A Sharpened Focus -- Exactly Why Merck Thinks Gilead Owes Up To $22.5 Billion(!) In Patent Infringement Damages, On Sovaldi® Sales

As of Monday afternoon, in the federal District Court for the Northern District of California (San Jose), Merck and Gilead had filed their joint statement of the areas on which they agree -- and disagree -- in principle, about how to construe claims in the patents under which Merck asserts a running-royalty right from, or an infringement claim against Gilead -- on Sovaldi^® (sofosbuvir). [June 2014 backgrounder, here -- and again, Kudos to Marilyn Mann, for alerting us to this whole narrative line -- about a year ago, now.]

Perhaps unsurprisingly, they only agreed on one construction of one term. And it seems the chief argument, over the terms in dispute here, is whether a naturally-occuring, in vivo (or "inside" the human body) transformation of a compound or prodrug into another metabolite form -- is properly patentable, and then, is covered by the Merck/Idenix patents in suit.

May an inventor (Merck & Idenix) claim patent rights -- on how the human body transforms a compound? Doubly so, where -- as here -- the reactions inside our bodies occur naturally, and in all humans, apparently. Moreover, if Merck (and Idenix) did not expressly claim a patent on these metabolite transformations inside a human body, once the compound is ingested, may Merck & Idenix nonetheless claim that Gilead owes a royalty, on the way Sovaldi transforms -- inside the human body?

These look to be the central questions in the almost unimaginably gargantuan patent war -- literally $2 billion to $2.5 billion at stake, late next year -- if Merck prevails in securing a 10 percent royalty, on even the first three years' of sales -- and say triple that over the life of the patents; and triple that once again (or, 9 X $2.5 billion = $22.5 billion), if the infringement is found to be "willful". [In my experienced estimation, it would seem those last two embody a whole "lot of iffy statements", however.] Here's a bit of how Gilead would read Merck's patents (via the court filing) -- essentially saying the patents can only be understood to claim synthetically created metabolites, not naturally occuring ones in the human body, and only those synthetics that were expressly claimed in the invention the patent teaches. Here's the full PDF version of that filing, just for complete reference.

. . . .providing a compound of the invention or a prodrug of a compound of the invention to the individual in need without reference to in vivo transformations of those compounds or prodrugs. The phrase “prodrug of a compound” means those prodrugs that are expressly claimed. . . .

The term “compound” refers to synthetically produced compounds only. . . .

This will be a fascinating lesson in negotiating, as each party's position is far from a clear winner. And I suspect neither party will be willing to risk an "all-or-nothing" outcome, at trial. So -- I foresee some negotiated settlement. Do stay tuned.