Merck & Co Inc.’s $200 million patent infringement win against Gilead Sciences Inc. should be revived, because the company’s alleged misconduct didn’t have any real effect on the case, a Merck lawyer told the U.S. Court of Appeals for the Federal Circuit at a Feb. 5 oral argument.

A California jury found Gilead’s Sovaldi hepatitis C drug infringed two Merck patents, but U.S. District Court for the Northern District of California Judge Beth Labson Freeman threw out the award under the doctrine of unclean hands, citing what she called Merck’s “pervasive pattern of misconduct.”

The Federal Circuit’s ruling could clarify the law around the unclean hands doctrine. During oral arguments, the three-judge panel questioned when misconduct gives an unfair advantage, which Merck said is required for a finding of unclean hands.

Disputed Meeting

The alleged misconduct relates to a Merck patent lawyer who attended a meeting with Pharmasset Inc., the Gilead predecessor company that developed the molecule in Sovaldi, in violation of confidentiality agreements.

The Merck patent lawyer, Phil Durette, filed two patents used to sue Gilead, the trial court found. Shortly after he attended the meeting, he amended the claims in one of the patent applications, claims eventually used to sue Gilead. Durette testified in his deposition that he didn’t attend the Pharmasset meeting, but he changed his position at trial, the federal district court said.

During oral arguments, Merck said there was no connection between the alleged misconduct and its trial victory. Merck had already filed the patent application before the allegedly improper meeting, and the applied-for claims would have covered Gilead’s product, it said. The later changes to the patent application actually narrowed the scope of the claims and didn’t affect whether Sovaldi was infringing, Merck said.

If the misconduct leads to a possible advantage, that would be enough to find unclean hands, Judge Richard G. Taranto said. He also said that even if Merck’s application covered Gilead’s product, it still gained an advantage because narrowing the patent scope reduces the likelihood that the claims can be invalidated for obviousness or anticipation by earlier research.

Judge Raymond T. Chen asked if Merck gained the advantage in trial by lying about whether it used information it got from Pharmasset in the allegedly improper meeting.

Merck argued that while Durette made contradictory statements about whether he attended the meeting, it ultimately didn’t matter. The information disclosed in that meeting, which included the structure of the molecule that Pharmasset was developing, became public knowledge after Pharmasset’s patent application was published, and the nondisclosure agreement didn’t cover information that became public, Merck said.

Fact-Specific Case

Gilead said the trial court judge came to the correct factual conclusions about the misconduct. Even though the Gilead molecule was part of Merck’s application, the information that the lawyer got from the disputed meeting allowed him to narrow the claims and still cover Sovaldi, Gilead argued.

Judge Raymond C. Clevenger said that unclean hands cases are very fact specific, and Merck needed to show that the trial court’s factual conclusions were clearly erroneous. Merck’s lawyer described a plausible reason for why its patent would have been narrowed in the same way even if the lawyer didn’t attend the meeting, but it’s not clear that there is evidence to support that scenario, he said.

Gilead said that Freeman, the trial court judge, acted within her discretion in her factual findings. Freeman’s conclusion that Durette wasn’t trustworthy was based on her observation of his demeanor and inconsistencies in his testimony, the determinations that trial courts are supposed to make, Gilead said.

Merck’s misconduct wasn’t limited to Durette’s attendance of the meeting, Gilead said. After the meeting, Merck should have barred him from prosecuting Merck’s patents related to hepatitis C treatments, it said. Instead, Merck allowed him to use the information to prosecute its patents, and then allowed him to give false testimony in the trial, Gilead said.

MoloLamken LLP, Williams & Connolly LLP and Hughes Hubbard & Reed LLP are representing Merck. Fish & Richardson PC and Orrick, Herrington & Sutcliffe LLP are representing Gilead.

The case is Gilead Sciences Inc. v. Merck & Co., Fed. Cir., No. 16-2302, oral argument 2/5/18.