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Seagen’s $42 Million Patent Verdict at Risk With Agency Review

April 13, 2022, 9:00 AM

Daiichi Sankyo Co. Ltd.‘s best hope for escaping a $42 million patent infringement verdict won by Seagen Inc. may lie in its separate administrative challenge to Seagen’s patent.

A federal jury in the U.S. District Court for the Eastern District of Texas found April 8 that Daiichi’s breast-cancer treatment Enhertu infringes Seagen’s patent. The Patent Trial and Appeal Board said in a preliminary ruling April 7 that relevant parts of the patent are likely invalid.

The outcome of the fight could hinge on whether the PTAB issues its final decision on Seagen’s patent before any Daiichi appeal is finished. If the board invalidates the patent before the court case is over, and the board’s decision withstands any subsequent appeal, it effectively erases the award.

“It’s now just a race to see which of those parallel paths gets there first,” said Eliot Williams, an attorney at Baker Botts LLP in Northern California.

PTAB invalidity decisions can wipe out infringement verdicts as long as the district court case isn’t completely over, under a U.S. Court of Appeals for the Federal Circuit rule.

Some legal scholars say infringement awards can be knocked out unfairly under the rule, which is also at play in a $2 billion patent fight between VLSI Technology LLC and Intel Corp. Patent owners say it can encourage gamesmanship and waste resources.

Opposite Strategies

Seagen isn’t the first company to win an infringement award for a patent it’s defending at the PTAB. The board’s decisions on whether patents are valid can differ from those of federal courts.

Personal Audio LLC saw its $1.3 million verdict against CBS Corp. over a broadcasting patent wiped out after a board decision. Baxter International watched a $23.5 million award against Fresenius USA Inc. evaporate after the PTAB invalidated its patent, while Chrimar Systems Inc. lost a judgment against ALE USA Inc. worth just under $325,000.

For Daiichi, the stakes are even higher. Its infringement was found by jurors to be willful, which means the judge could increase the $41.8 million award up to three times.

“For the defendant-petitioners, the goal is not to end up with a final judgment that can be collected,” said Leisa Talbert Peschel, an attorney at Jackson Walker LLP in Houston. That means the appeals are over and no issues are pending.

Peschel, who represented ALE in the case with Chrimar, said Daiichi and Seagen will have “completely opposite strategies.”

“The patent owner is going to want to accelerate everything that’s happening at the district court level,” Peschel said. “The defendant-petitioners are going to want to slow down everything that’s happening at the district court level.”

Slowing Litigation

Like Seagen, VLSI likely has been planning its strategies.

Not long after VLSI won a $2.18 billion verdict against Intel, two newly formed entities—OpenSky Industries LLC and Patent Quality Assurance LLC—challenged the underlying patents at the PTAB. The board has agreed to review the patents.

Barring some change, the PTAB’s final decisions on the validity of those patents are expected in December and January. Intel and VLSI are still sorting through post-trial motions at the district court, while Intel has vowed to appeal the verdict.

Alleged infringers can have a leg up in the race.

The PTAB generally is required by law to issue a final decision within 12 months of starting review of a patent. District courts don’t have the same deadlines, and there are various mechanisms that can slow down, or pause, the court proceedings.

“There are lots of tactics to try to slow down infringement litigation if you want,” Paul Gugliuzza, a law professor at Temple University’s Beasley School of Law, said. That’s one of the problems with allowing a PTAB decision to effectively wipe out an infringement judgment, he said.

“It encourages this gamesmanship or wasteful procedural maneuvering that really doesn’t serve anyone’s interests except the party who’s trying to take advantage of the Federal Circuit’s ‘absolute finality rule,’” Gugliuzza said.

The patent office tried to cut down on the number of times when there is overlap, adopting a rule during the Trump administration that allows PTAB judges to decline review when a district court case involving the same patent is in its late stages.

Daiichi’s petition was initially denied under that rule. But the board agreed April 7 to reconsider that decision and review the patent claims. The PTAB, which had already agreed to review part of the patent no longer part of the litigation, noted the “strong merits” of the challenge.

Under “the particular circumstances of this case, the interests of efficiency and integrity of the patent system weigh against exercising discretionary denial,” the board wrote in its rehearing decision.

More Flexibility?

The Federal Circuit’s rule draws a clear line for parties in litigation, legal scholars say.

But Chrimar told the U.S. Supreme Court in a 2020 petition that the rule is legally incorrect and “incentivizes unfairness against patentees.” The Supreme Court didn’t take the case.

The Federal Circuit is right that patent office cancellation trumps pending litigation, according to Greg Reilly, a law professor at the Chicago-Kent College of Law. But Reilly questions the rationale behind the rule.

The appeals court has relied on the doctrine of issue preclusion, which blocks re-litigation of certain issues. Reilly argues the correct approach is mootness.

The distinction is more than an academic quibble. Because of certain differences between the two doctrines, the mootness approach could, among other things, buy the patent owner extra time.

“Under a correct mootness approach, there would be more time for the district court litigation to reach final judgment,” Reilly said.

Gugliuzza questioned whether the Federal Circuit should also allow more flexibility in certain cases. The dust-up over the VLSI patents may be an example.

“To the extent one of the parties is really gaming the system, maybe we ought to untie the courts’ hands a little bit to say, for equitable reasons we’re going to hold the defendant to the judgment against it even if there’s been some subsequent developments at the PTAB,” Gugliuzza said.

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Keith Perine at kperine@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com