June 7, 2016 / 12:35 AM / 3 years ago

Gilead escapes liability in hepatitis C patent fight with Merck

NEW YORK (Reuters) - A U.S. judge on Monday found a pattern of misconduct by Merck & Co including lying under oath and other unethical practices, freeing Gilead Sciences Inc from paying any damages for infringing Merck’s patents with its lucrative treatments for hepatitis C, Sovaldi and Harvoni.

The dramatic ruling comes after a federal jury in San Jose, California, on March 24 ordered Gilead to pay $200 million in damages, based on findings that Merck’s patents were valid.

U.S. District Judge Beth Labson Freeman said Gilead proved that in the process of applying for its patents, Merck deceptively used confidential information from Pharmasset, Inc, a company Gilead bought in 2011.

Freeman also said Merck cannot enforce the patents because Merck’s own lawyer gave inconsistent and untruthful testimony during the trial. “Merck’s acts are even more egregious because the main perpetrator of its misconduct was its attorney,” she said.

In a statement, Merck spokeswoman Lainie Keller said Gilead’s allegations against the patents are without merit and the company would appeal. “The judge’s ruling does not reflect the facts of this case.”

Gilead feels “vindicated” by the decision, spokeswoman Michele Rest said.

Gilead had also been facing a demand from Merck for an ongoing royalty of at least 12 percent of all future sales of the drugs, according to court papers. Gilead made $23 billion on the two pills in the U.S. alone over the last two years.

Pharmaceutical firms such as Merck, which recently launched its own hepatitis C drug, Zepatier, are trying to chip away at Gilead’s dominant position in the market for a new generation of drugs, which cure the liver disease in well over 90 percent of patients.

Some policy makers and insurers have criticized their costs. Harvoni, for instance, lists at $1,125 per pill before discounts and $94,000 for a 12-week regimen.

The case dates back to 2013 when Gilead and Merck sued each other, claiming ownership of laboratory work underlying sofosbuvir, the active ingredient in Gilead’s drugs.

After the jury verdict, Freeman separately dealt with Foster City, California-based Gilead’s accusations of Merck’s unethical conduct in obtaining the patents.

Merck, based in Kenilworth, New Jersey, countered that it had already known of the technology Gilead claimed was Pharmasset’s.

Merck’s partner in the suit and co-owner of the patents, Ionis Pharmaceuticals Inc, stood to receive 20 percent of any damages awarded Merck.

The case is Gilead Sciences, Inc v Merck & Co, Inc, in the U.S. District Court for the Northern District of California, No. 13-cv-4057.

Reporting by Andrew Chung; Editing by Bernard Orr and Andrew Hay

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