In a high-stakes jury trial on a Bayer patent asserted against Baxalta, on February 4, 2019, the jury returned a damages award that ranks among the 10 largest patent verdicts in Delaware in the past decade and constitutes the largest biotech patent verdict in that court. The jury found in favor of Bayer across the board. It then awarded Bayer more than $155 million for Baxalta’s past infringing manufacture and sales of its flagship hemophilia drug, Adynovate, applying a royalty rate of about 18 percent of net sales.
The trial involved Bayer’s patent on an innovative life-saving drug for hemophilia that can be taken less frequently than conventional alternatives. It took place over six days, and involved 18 witnesses, a challenge in itself given that each side was limited to 14 hours to present evidence. Fact witnesses included executives from both Bayer and Baxalta and inventors. There were nine expert witnesses, including physicians, protein chemists, polymer chemists and economists. Bayer’s victory was led by Jim Badke, Sona De and Ching-Lee Fukuda. They delivered a shared closing argument that intricately weaved together the story of Baxalta’s infringement, the innovation of Bayer’s patented invention and the fair amount of damages that the jury was asked to determine.
After about six hours of deliberation, the jury found all asserted claims of Bayer’s U.S. Patent No. 9,364,520 both infringed and valid. It rejected multiple defenses raised by Baxalta, including Baxalta’s arguments that the patent was not infringed, was obvious, lacked unexpected results and failed to teach the invention. The jury applied a royalty rate of about 18 percent to net sales that spanned the two-and-a-half years since Adynovate’s launch. The remedy for future sales of Adynovate, which Baxalta characterized in the evidence as “business critical,” will be determined by the court.
Bayer and Baxalta have been head-to-head competitors in the field of recombinant Factor VIII technology to treat hemophilia for over 25 years. Baxalta’s main argument against patent validity stemmed from a history between Bayer and a company named Nektar, Baxalta’s research partner for Adynovate. Before working with Baxalta, Nektar had done work for Bayer in the same field. Baxalta used this history to argue that Bayer derived its patent invention from Nektar. In an unusual twist, Baxalta’s parent company had hired the first named inventor on Bayer’s patent and Baxalta brought him to trial to essentially testify against his own patent. Bayer had to cross examine its own inventor to demonstrate to the jury that Bayer had the foundation of the invention before the Nektar work. Bayer then used much of the same evidence on which Baxalta relied to show how innovative Bayer’s invention actually was.
To show patent infringement, Bayer relied on Baxalta’s own representations to the Food and Drug Administration about Adynovate. Through focused cross examination of Baxalta’s experts, Bayer further showed that each of them failed to give the jury the full picture of what that FDA data showed.
On the damages side, the court issued rulings on both parties’ Daubert motions the Friday before a Monday trial start. It granted-in-part Bayer’s motion to exclude Baxalta’s damages expert from testifying about the licenses he relied upon. It allowed Bayer’s damages expert to testify about the bargaining range of the reasonable royalty rate but excluded his testimony as to an exact rate. During trial, the bargaining range was submitted to the jury to determine, based on the facts, the reasonable royalty rate. Baxalta’s expert testified the rate should be one percent, even though Baxalta’s own documents referred to Adynovate as its “flagship” product and as “business critical,” and revealed that defending Baxalta’s business with Adynovate is “an imperative.” Baxalta was making 82.5 percent in gross profits from its sales of Adynovate, and had no non-infringing alternative to turn to if it could not obtain a license from Bayer. On the other hand, Bayer’s witnesses testified that Bayer spent well over a decade developing the technology claimed in the ‘520 patent and would never have voluntarily licensed it to a direct competitor. The damages portion of the closing argument finished with the following: “Why would Bayer license a patent like this to Baxalta for just one percent? That is completely unreasonable to say it’s one percent and it’s frankly insulting. So we ask you to look at that and pick out your number, and give what is fair to Bayer.”
The trial team representing Bayer also included Lauren Cranford Katzeff, Kevin O’Brien, Gwen Hochman Stewart, Sue Wang, Grace L. W. St. Vincent, Saurabh Prabhakar and Julie Hsia.