Will MorphoSys win the Darzalex patent case against Janssen and Genmab?
In 2016, MorphoSys ($MOR) sued Janssen ($JNJ) and Genmab for patent infringement. MorphoSys claims that Janssen’s anti-CD38 antibody, Darzalex®, infringes three of its patents. The case is scheduled to go to trial in February 2019. The stakes are big because the patents purport to cover the actual protein used in Darzalex®, which could mean material royalty rates on sales of Janssen’s drug. What are the strengths and weaknesses of each party’s case?
What is MorphoSys’s complaint against Janssen?
Darzalex® is indicated as a fourth-line treatment of multiple myeloma. The active protein is daratumumab, which is an anti-CD38 antibody. Daratumumab was originally developed by Genmab, which granted Janssen a license to commercialize the protein in August 2012. Genmap received FDA approval for daratumumab on November 16, 2005.
MorphoSys ($MOR) claims that Darzalex® infringes three of its patents: U.S. Patent Nos. 8,263,746; 9,200,061 and 9,758,590. The ‘746 patent and ‘590 patent each cover certain types of anti-CD38 antibodies, and the ‘061 patent covers methods for treating hematologic cancer associated with the presences of CD38+ cells.
MophoSys alleges that, when characterizing daratumumab, Genmab relied upon MorphoSys’ protein disclosed in the ‘746 patent. MorphoSys points out that Genmab has its own patent, U.S. Patent No. 7,829,673, which also covers anti-CD38 antibodies. The parent patent applications for the ‘746 patent were disclosed by Genmab to the Patent Office during prosecution of the ‘673 patent. While that may be evidence of prior knowledge, it does not necessarily show infringement. It is not uncommon for pharmaceutical companies to disclose lots related inventions during prosecution of a patent.
Overall, MorphoSys’ case for infringement is strong. Following two Markman hearings, which are discussed in more detail below, Janssen and Genmab agreed to stipulate to infringement of two of the patents. Thus, MorphoSys has essentially proven infringement by this point, and trial should focus mostly on invalidity of the patents.
What damages is MorphoSys seeking?
This case is all about damages. MorphoSys seeks past damages since Darzalex®’s launch as well as future royalties until the patents expire. Because MorphoSys does not have a competing drug on the market, it is not seeking an injunction against Darzalex®.
The ‘746 patent issued in September, 2012, the ‘061 patent issued in December 2015, and the ‘590 patent issued in September 2017. The ‘061 and ‘590 patents expire in approximately 2024/2025, and ‘746 patent will expire in January 2027. That will likely cap the period that MorphoSys can successfully collect royalties, presuming it prevails in this case.
The ‘746 patent has a priority date in approximately 2004, and it was granted nearly four years of patent term extension. That would suggest the patent expires in 2028. However, the ‘746 patent is also subject to a terminal disclaimer over U.S. Patent No. 8,088,896. The ‘896 patent expires in approximately January 2027, which will set the expiration date for the ‘746 patent.
In addition to past damages and future royalties, MorphoSys also seeks to potentially triple the damages based upon its allegation that Genmab and Janssen intentionally infringed its patents. Publicly-available evidence suggests that Genmab and Janssen clearly knew about MorphoSys’ patents. For instance, Genmab’s CEO, Dr. Van de Winkel, has publicly acknowledged prior knowledge of the ‘746 patent. The Second Amended complaint alleges that Dr. Van de Winkel stated, “this patent [the ‘746 patent] was known since 2011 and has been studied very carefully. There has been extensive due diligence by Janssen as well as more than 10 other pharma or biotech companies on this patent case, we believe.” If true, that is fairly strong evidence of prior knowledge by Defendants.
MorphoSys also claims that Genmab publicly stated that daratumumab infringes the ‘746 patent. One of the claims of the ‘746 patent covers an antibody that binds to amino-acids 196-206 of CD38. Genmab purportedly stated at a Keynote Symposium that amino acid 202 of CD38 is “essential for daratumumab’s binding.” MorphoSys also claims that both Genmab and Janssen intentionally withheld information from the public showing that daratumumab infringes the ‘746 and other patents. For instance, MorphoSys claims the defendants published incomplete data regarding daratumumab binding to specific amino acids on CD38, and stopped publicly discussing the importance of amino acid 202.
All that said, recovering treble damages based on willful infringement requires more than prior knowledge. We previously wrote about difficulties of recovering willful damages in similar patent disputes seeking only damages, rather than an injunction, in connection with Dupixent®, Biktarvy® and Eylea®.
As discussed in those articles, MorphoSys cannot likely claim lost profits because it does not currently sell a competing drug. But it does have patents covering the anti-CD38 antibody itself, and royalty rates for patents covering a pharmaceutical’s active ingredient can be material. We will address the likely royalty rate in this case more in future posts.
Separately, the Court decided that willfulness issues are bifurcated from liability. That means MorphoSys cannot collect willfulness evidence now, or argue at trial that Janssen and Genmab intentionally infringed the patents. This was a minor setback for Morphosys, and a win for Janssen.
Why did MorphoSys amend its complaint to add the ‘061 and ‘590 patents?
When the case commenced, MorphoSys asserted only the ‘746 patent. Yet, during discovery, MorphoSys claimed that evidence produced by Janssen and Genmab show that the defendants are using daratumumab to treat hematologic cancer. That led to the addition of the ‘061 patent. The ‘590 patent was added because it issued on September 12, 2017, which was while the case was pending.
What happened in the Markman hearings?
There have been two claim construction hearings wherein the Court has interpreted the patents. One of those hearings followed Janssen’s request for a “super early” hearing on select terms that it claimed could lead to an early dismissal of the case in favor of Janssen.
For instance, Janssen argued that its daratumumab protein is derived from a transgenic mouse, but many of the claims from the ‘746 patent are directed to a “human” antibody. MorphoSys, however, prevailed on most of the claim construction disputes. The Court found that “human” antibodies cannot include those derived from a transgenic mouse. That was good news for Janssen, because it likely does not infringe many of the claims of the ‘746 patent limited to “human” antibodies. But other claims are directed to “human” or “humanized” antibodies, which the Court found can include those derived from transgenic mice. These are the claims from the ‘746 patent (including claims 14 and 18) to which Janssen and Genmab have stipulated to infringing.
For other claims of the ‘746 patent, Janssen argued the claimed antibody can bind only to the recited amino acids, and no others, whereas daratumumab to additional amino acids. For instance, claim 18 recites an antibody that “which specifically binds within amino acids 192-206 of CD38.” The Court found that, even if daratumumab binds to amino acids other 192-206, it can still infringe the ‘746 patent. (Janssen subsequently stipulated to a similar construction for the ‘590 patent, but preserved its right to appeal this construction.)
MorphoSys appears to have prevailed on the balance of other claim construction disputes. Some of the disputes appear to be relevant to Janssen’s non-infringement arguments and others to Janssen’s invalidity arguments based on obviousness. Without having access to proprietary information regarding Janssen’s protein or Janssen’s invalidity contentions, overall it appears that Janssen non-infringement and obviousness-based defenses are likely weakened. This shores up the conclusion that the trial will most likely be all about invalidity.
What’s with Janssen’s inequitable conduct defense?
In March 2018, nearly two years after this case started, Janssen added a new defense of inequitable conduct to the case. An inequitable conduct is a defense to patent infringement that alleges, essentially, that the asserted patent was procured by fraud, based upon misrepresentations to the Patent Office. An applicant for a patent actually has an affirmative duty to disclose material prior art to the Patent Office, even if that prior art may undermine issuance of the patent. Inequitable conduct typically arises when it comes to light, during a patent-litigation, that the patentee intentionally withheld material prior art from the Patent Office, despite its affirmative duty to disclose it. If inequitable conduct is proven, the patent will be invalidated. (If a patent is invalidated, that is a complete defense for any accused infringer. Even if the patent is proven to be infringed, the accused infringer is not obligated to pay any damages for a patent that has also been invalidated.)
Here, Janssen claims all three asserted patents were procured by fraud, but not on the basis of withheld prior art. Rather, during prosecution of the patents, MorphoSys argued that its antibodies were distinguishable over the prior art because they bound to specific amino acid regions (epitopes) on CD38, and no prior art antibodies bound to the same epitopes. MorphoSys claimed to have actually engineered these antibodies. In the patent applications, MorphoSys disclosed these antibodies and the epitopes to which they bind in FIG. 7.
Janssen claims, however, that it uncovered during discovery that FIG. 7 is wholly unreliable. That is because the data in FIG. 7 was subsequently revised and changed. The data in FIG. 7 was originally collected by an outside vendor. Yet, after MorphoSys scientists questioned the reliability of the data, further experiments were conducted on the antibodies. Subsequent testing showed that the data in FIG. 7 was incorrect—MorphoSys’ antibodies actually bound to different epitopes than those disclosed in FIG. 7.
Whereas MorphoSys internally revised its data regarding its antibodies, and may have told the public of the revised data, MorphoSys allegedly never disclosed the revised data to the Patent Office. The problem, Janssen alleges, is that had the Patent Office known about the revised data—and known the epitopes to which MorphoSys’ antibodies actually bind, and known that the data in FIG. 7 had been proven to be false—then the Patent Office never would have granted the patents.
The Court permitted Janssen to add its inequitable conduct defense to the case, but has not yet ruled on their merits. (Indeed, the jury will likely decide the merits of this defense.) The Court nevertheless observed that the updated data for FIG. 7 was disclosed publicly, which the Court suggested could potentially undercut Janssen’s invalidity defense. (It is not clear why that should be the case, however, since the patent Examiner will not typically question the veracity of data presented to the Office—which underlies the very reason why inequitable conduct is a needed doctrine to weed out fraudulently procured patents.)
MorphoSys attempted to bifurcate the inequitable conduct issue from the trial. The tactic was to avoid having the jury hear about MorphoSys’ alleged improprieties before the Patent Office while MorphoSys was simultaneously attempting to convince the jury that Janssen and Genmab are infringing its patents. This tactic, however, failed, and the Court ruled that inequitable conduct will not be bifurcated. This was a minor setback for MorphoSys.
Janssen’s inequitable conduct claims are serious allegations, if proven true. It is hard not to draw the parallel to the Merck versus Gilead patent litigation a few years back. Gilead commenced an action for declaratory relief that Solvaldi did not infringe two patents owned by Merck directed to treatment of hepatitis C. Merck demanded a 10% royalty on Sovaldi, but Gilead refused. The case went to trial, and Gilead lost. The jury found that Gilead owed Merck $200M. Before that happened, however, the Judge tossed the verdict after concluding that Merck obtained the patents through unclean hands, by using confidential information to obtain the patents, and then concealed that misconduct during the litigation. Merck was ordered to pay Gilead’s attorneys’ fees, for $14M.
When is the trial?
Trial is currently scheduled to commence on February 11, 2019. That date will come up pretty fast, and it will be important to monitor the docket in advance of trial for any material developments in the case as the key issues come to a head.
Overall, MorphoSys has already won some pitched skirmishes, including prevailing at the Markman hearings, which teed up defendants’ stipulation to infringement. But Janssen put MorphoSys back on its heels after inserting the inequitable conduct defense into the case. That defense will likely form the focus of the trial in February. There is always the chance that the parties will settle, and if so, that settlement could happen as trial nears. We will address the factors and dynamics into a possible settlement in a future post.