IP Law Alert

IP Law Alert

Practical Perspectives on Intellectual Property Legal Developments

Takeda Part Two: Destroy Evidence, Pay the Price — Eli Lilly and Takeda Pharmaceutical Co. Get Hit For $9 Billion Punitive Damages Verdict

Posted in Pharmaceuticals

Recently, in In re Actos (Pioglitazone) Products Liability Litigation, MDL No. 11-2299, a Louisiana federal jury awarded $9 billion in punitive damages against Takeda Pharmaceutical Co. (“Takeda”) and Eli Lilly & Co. (“Lilly”). The verdict was delivered on the heels of Judge Rebecca Doherty’s January opinion, previously covered by this blog, which lambasted Takeda for failing to (1) enforce its own litigation hold and (2) follow its document retention procedures, which led to the destruction of relevant evidence that Judge Doherty found would have likely been beneficial for the plaintiffs’ case.

The verdict represented the first federal jury decision in multidistrict litigation against Takeda – Asia’s largest drug company – and Lilly, its American partner. The plaintiffs alleged that the companies actively concealed the cancer risks of the diabetes drug Actos. Takeda was hit for $6 billion, while Eli is responsible for $3 billion. Despite the massive verdict, the jury only found that the plaintiffs were entitled to $1.5 million in actual damages.

It is highly likely that Judge Doherty’s opinion played a substantial role in the jury’s decision making. Although she has not yet imposed any formal sanctions as a result of Takeda’s destruction of relevant documents and emails, she instructed the jury after closing arguments Monday that they could take Takeda’s evidence spoliation into account. Additionally, throughout the trial, the jurors were exposed to voluminous evidence detailing Takeda’s conduct in destroying the relevant evidence.

While Takeda and Lilly may succeed in getting the punitive damage verdict greatly reduced, Takeda’s spoliation may continue to haunt it. Since this is a multidistrict litigation, this issue is certain to arise in future trials. Regardless of the future ramifications, the Actos matter acts as yet another reminder to companies of the importance of following proper document retention procedures. Further, organizations are reminded to follow the terms of their own litigation holds, and appropriately draft their scope. Failure to do so may result in drastic consequences.

Christian A. Stueben is an Associate in the Gibbons Business & Commercial Litigation Department and a member of the Gibbons E-Discovery Task Force. This blog originally appeared on Gibbons E-Discovery Law Alert.

Takeda Part One: Prelude To Disaster? — Takeda Can’t Narrow Its Broadly-Written Litigation Hold

Posted in Pharmaceuticals

An opinion from Judge Rebecca Doherty in In re Actos (Pioglitazone) Products Liability Litigation, MDL No. 11-2299, provides valuable lessons on the consequences of drafting overly-broad litigation hold notices, as well as the importance of providing evidence from knowledgeable witnesses in defense of document retention procedures.

In a Rule 37 and spoliation motion, the plaintiffs alleged that defendants, Takeda Pharmaceuticals U.S.A., Inc. and several of its affiliates in the United States, Japan, and Europe (collectively “Takeda”), purposefully deleted the files of 46 former employees, including several high-level officers. The plaintiffs sought a default judgment or, in the alternative, a combination of sanctions that included an adverse inference jury instruction, cost-shifting, and a fine.

The court first addressed whether Takeda had a duty to preserve the deleted information and, if so, when that obligation arose. Takeda argued its obligation was triggered on February 15, 2011, when it issued a litigation hold notice specifically limited to bladder cancer product liability litigation. However, Takeda acknowledged that liability claims involving Actos (the product at issue) went back as far as 2002 and that the company had issued a “general Actos ‘products liability’ litigation hold” in July 2002 in connection with litigation over liver injuries. Importantly, the broadly-written 2002 litigation hold, which was subsequently “refreshed” five times, instructed recipients to “preserve any and all documents and electronic data which discuss, mention, or relate to Actos,” and it explicitly stated that the hold was to be interpreted “in its broadest sense to prevent the deletion or destruction of any recorded information and data relating in any way to Actos.” Takeda argued that, despite the clear language to the contrary, the 2002 litigation hold was limited to information relating to liver injuries and, therefore, the company did not have an obligation to preserve information related to bladder cancer at that time.
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Start the Clock: NJ Court Holds Declaratory Judgment Available to Later ANDA Filers

Posted in Patent

Yesterday, the United States District Court for the District of New Jersey held that patents listed in the Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”), but not asserted under the Hatch-Waxman framework, are subject to declaratory judgment actions by later ANDA filers seeking to trigger the first ANDA filer’s exclusivity period.

To encourage the development and marketing of generic versions of banded pharmaceutical products, Congress passed the Drug Price Competition and Patent Restoration Act of 1984 (“Hatch-Waxman Act”). Under the Hatch-Waxman Act, generic drug companies can file Abbreviated New Drug Applications (“ANDA”) which can rely on the research of the NDA holder so long as the proposed generic product is bioequivalent to the brand product. See 21 U.S.C. § 355(j), (j)(2)(A), (j)(8)(B). Additionally, the ANDA filer is required to include a certification to each of the patents listed in the Orange Book covering the brand product. In the case of a paragraph IV certification, where the generic company claims that the listed patent(s) are invalid or not infringed, the NDA holder and/or the patent owner may sue the ANDA filer for patent infringement within 45 days of receiving notice of the ANDA filing. If such suit is brought, the FDA is prohibited from approving the ANDA for 30 months. The first ANDA filer to submit a paragraph IV certification is entitled to a 180-day period of generic market exclusivity before the FDA may approve any subsequent ANDA with a paragraph IV certification for the same brand product.

A 2003 amendment to the Hatch-Waxman Act changed the triggering of the 180-day exclusivity period for the first ANDA filer. In addition to the launch of the first ANDA filer’s generic product, the 180-day clock can also start if a later ANDA-filer obtains a final judgment that the Orange Book patents are invalid or not infringed. In that circumstance, the first ANDA-filer must market its ANDA product within 75 days or forfeit its period of exclusivity.
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Market Growth of Fuel Cell Products Follow Patent Growth of Fuel Cell Technologies

Posted in Patent

Recently, Wal-Mart placed an order for 1,738 fuel cell powered forklifts that move products in Wal-Mart’s warehouses. This highly publicized order spotlights the emerging commercial markets, the technologies and patents that have made the production of energy through fuel cells more cost effective. The commercial use of fuel cells is certainly not new, however. Advancements in the technology have decreased costs associated with the production of energy from fuel cells and consequently there has been a rise in the commercial use of fuel cells. The Clean Energy Patent Growth Index shows that for the last decade fuel cell related patents outpaced all other clean energy technology patents until 2013 when solar patents for the first time surpassed fuel cell patents.

The number of patents that have been issued related to fuel cells is an indication of the varied forms of fuel cells and technology used in the production of fuel cells. A very simplistic description of the technology is that a fuel, typically hydrogen, is oxidized in the first segment of the fuel cell to create positively charged ions and negatively charged electrons. While the positively charged ions pass through the fuel cell, the negatively charged electrons are diverted and directed through a wire to create an electric current. The electrons complete the detour to meet up with the ions in the final segment of the fuel cell where they combine with oxygen to create water or carbon dioxide. The energy produced is clean, with water or carbon dioxide being the only by-product.

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New Jersey Law Journal Names Gibbons the 2014 “General Litigation Department of the Year”

Posted in Litigation

The New Jersey Law Journal has named Gibbons P.C. the “General Litigation Department of the Year” for 2014, the top award presented in its second annual “Litigation Departments of the Year” awards program. The general litigation award recognized the firm’s litigation strength in several areas, including commercial litigation, products liability, employment, intellectual property, and media law. In 2013, the firm’s Business & Commercial Litigation Department was named the “Commercial Litigation Department of the Year” in the same awards program.

The 2014 award also recognized the extensive value-added services Gibbons offers litigation clients, including its E-Discovery Task Force, comprehensive Litigation Support Department, innovative and custom alternative fee arrangements, and recruitment focus on former judicial clerks and retired jurists.

The competition was open to any law firm with a litigation practice and New Jersey presence. According to Ronald J. Fleury, Editor in Chief of the New Jersey Law Journal, “In just the second year that the Law Journal has been rating law firm litigation departments based on their recipes for success, participation among firms was noticeably more enthusiastic, and consequently, competition was keener. It was no easy task deciding on winners and finalists among a field of such strong contenders.”

“The cases we have litigated for clients in the past year address some of New Jersey’s more significant projects and hot-button issues,” notes Patrick C. Dunican Jr., Chairman and Managing Director of Gibbons. “Our representative matters included the largest litigation our client had ever faced; one of the most complex groups of business bankruptcies ever filed; a major FINRA arbitration; a huge pharmaceutical class action; and a precedent-setting appellate decision.”

Viewing Windows Through Bars – Former Microsoft Employee Takes Plea in Criminal Trade Secrets Case

Posted in Privacy

While most trade secrets cases are litigated in civil court, one former Microsoft employee learned the hard way that the theft of trade secrets is also a federal crime. Alex A. Kibkalo, a former Microsoft Corp. employee, was being prosecuted for leaking valuable company trade secrets to a blogger for publication. On March 31, 2014, Kibkalo’s counsel and the prosecution advised a district court judge in Washington that the government and Kibkalo had reached a plea agreement. Pursuant to the terms of the agreement, Kibkalo will spend three months in federal prison and pay Microsoft Corp. restitution of $22,500.

Kibkalo’s prosecution and plea came to a quick conclusion after the Department of Justice filed a complaint on March 21, 2014. The investigation leading up to Kibkalo’s arrest and prosecution was the culmination of a Microsoft internal investigation launched in 2012 following media leaks relating to the company’s trade secrets, proprietary computer source code for the Microsoft Activation Server Software Development Kit and unreleased updates to the company’s Windows 8 operating system. In the course of that investigation, Kibkalo, a seven year employee, allegedly admitted that he had obtained and leaked the company trade secrets to a well-known blogger based in France.

Perhaps not coincidentally, Kibkalo’s decision to quickly agree to a plea came on the heels of the district court’s finding that he represented a flight risk and should be detained in a federal detention center during the trial. By agreeing to a plea, Kibkalo also avoided the possibility of a far lengthier sentence and fines under the Federal Sentencing Guidelines if he had been convicted at trial.

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PTAB Roundtables Coming to a City Near You

Posted in Patent, USPTO

On March 25, 2014, the United States Patent and Trademark Office (USPTO) announced that the Patent Trial and Appeal Board (PTAB) would be hosting roundtables across the country to educate the public, and collect feedback regarding the new America Invents Act (AIA) trial proceedings. These roundtables are free and open to the public. According to Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the USPTO, Michelle Lee, “[t]hese roundtables are a part of USPTO’s ongoing efforts to provide more opportunities for the public and other key stakeholders to share ideas, feedback, experiences and insights on additional ways we can improve our processes.”

The proposed agenda for these roundtables tentatively consists of an overview of the trials, with statistics and lessons learned thus far. The agenda also includes mock conference calls where the PTAB judges will illustrate techniques for making successful motions to amend and motions for additional discovery. The roundtables will close out with panel discussions with PTAB judges and patent practitioners for both petitioners and patent owners, with audience participation actively encouraged.

The PTAB roundtables will commence on April 15, at the USPTO headquarters in Alexandria, VA, and will come up to the New York area on April 17, at New York Law School. They will also take place in Chicago, Detroit, Silicon Valley, Seattle, Dallas, and will conclude in Denver on May 8. Further details regarding locations and venues for the roundtables can be found on the USPTO website.
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Patent 101

Posted in Patent

On the heels of CLS Bank Int’l v. Alice Corp. Pty presently before the Supreme Court, the Federal Circuit and district courts in 2014 have continued to issue decisions analyzing computer-implemented inventions under 35 U.S.C. § 101. These courts have generally sought to answer similar questions: whether the claim is an abstract idea; whether this abstract idea preempts all other uses or can be performed in the human mind (or on a pen and paper); and whether the claim contains other limitations to narrow it sufficiently, such as being tied to a specific machine or transforming the data into a different thing.

In CyberFone Sys., LLC v. CNN Interactive Group, Inc., 2012-1673, 1674, 2014 U.S. App. LEXIS 3599 (Fed. Cir. Feb. 26, 2014), the Federal Circuit (in a nonprecedential opinion) affirmed the finding of invalidity under 35 U.S.C. § 101. The patent there was generally related to obtaining transaction information from a telephone which is “exploded” into different data transactions that are sent to different destinations based on the transaction data information.

The court first found claim 1 was an abstract idea of “categorical data storage, i.e., the idea of collecting information in classified form, then separating and transmitting that information according to its classification.” Furthermore, even if the claimed subject matter could not be performed by a human unaided by devices, the court further noted that “the category of patent-ineligible abstract ideas is not limited to methods that can be performed in the human mind.”

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Propping Open Cracks in Secret Depths of Fracking Chemicals: How the Wyoming Supreme Court Is Demanding More of Companies Seeking Trade Secret Protection

Posted in Trade Secret

In Powder River Basin Resource Council v. Wyoming Oil and Gas Conservation Commission, 2014 WY 37 (2014), the Wyoming Supreme Court recently held that state district courts receiving appeals of denied record requests must independently determine whether the information must be disclosed or not, rather than merely reviewing the determination of the Commission as an administrative decision. Further, when determining whether the disclosed chemicals qualify as trade secrets protected under the Wyoming Public Records Act (WPRA), Wyo. Stat. Ann. § 16-4-203, the Wyoming high court held that district courts must apply the more narrow definition of what constitutes a trade secret under the Freedom of Information Act (FOIA) as developed through federal case law when determining if the chemical formulations used in fracking qualify as trade secrets protected under the Wyoming Public Records Act (WPRA), Wyo. Stat. Ann. § 16-4-203.

Wyoming has handily maintained its status as a top energy producing state (Wyoming produced more coal than the next six states combined in 2012) and, over the past three years, oil production in Wyoming has slowly increased due to the application of new technologies, including directional and horizontal drilling and hydraulic fracturing. Fracking companies rely on comprehensive intellectual property law, from patents to trade secrets, to protect their confidential business information about the processes by which companies develop these resources. Hydraulic fracturing throughout the nation, however, has drawn criticism for the use of potent chemicals in those processes and companies’ waste water disposal methods (the recent criminal charges brought against Benedict Lupo under the Clean Water Act for dumping saltwater brine and drilling mud containing benzene and toluene into the Mahoning River is just one example).

With these developments, Wyoming environmental groups have become concerned about protection of groundwater and surface water from contamination by fracking companies in the state and made a public records request for required disclosures of the chemicals in several companies’ hydraulic fracturing products. As a result, Wyoming law now requires companies that frack in the state to submit to the Wyoming Oil and Gas Conservation Commission “[t]he chemical additives, compounds and concentrations or rates proposed to be mixed,” as well as “the type of chemical (the ingredient’s purpose), the chemical compound name, [Chemical Abstracts Service] number, and the concentration of each chemical.” 2014 WY at *6. However, the Commission’s regulations permit companies to seek protection of their information from public disclosure as being trade secrets. See Rules, Wyoming Oil and Gas Conservation Commission, Chapter 3, Sec. 45(d).

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New Patent Case Scheduling Order Seeks to Achieve Efficiencies in Delaware

Posted in Patent

This week, United States District Judge Sue L. Robinson issued a new Patent Case Scheduling Order dictating how patent cases will proceed in Her Honor’s Court.  The District of Delaware is second only to the Eastern District of Texas in the number of patent cases filed; both of which have nearly three times the number of patent cases as the third busiest district, the Central District of California. In order to help streamline the hundreds of patent cases assigned to Her Honor, Judge Robinson issued a new Patent Case Scheduling Order, requiring the identification of key issues earlier in the case, which should improve overall case efficiencies.

The District of Delaware, unlike the Eastern District of Texas, does not have any local patent rules. Instead, District of Delaware Judges typically issue their own form scheduling orders. For example, Chief Judge Gregory M. Sleet recently issued His Honor’s revised scheduling order for patent cases on February 25, 2014. Additionally, Delaware’s Default Standard for Discovery contains a section for the Initial Discovery in Patent Litigation that includes, among other things, the disclosure of the parties’ contentions.  However, until now, no one schedule in the District of Delaware has contained most, if not all, of the discovery provisions contained in other district court’s local patent rules.

While it doesn’t set specific timeframes tied to the Rule 16 conference, Judge Robinson’s Order does call for several disclosures in advance of an initial status conference before a Magistrate Judge. One of the more innovative requirements is that, in addition to the identity of the asserted patents and accused products, the plaintiff must also identify its damages model as part of its initial disclosures. By making plaintiff’s damages position part of the initial disclosures, the Order appears to bring Federal Rule 26(b)(2)(C)(iii) into play early in the case, allowing the parties and the court to properly balance the burden and expense of discovery with the amount in controversy. Judge Robinson’s Order also includes separate deadlines for the parties’ initial and final infringement and invalidity contentions. This provision should help alleviate the preclusion issues which have recently vexed litigants who have not sought leave to amend their preliminary contentions in a timely manner. Continue Reading