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MorphoSys loses its Darzalex patent case against J&J—what happens next?

Zachary Silbersher

As we previously wrote, MorphoSys’ ($MOR) patent trial against Janssen ($JNJ) and Genmab was headed for trial in February.  In advance of that trial, however, the parties traded numerous summary judgment motions.  While the Court dispensed with many of those motions on December 4, 2018, it reserved decision on Janssen’s case dispositive motions.  Those motions argued that, for a number of different reasons, MorphoSys’ asserted patents are invalid.   

On January 26, Genmab announced that the District Court granted its motion to invalidate the asserted patents.  A sealed version of the Court’s decision appears to have issued on January 25, but the unsealed, public version did not hit the Court’s docket until today, January 28. 

            What happens next?

In the sections below, we address the Court’s reasoning for why it invalidated the patents for lack of enablement, and how the other invalidity grounds could impact the case in the future.  Before that, however, we address what will happen next in the case.

In connection with its decision invalidating the patents for lack of enablement, the Court also ordered the parties to come up with a proposal for next steps.  The parties were ordered to meet-and-confer and file a joint status report, which they did on the evening of January 28.

The case is technically not yet over and not yet ripe for appeal.  Janssen and Genmab prevailed on liability, which means they won.  Because the patents are now invalid, all claims for royalties by MorphoSys have now essentially been denied.   Yet, while the case was pending, Janssen added a separate counterclaim for inequitable conduct, which was discussed in more detail here

Having invalidated the patents by showing they are not enabled, Janssen does not need to prevail on its inequitable conduct counterclaim to avoid paying any royalties.  But, unlike other invalidity defenses, a claim for inequitable conduct is essentially a claim for fraud.  Janssen has essentially claimed that MorphoSys lied to the Patent Office.  Because of that, if Janssen were to prevail on its inequitable conduct counterclaim, it has a much higher chance of recovering its attorneys’ fees.  The joint status report shows that Janssen is intent on proving inequitable conduct so that it can collect its attorneys’ fees.

Thus, the parties offer contrasting proposals for the next steps of the case.  MorphoSys argues that it should be permitted to immediately appeal the Court’s invalidity decision to the Federal Circuit, and in the meantime, stay the trial on inequitable conduct until after the appeal is over.  By contrast, Janssen argues that it should be permitted to try its inequitable conduct defense immediately, during a two-day window in the middle of February, which was the period previously set aside for a seven-day trial.

This is an issue on which the Court has considerable discretion.  On the one hand, there is relative precedent that, in some cases, appeals have been taken following invalidity of the patents when the only outstanding claim is one for inequitable conduct.  On the other hand, the Court in this case already denied MorphoSys’ request to bifurcate the inequitable conduct defense from the upcoming trial.  This is due, in part, because Janssen still has the right to try its inequitable conduct defense—regardless of whether MorphoSys wins or loses appeal of the enablement decision.  One way or another, MorphoSys cannot escape facing Janssen’s inequitable conduct claim, and the Court likely views it as most efficient to try all these issues at once.

Finally, MorphoSys itself claims that it has its own defense to Janssen’s inequitable conduct defense.  MorphoSys has styled this defense one of unclean hands.  It claims that Janssen’s own litigation misconduct, or alleged willfulness conduct, means that Janssen cannot prevail on its inequitable conduct defense.  The Court has remarked that this defense is shaky, at best.  If MorphoSys did truly defraud the Patent Office, no litigation misconduct by a private party (Janssen and Genmab) would theoretically excuse that.   

That sort of misconduct might otherwise mitigate an assessment of attorneys’ fees, but it is unlikely to negate a finding of inequitable conduct.  Either way, MorphoSys’ unclean hands defense is unlikely to affect how the Court comes out on whether to proceed with trial now or after an interim appeal.

Given how soon the upcoming trial may be (mid-to-late February), the Court is likely to decide very shortly on whether to stay the case pending appeal or proceed with a trial on Janssen inequitable conduct. 

Update (January 29, 2019): On January 29, the Court issued an order denying MorphoSys’ request to stay the trial until after appeal of the enablement decision. Trial on Janssen’s inequitable conduct claim will proceed on February 19-20, 2019.

            Enablement

The biggest take-away from the Court’s decision is that each of MorphoSys’ patents asserted against Janssen and Genmab, due to the alleged infringement by Darzalex®, are invalid for lack of enablement.  That means that Janssen and Genmab have essentially prevailed on liability.  While MorphoSys will undoubtedly appeal the Court’s decision to the Federal Circuit, if this decision stands, then Janssen will not owe any royalties to MorphoSys.  (Recall, as previously discussed, because MorphoSys does not sell a drug competing with Darzalex®, it could not have sought an injunction kicking Darzalex® off the market.)

The enablement requirement provides that a patent discloses how to make and use the claimed invention.  As an example, if your patent claims a wheel that turns perpetually without any required energy, that would undoubtedly satisfy the novelty test.  Yet, without disclosing how to actually do create a perpetual-motion wheel, the patent would be invalid for lack of enablement.

Here, the key to the Court’s finding was that MorphoSys’ patents cover potentially billions of different anti-CD38 antibodies.  That is because they describe the claimed antibodies primarily by their function (where they bind on CD38) rather than their structure (amino-acid sequences.)  The law requires that the full scope of the claimed inventions are enabled.  The Court acknowledged that that does not mean MorphoSys must describe every possible antibody falling within its claims.  But, on the other hand, describing only a few examples is insufficient if it would not be routine for scientists to make all the other proteins encompassed by the claims.  

Here, the problem for MorphoSys is that its example antibodies look nothing like Darzalex®.  Thus, to show infringement, MorphoSys pressed for a very broad claims.  Those broad claims covered potentially billions of different anti-CD38 antibodies.  MorphoSys’ challenge was then to show that breadth of antibodies was enabled. 

The Court acknowledged that antibodies can be made routinely from variants of known effective antibodies.  Further, “conservative” variants of known effective antibodies are likely to be effective.  Thus, those conservative variants may be enabled.  But “non-conservative” changes would have to be screened for effectiveness.  The Court was persuaded that doing that form of screening for non-conservatie variants would require non-routine, laborious, trial-and-error effort and, therefore, undue experimentation.  Unfortunately for MorphoSys, daratumumab is not a conservative variant of any of the disclosed example antibodies in its patents.

In short, to corner the market on anti-CD38 antibodies, MorphoSys obtained very, very broad patents, despite only describing four possible examples.  The tradeoff, the Court found, was that by covering non-conservative variants, the claims were too broad to be enabled.  That’s another way of saying, simply, that the Court found that MorphoSys did not invent the daratumumab antibody.

            Written Description

Janssen also argued MorphoSys’ patents were invalid for lack of written description.  First, Janssen argued that the patents did not disclose any example species of the claimed antibodies.  Janssen pointed out that the patents identify only where the purported antibodies bind on CD38, and the data showing that in the patents was either unreliable or demonstrably false.  Nevertheless, the Court disagreed, and found that a reasonable juror could agree MorphoSys’ data was enough to show examples of its claimed antibodies.  Thus, the Court was prepared to send this issue to the jury. 

Similarly, Janssen also argued that MorphoSys’ patents only disclose four example antibodies, but the patents themselves purport to cover millions—or even billions—of different antibodies that bind to CD38.  Janssen argued that these four examples are not “representative” of the billions of claimed antibodies.  As an example, Janssen pointed out its daratumumab antibody looks nothing like the four examples disclosed in the patents.  Nonetheless, the Court found that a reasonable juror could agree the four examples were sufficiently representative of the genus, and thus denied summary judgment.

Yet, the Court did agree with Janssen on a third point.  The patents claim the antibody based on their function (i.e., where they bind on CD38), not by their structure (i.e., an amino-acid sequence.)  Yet, the Court found the patents described no correlation between functional properties (such as binding to specific epitopes on CD38) and the structural characteristics of the claimed protein (the amino-acid sequence.)  On the contrary, MorphoSys’ witnesses admitted that you cannot use an antibody’s sequence to predict is binding properties.  Thus, the Court found that, without any known relationship between an antibody’s structure and its binding properties, the patents do “not sufficiently disclose structural features common to the members of the genus.” 

This finding alone is very important.  This is effectively an alternate ground that can be used to eventually sink the validity of these patents in the event the Court’s enablement finding does not stand up on appeal.  Indeed, having invalidated the patents for lack of enablement, the Court did not have to reach a partial finding on a dispositive defense that the patents are also invalid for lack of written description—based upon the lack of disclosed correlation between the claimed function and the antibody’s structure.  In addition, the reasoning behind the Court’s finding has broader implications for the vitality of antibody patents within the biotech space, which we hope to address in future posts.

Finally, Janssen also argued that MorphoSys’ patents were invalid for being indefinite.  The Court, however, denied this motion.  The argument, however, was essentially mooted by otherwise invalidating the patents for lack of enablement. 

            Non-Infringement

The Court also granted Janssen’s summary judgment motion that it does not infringe any of the “human” antibody claims in MorphoSys’ patents.  Some of the claims in MorphoSys’ patents are to “human” antibodies, whereas others encompass “humanized” antibodies.  There was no dispute that Janssen’s Darzalex® is made using a transgenic mouse.  Thus, the Court found that Darzalex® cannot be a “human” antibody, and Janssen necessarily does not infringe the “human” antibody claims. 

 This holding alone would not have avoided the trial.  That is because, even if Janssen does not infringe the “human” antibody claims, MorphoSys’ patents include other claims covering “humanized” antibodies.  Thus, the invalidity decision was the key holding for Janssen to prevail.