U.S. court upholds dismissal of $200 million Merck verdict against Gilead

(Reuters) - A U.S. appeals court on Wednesday affirmed a ruling that pharmaceutical company Merck & Co dishonestly obtained patent rights and was not entitled to collect a $200 million infringement verdict it won against rival Gilead Sciences Inc.

The U.S. Court of Appeals for the Federal Circuit upheld a June 2016 ruling that the two Merck patents, which cover methods of treating Hepatitis C, were unenforceable because of a pattern of misconduct by the company, including lying under oath by one of its in-house lawyers.

A Gilead spokesman said the company was very pleased with the ruling and believe it was “justified and well supported by the record.”

A Merck spokeswoman said in a statement that the ruling “does not reflect the facts of the case” and that the company was reviewing its next steps.

Direct-acting anti-virals, such as Gilead’s Sovaldi and Harvoni, have revolutionized treatment of Hepatitis C, with cure rates of more than 90 percent. The viral disease is estimated to infect about 3.2 million Americans and can lead to liver failure.

A jury in federal court in San Jose, California, awarded Merck $200 million in 2016 after finding Sovaldi and Harvoni infringed two of its patents.

A judge threw out the verdict later that year, ruling the patents were unenforceable based on the company’s conduct. She noted that, in the process of applying for one of the patents, Merck used confidential information it obtained in 2004 while discussing a possible partnership with Pharmasset Inc, a company Gilead bought in 2011.

The judge also said a Merck in-house lawyer testified untruthfully in a deposition and at trial about his participation in a confidential call with Pharmasset personnel.

Merck appealed the ruling, saying there was no “deliberately planned and carefully executed scheme by Merck to defraud or deceive.”

But the appeals court said in Wednesday’s ruling that the lower judge had sufficient reason to conclude that the Merck patents were “tainted” by misconduct and should not be enforceable.

In February a federal judge in Delaware overturned a different jury verdict requiring Gilead to pay $2.54 billion for infringing another Merck patent relating to the hepatitis C drugs.

The verdict had been the largest ever in a U.S. patent case, but the judge ruled Merck’s patent was invalid because it did not meet a requirement that it disclose how to make the treatment it covered without undue experimentation.

Reporting by Jan Wolfe; Editing by Jonathan Oatis and Alistair Bell