[Ip-health] Andrew Pollack...Eli Lilly & Company infringed a patent covering body's basic biological pathways

[James Love]

http://www.nytimes.com/2006/05/05/business/05patent.html?
_r=1&adxnnl=1&oref=slogin&adxnnlx=1146819935-8eQ4TdyVhaw+Thwanljm8Q

Lilly Loses Patent Case to Ariad
By ANDREW POLLACK
Published: May 5, 2006

A federal jury in a closely watched lawsuit ruled yesterday that Eli
Lilly & Company had infringed a patent covering drugs that work
through one of the body's basic biological pathways, in a verdict
that could send ripples through the pharmaceutical industry.

The jury, in Federal District Court in Boston, ordered Lilly to pay
$65.2 million in back royalties to Ariad Pharmaceuticals, a
biotechnology company that had licensed the patent from Harvard and
two other academic institutions. Lilly will also have to pay a 2.3
percent royalty on future United States sales of its osteoporosis
drug Evista and its drug Xigris, used to treat septic shock.

The case has attracted attention because Ariad claims the patent,
issued in 2002, covers any drug that works by influencing the action
of an important protein in the body. Some critics have said that
patents covering an entire pathway in the body, as opposed to a
particular drug, could hinder drug development.

Ariad executives have said that the patent could cover drugs with
billions of dollars in annual sales and that the company had sent
letters offering licenses to more than 50 companies. Last week, the
biotechnology giant Amgen filed a pre-emptive lawsuit against Ariad,
seeking to shield its lucrative arthritis drug Enbrel from
infringement charges based on the same patent.

Lilly argued in the trial that Ariad's patent covered a natural
phenomenon and was therefore invalid. It also said its two drugs were
under development before the protein at the heart of the Ariad patent
was even discovered.

"The Ariad position is equivalent to discovering that gravity is the
force that makes water run downhill and then demanding the owners of
all the existing hydroelectric plants begin to pay patent royalties
on their use of gravity," Robert A. Armitage, Lilly's general
counsel, said in a statement yesterday.

Lilly said it would ask the judge, Rya W. Zobel, to set aside the
verdict and, if that failed, would appeal. The United States Patent
and Trademark Office is re-examining the validity of the patent at
the request of Lilly.

Harvey J. Berger, the chairman and chief executive of Ariad, disputed
Lilly's arguments. "The jury looked at the evidence, looked at this
issue and concluded unanimously that the patent was valid and
infringed," he said.

No one has yet agreed to pay to license Ariad's patent, according to
Dr. Berger, who said companies had been waiting for the outcome of
the Lilly litigation. He said Ariad did not want to stop other
companies from developing drugs. "A reasonable royalty is what we're
looking for," he said. Academic scientists doing noncommercial
research do not need a license, he said.

Based on Lilly's 2005 sales for the two drugs, Ariad, based in
Cambridge, Mass., would receive $17.8 million in royalties each year
until the patent expires in 2019. The company will keep at least 75
percent of its proceeds and share the rest with its academic partners.

Evista, one of Lilly's biggest drugs, was approved by the Food and
Drug Administration in 1997 and had United States sales last year of
$652.9 million. Xigris, approved in 2001, had United States sales of
$119 million in 2005. While royalty payments are not expected to be a
big burden for Lilly, they could be a significant boon to Ariad, an
unprofitable company that has not yet brought a drug to market.

The case was important enough to his company that Dr. Berger sat
through the entire trial, which started April 10. Ariad's shares
jumped $1.45, or 26 percent, to $6.99 yesterday, while Lilly rose 6
cents, to $52.02. Analysts had generally expected Lilly to win.

The patent covers drugs that work by modulating the action of nuclear
factor kappa B, or NF-kB, a protein that was discovered in the 1980's
by scientists at Harvard, the Massachusetts Institute of Technology
and the Whitehead Institute for Biomedical Research, in Cambridge,
Mass. Among those scientists were Phillip A. Sharp of M.I.T. and
David Baltimore, now the president of the California Institute of
Technology, who are both Nobel laureates.

NF-kB serves as sort of a master biological switch that turns dozens
of genes on or off. It is thought that many drugs, particularly those
aimed at cancer, inflammation and immune diseases, might somehow
influence NF-kB. Even aspirin and red wine affect the activity of NF-
kB, according to a brief filed by Lilly.

The patent, granted in 2002, took 16 years to make it through the
patent office. As soon as it was issued, Ariad, joined by the three
academic institutions, sued Lilly. Spokesmen for Harvard and M.I.T.
had no comment on the verdict, other than Harvard saying it was pleased.

Ariad has not developed any drugs that work through NF-kB, according
to Dr. Berger, though it intends to do so.

Edward R. Reines, a Silicon Valley patent attorney, said the case
could make pharmaceutical companies more sympathetic to complaints by
some computer and Internet companies about patent holders that do not
develop products themselves but instead demand payments from
companies that have.

"This may be the beginning of an era in which the pharmaceutical
industry joins the electronics industry to complain about unfair or
improper patent assertions," Mr. Reines said.

Some experts said judges might not uphold a patent as broad as
Ariad's. They point to a case in which a federal judge in 2003
invalidated a patent that the University of Rochester claimed covered
all pain drugs that worked through a particular mechanism. The judge
ruled the patent invalid because Rochester had not actually developed
such a drug or shown specifically enough how to do it.

"No compound, no patent," said Gerald P. Dodson, the attorney who
represented Rochester. He said that Ariad might "have the same
hurdles that we had" but would be helped by having won a favorable
jury verdict, which Rochester never did.

The Supreme Court is expected to rule on a separate case in the next
few weeks, LabCorp v. Metabolite Laboratories, that could set new
guidelines regarding patents related to processes in the body.


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James Love, CPTech / www.cptech.org / mailto:james.love@cptech.org /
tel. +1.202.332.2670 / mobile +1.202.361.3040

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