388. Following a three day trial on damages, ECF 386, 389, 391, the jury awarded Merck $200 million in damages for sales of Sovaldi® and Harvoni® through December 31, 2015. Verdict Phase 2, ECF 392.

15. On March 30, 2016, the Court held a bench trial on Gilead's equitable defenses. ECF 401. Prior to the bench trial, on March 22, 2016, Gilead withdrew its defenses of laches and equitable estoppel. Gilead Trial Br. at 1 n.1, ECF 368. As a result, the March 30...