Judge considers dismissal in HIV drug case

SAN FRANCISCO -- The agreement between Gilead Sciences Inc. and partner companies that allegedly constitute a monopoly by restricting generic competition is the "market reality," an attorney for the HIV drugmaker argued before a federal judge Thursday.

Defense attorney Christopher Curan said federal antitrust law "acknowledges and encourages the competitive, efficiency-enhancing benefits of such collaborations," like the partnership Gilead had with Bristol-Myers Squibb, Janssen and Japan Tobacco.

Fighting back a bid to dismiss the lawsuit, plaintiffs' attorney Mark Lemley argued a provision in the agreement preventing any of the four companies from creating competing generics while any component of the drug formulation remains patented is anticompetitive. It's designed to improperly extend Gilead's soon-to-expire intellectual property, he continued.

"That's the purpose. They want to extend the patent life," he said. "They want monopoly power after [they] expire."

U.S. District Judge Edward Chen initially questioned why joint ventures can't prohibit participating companies from directly competing with the product they're collaborating to produce.

"It doesn't seem unusual to say, 'We're going to put the effort into creating this product jointly, and you can't create competition while we're doing this thing,'" he said.

Lemley disputed Chen's characterization of the partnership as a "joint venture" since courts have often found such collaborations encourage competition. Even if it was, he continued, parts of the deal that restrict competition after the patent expires is illegal outright because it artificially extends intellectual property rights.

The Durie Tangri LLP partner also argued Gilead agreed to pay co-defendant Japan Tobacco royalties for 10 years regardless of whether it has a valid patent to block it from selling competing generics.

"That's a matter of patent policy with very significant antitrust implications," he said.

The issue of patent protection extension is a red herring, responded Curan, a partner at White & Case LLP. He said joint ventures "need protection to be assured they reap the benefits" of their massive investments in the collaboration.

"Companies won't make that type of investment if they can't rest comfortably knowing that a collaborator won't undermine the agreement by competing," he said.

Plaintiffs' claims are implausible because Gilead's collaborators would never have chosen to create a product to directly compete with the joint venture anyway, according to Curan.

Lemley said alleged conspirators should "be on the hook" for Gilead's misconduct because they understood the company's intent given the "common sense nature of this market."

Chen took the motion to dismiss under submission.

A proposed class of plaintiffs alleged the four companies' partnership constitutes a monopoly on HIV drugs by illegally extending patent protection for their drugs and impairing entry of generic competitors to charge exorbitant prices on vital medication. They seek to block further collaboration. Staley v. Gilead Sciences, Inc., 19-CV02573 (N.D. Cal., filed May 14, 2019).

At least 80% of patients taking HIV medication take at least one Gilead product, accounting for $11 billion in sales annually, according to the complaint.

The Trump administration sued Gilead in November, alleging it failed to obtain licenses to use patents that belong to the Centers for Disease Control and Prevention. It accused the company of earning billions through research funded by taxpayers without paying the money back.