[Ip-health] Lilly loses patent case that could shake up drug makers

[Kent Nnadozie]

Lilly loses patent case that could shake up drug
makers
By Andrew Pollack The New York Times

FRIDAY, MAY 5, 2006


In a verdict that could ripple across the
pharmaceutical industry, a U.S. jury in a federal
lawsuit has ruled that Eli Lilly infringed a patent
covering drugs that work through one of the body's
basic biological pathways.

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

The case has attracted attention because Ariad claims
that 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.

Executives at Ariad have said that the patent could
cover drugs with billions of dollars in annual sales
and that it 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," Lilly's general counsel, Robert
Armitage, said Thursday in a statement.

Lilly said it would appeal if a request to set aside
the verdict was refused by the trial judge, Rya Zobel.
The U.S. Patent and Trademark Office is re-examining
the validity of the patent at the request of Lilly.

Ariad's chairman and chief executive, Harvey Berger,
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, said Berger, who added that 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, Massachusetts, would receive $17.8
million in royalties each year until the patent
expires in 2019. The company would keep at least 75
percent of its proceeds and share the rest with its
academic partners.

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 1980s by scientists at
Harvard, the Massachusetts Institute of Technology and
the Whitehead Institute for Biomedical Research, in
Cambridge. Among those scientists were Phillip Sharp
of MIT 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.

 In a verdict that could ripple across the
pharmaceutical industry, a U.S. jury in a federal
lawsuit has ruled that Eli Lilly infringed a patent
covering drugs that work through one of the body's
basic biological pathways.

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

The case has attracted attention because Ariad claims
that 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.

Executives at Ariad have said that the patent could
cover drugs with billions of dollars in annual sales
and that it 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," Lilly's general counsel, Robert
Armitage, said Thursday in a statement.

Lilly said it would appeal if a request to set aside
the verdict was refused by the trial judge, Rya Zobel.
The U.S. Patent and Trademark Office is re-examining
the validity of the patent at the request of Lilly.

Ariad's chairman and chief executive, Harvey Berger,
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, said Berger, who added that 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, Massachusetts, would receive $17.8
million in royalties each year until the patent
expires in 2019. The company would keep at least 75
percent of its proceeds and share the rest with its
academic partners.

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 1980s by scientists at
Harvard, the Massachusetts Institute of Technology and
the Whitehead Institute for Biomedical Research, in
Cambridge. Among those scientists were Phillip Sharp
of MIT 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


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