Merck CEO Kenneth Frazier Copyright Spencer Platt, Getty Images

Merck CEO Kenneth Frazier

Merck Wins Record $2.5 Billion Patent Verdict Against Gilead

Gilead's infringement also was found to be willful, meaning the judge could increase the damage award by as much as three times the amount set by the jury.

Gilead Sciences Inc. (IW 500/34) was told by a federal jury to pay $2.54 billion to Merck & Co. (IW 500/29) for using a patented invention as the basis for its blockbuster drugs for the potentially deadly liver disease hepatitis C -- the biggest patent-infringement verdict in U.S. history.

The jury in Wilmington, Del., deliberated for less than two hours and rejected Gilead’s arguments that Merck’s patent is invalid. The judge in the case had already decided that Merck’s patent was infringed by Gilead’s Sovaldi and Harvoni, which account for more than half the drugmaker’s revenue.

The infringement also was found to be willful, meaning the judge could increase the damage award by as much as three times the amount set by the jury. The jury said on Thursday that Gilead owed 10% royalties on $25.4 billion in total sales for the two drugs.

Gilead pledged to appeal.

The patent, issued in 2009, is for a compound that Merck’s Idenix unit contends is the basis for all major treatments for hepatitis C, including ones made by Gilead. Sovaldi was approved by the U.S. Food and Drug Administration in 2013 and Harvoni got regulatory go-ahead a year later. Merck’s drug, Zepatier, was approved this year.

“We were first,” Merck lawyer Stephanie Parker said in closing arguments. “That’s the most important thing. All of the Gilead work comes after ours. Our patent was first. The Gilead story starts years later.”

Merck shares rose 0.9% to $62.37 in regular trading and reached as high as $63.40 in after-hours trading. Gilead shares fell 0.2% to $75.55 in regular trading and reached a low of $73.20 in after-hours trading.

‘No Contribution’

Gilead argued that Idenix never adequately described what it claimed to have invented, and the patent didn’t cover a new idea.

“We remain steadfast in our opinion that Idenix’s U.S. patent is invalid, and since they made no contribution and assumed none of the risk in the discovery and development of sofosbuvir and its metabolites, do not believe they are entitled to any level of damages,” the company said in a statement following the verdict.

Sovaldi is based on the compound sofosbuvir, while Harvoni combines sofosbuvir with the compound ledipasvir. Gilead, based in Foster City, Calif., got the compounds as part of its 2012 acquisition of Pharmasset Inc.

Gilead added that the verdict doesn’t affect its ability to sell its products.

This is the second trial between the two companies. The first, over different patents, ended in a disaster for Merck. A jury in California said that Gilead should pay $200 million in royalties, but that was thrown out because the judge said a key Merck witness lied. In that case, Merck may have to pay Gilead’s legal fees.

Hepatitis C is a virus that attacks the liver and can lead to cirrhosis or liver cancer. The disease affects 130 million to 150 million globally, according to the World Health Organization, and the Centers for Disease Control has said as many as 4 million Americans may have chronic hepatitis C infections.

The drugs are effective at curing the virus with fewer side effects than earlier treatments, but they have been controversial because of their costs. A complete treatment with Sovaldi costs $84,000, while Harvoni’s price tag is $94,500, though the drugs are typically discounted. A newer version that can treat more genotypes of the virus, called Epclusa, has a list price of $74,760 for a 12-week treatment.

Harvoni generated $4 billion in U.S. sales in the first nine months of the year, and Sovaldi brought in $1.78 billion. Revenue from the two drugs is falling, however, because Gilead has been forced to offer discounts to insurers due to competition from Merck and AbbVie Inc. Merck sells Zepatier for $54,600.

Gilead and Idenix have been engaged in a global fight since 2012 over who was first to invent certain compounds for treating hepatitis C. Merck had claims demanding patent royalties on sales of Sovaldi and Harvoni even before it bought Idenix in 2014, absorbing this case as part of the deal.

The case in California was Merck’s own suit against Gilead, filed in 2013 by the Whitehouse Station, N.J.-based drugmaker.

Gilead also had been engaged in a patent fight with AbbVie over ways to treat hepatitis C. The companies resolved their disputes in August.

The previous top verdict was a $1.67 billion judgment Johnson & Johnson won against Abbott Laboratories. It was later thrown out on appeal.

By Christopher Yasiejko and Susan Decker

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