Gilead Accusers Argue Supreme Court Has Changed the Game on Licensing
Durie Tangri's Mark Lemley, an attorney for a would-be class of consumers and insurers, says a 2015 ruling on a Spider-Man toy established limits on royalties that drug companies are ignoring.
May 16, 2019 at 03:54 PM
5 minute read
The original version of this story was published on The Recorder
If HIV patients and their insurers can win a court ruling that leads to lower drug prices, they might have Spider-Man to thank.
Plaintiffs leveled 137 pages of spectacular—if not altogether new—allegations against Gilead Sciences Inc., Bristol-Myers Squibb Co., Japan Tobacco Inc. and Johnson & Johnson subsidiary Janssen R&D Ireland on Tuesday. They accuse the companies of inflating the price of HIV meds through collusive licensing agreements, “crippling this nation's ability to stop new HIV infections.”
Staley v. Gilead Sciences comes as political pressure is being applied on the U.S. government to “break” patent protection for Gilead's Truvada medicine, and as the House of Representatives weighs drug pricing bills. But some of the same arguments in Staley were leveled against the same parties over the same drugs and licensing agreements a few years ago in the same Northern District of California. Judge William Alsup dismissed them in AIDS Healthcare Foundation v. Gilead Sciences, ruling that under U.S. Court of Appeals for the Ninth Circuit case law Gilead had no legal duty to market its most cutting-edge antiviral as a stand-alone product.
One of the attorneys for the new would-be class, Durie Tangri's Mark Lemley, said Wednesday he believes the Supreme Court has changed the game when it comes to license agreements that extend protection beyond a patent's expiration. The high court ruled in 2015 that a license agreement Marvel Enterprises struck with the inventor of a Spider-Man toy was unenforceable once the 20-year term of the patent was up.
“What's fundamentally different here,” Lemley said, is the contracts Gilead signed with the other drugmakers “sure seem like contracts the Supreme Court has said pretty recently are illegal per se.”
A spokeswoman for Gilead disagreed with the premise of the suit. “We have entered into partnerships with other companies with the goal of bringing lifesaving therapies to patients in need,” said Sonia Choi, vice president, public affairs. “Any suggestion that we had improper motives is absolutely false.”
Durie Tangri is teaming up with Hilliard & Shadowen; Hagens Berman Sobol Shapiro; and three other law firms on Tuesday's suit. They allege that Gilead has colluded with competitors to combine its nucleotide analog reverse-transcriptase inhibitor tenofovir with the other companies' more recently patented compounds into fixed-dose combinations, with each promising not to market or license generic versions of the other party's individual drugs. “The coconspirators created a private hiatus from competition that the public law does not provide,” the complaint states. “Those agreements are illegal per se.”
The deals created space for Gilead to hold back a less-toxic formulation of tenofovir, known as TAF, for more than a decade in order to extend its patent franchise, the complaint alleges.
Staley alleges the drug companies monopolized, attempted to monopolize and conspired to monopolize under state and federal antitrust laws. It also alleges violations of state consumer protection laws.
In 2016 the nonprofit AIDS Healthcare Foundation brought a similar suit against Gilead, accusing it of “manipulating the patent system” and pointing to at least one of the same licensing deals spotlighted in Tuesday's suit, Gilead's 2005 agreement with Japan Tobacco to develop integrase inhibitor elvitegravir. Such deals let Gilead “enjoy the patent protections of not only the TAF patents, but also the patents that cover the other pharmaceutical compounds in these combination drugs,” that suit alleged. Like Tuesday's suit, it also accused Gilead of withholding TAF from the market until the patents on a more toxic predecessor expired.
Alsup granted Gilead's motion to dismiss in July 2016, quoting the Ninth and Second circuits: “Any firm, even a monopolist … may bring its products to market whenever and however it chooses.”
AIDS Healthcare was represented by different law firms and did not raise the Kimble v. Marvel Supreme Court precedent.
In Kimble, Justice Elena Kagan brushed off criticism from the Ninth Circuit and others, and ruled that the court would stick with a rule that blocked patent owners and licensees from agreeing to extend royalties beyond the patent's expiration. “Patents endow their holders with certain superpowers, but only for a limited time,” Kagan wrote.
Lemley said that decision has forced people to rethink some of their assumptions about the direction of antitrust law in the patent context. “I wouldn't have had an interest in this,” he said, “if there weren't something new here.”
Staley was assigned Friday to U.S. District Judge Maxine Chesney.
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