Our Litigators of the Week are Eric Dittmann and Kecia Reynolds of Paul Hastings. They have been representing client Viking Therapeutics Inc., a company working on a potential treatment for non-alcoholic fatty liver disease, in trade secret proceedings before the U.S. International Trade Commission involving Ascletis, a Chinese biotech company.

In a decision made public this week, Chief Administrative Law Judge Clark Cheney found that Viking’s trade secrets were protectable and misappropriated, and that the misappropriation injured the domestic market for Viking’s drug candidate. The decision, which recommends a seven-year exclusion order barring the Ascletis tablets from the U.S., comes after Clark previously allowed the case to move past the ITC’s expedited 100-day proceedings considering whether there was any injury to the domestic market. The judge also sanctioned the Ascletis parties and their initial lawyers at Rimon after finding “an extensive pattern of inappropriate conduct” during discovery in the run-up to the evidentiary hearing in the expedited proceedings.

Litigation Daily: How would you characterize what’s at stake here for Viking?

Eric Dittmann: This is a significant outcome. The Chief Administrative Law Judge’s ruling that Ascletis and other respondents misappropriated Viking’s trade secrets and injured Viking by doing so helps put Viking back into the position it would be without that misconduct—continuing to have the opportunity to develop VK2809, a differentiated THR-beta agonist with superior efficacy at an advanced stage of the FDA approval process. Once the ITC investigation is concluded, Viking will be able to seek monetary damages and additional relief for its injury.

Tell me about the underlying trade secrets. They relate to drug candidates for treatment of nonalcoholic fatty liver disease—things that are still working their way through trials prior to potential FDA approval, right?

Kecia Reynolds: The misappropriated trade secrets came about from the development of VK2809, a cutting-edge drug product for the treatment of non-alcoholic fatty liver disease. The asserted trade secrets generally fall into at least three categories: (1) trade secrets relating to the VK2809 drug product formulation, characteristics of the formulation and properties of the formulation; (2) pre-clinical trade secrets relating to in vitro and in vivo non-human testing for VK2809, such as test design protocols and results from those tests; and (3) human clinical trial protocols and results for VK2809.

How did this matter come to you and the firm?

Dittmann: Viking Therapeutics is a good client of the firm. When Viking was facing this problem, they came to us. Our IP team, which includes district court and ITC litigators, were able to see the opportunity to sue, not just in a district court, but also in the ITC for relief.

Who all is on your team and how have you divided the work on this matter?

Reynolds: IP global co-chair Eric Dittmann, trade secrets partner Jeff Pade, life sciences IP partner Isaac Ashkenazi and myself (as leader of the ITC practice and as lead counsel) were responsible for our three-pronged approach leveraging our expertise in the ITC, trade secrets and pharmaceutical/life sciences litigation. This three-pronged approach is one of the strengths of the deep bench our practice entails. Being able to come at it from three unique angles was absolutely critical to our success here.

Other team members included global co-chair Bruce Wexler, partners Chris McGrath and Shaun Wu, of counsel Mark Smith and associates Kyotaro Ozawa, Richard Rothman, Brooke Wilner, Brandon Howell, Zachary Hadd, Josh Lopez, Cheron Mims, Summer Stevens, Richala Jackson, Zoey Xie and Madeleine Moss. Associates Brandon Howell and Zachary Hadd, as well as former associate Amanda Hoffman, who is now in-house counsel at Sanofi, also examined witnesses at the hearing as part of the ITC’s NEXT Advocates Program.

For those not familiar with ITC practice, can you explain the nature of the 100-day evidentiary hearing that occurred in this case? What’s the purpose of that process and why was it significant for your client for this investigation to survive it?

Reynolds: At the time of the institution of an investigation, the Commission can identify a dispositive issue to be addressed within 100 days. The Commission ado,pted the 100-day proceeding to lessen the burden on the Commission’s and parties’ resources so that time and resources would not be spent litigating the full scope of the case if it appears that a single dispositive issue could quickly resolve the entire investigation. In our case, the Commission, at the suggestion of the Office of Unfair Import Investigations (“OUII”), instituted the investigation and directed the Administrative Law Judge to “hold an early evidentiary hearing, find facts, and issue an early decision, within 100 days of institution except for good cause shown, as to whether complainant can show that the threat or effect of the alleged unfair acts is to (i) to destroy or substantially injure an industry in the United States, or (ii) to prevent the establishment of such an industry.” Meaning, because the accused products and Viking’s product were not yet FDA-approved, Viking may not be able to satisfy the domestic industry and injury requirements.

Dittmann: Within 10 weeks of the institution of the case, Viking collected evidence through discovery from the respondents and third parties to present at the evidentiary hearing that it had a domestic industry related to research and development of VK2809 and that it was in the process of establishing an industry related to the commercialization of VK2809. Viking’s efforts to collect evidence from the respondents to present at the evidentiary hearing was significantly frustrated by the respondents’ discovery misconduct, which led to monetary and non-monetary sanctions. The respondents’ discovery misconduct was one of the reasons the Chief Judge continued the investigation.

Reynolds: By surviving a 100-day proceeding on injury, the investigation was continued and Viking was able to prove that the respondents’ misappropriation of its trade secrets warrants an exclusion order and cease and desist orders.

The ALJ’s decision outlines what it characterized as “an extensive pattern of inappropriate conduct throughout discovery” by your opponents and their initial lawyers at Rimon. Walk me through the basics of what was going on and the options the judge gave the other side after those issues came to light in the run-up to the expedited 100-day hearing?

Reynolds: The CALJ’s characterization of the respondents’ discovery misconduct is accurate. The discovery misconduct rose to the level requiring judicial intervention when the respondents reneged on the agreement for the exchange of emails. The parties had agreed to exchange email discovery on the last day of fact discovery. After Viking produced email discovery, which the respondents downloaded, the respondents unilaterally decided they would not be producing any email discovery. After being ordered to produce emails, it then became evident that the respondents’ counsel had significantly misrepresented the volume of emails to be produced, which Viking had relied on when offering to modify its discovery requests to lessen the burden on the respondents. Also, it also became evident that the respondents had not produced any documents attached to emails. We raised these issues with the respondents and they produced 44,000 pages of documents two days before the hearing. We then raised this issue with the Chief Judge in a letter. In response, the CALJ gave the respondents two options: (1) “Ascletis voluntarily stipulates that Viking prevails” on the domestic industry and injury requirements and that the hearing to start the next day will not convene or (2) the hearing convenes as scheduled and that “Viking will be granted leave to move for forensic examination of electronic media relevant to respondents’ email production and to move for sanctions as a result of the violation of Order No. 14. If Ascletis elects this option, respondents, their counsel, and their discovery vendor will assume the risk of liability for attorney fees and costs …”

Dittmann: The respondents selected option two. At the evidentiary hearing, it was revealed that the respondents had withheld significant discovery, in addition to the belated production, and deliberately provided inaccurate verified interrogatory responses to mislead Viking. Following the hearing, based on the respondents’ misrepresentations and the belated production, the Chief Judge ordered a forensic examination. However, the respondents consistently blocked the examination by refusing access to servers, withholding passwords and refusing access to laptops and mobile phones. This required the Chief Judge to intervene several times to keep the forensic examination moving forward. However, after issuing several orders that were violated, the Chief Judge terminated the forensic investigation and permitted Viking to immediately move for sanctions. Viking then moved for monetary and non-monetary sanctions on several grounds. The CALJ ultimately sanctioned the respondents and Rimon as a result of Viking’s sanctions motion.

What were the challenges in proving these particular trade secrets protectable at trial, and that a domestic industry existed in regards to them?

Reynolds: All of Viking’s asserted trade secrets were determined by the Chief Judge to be protectable. The respondents’ primary argument for all asserted trade secrets was that Viking’s conference posters and articles touting their success with VK2809 was a disclosure of the trade secrets. In rebuttal, Viking presented expert testimony explaining how the details of the asserted trade secrets were not disclosed and that those details would not have been readily apparent. With respect to domestic industry, Viking presented fact and expert testimony explaining how Viking has made significant investments in its R&D program for VK2809. The witnesses also tied those significant investments to the trade secret test protocols and results from the R&D program. In fact, most of the trade secret documents are the testing protocols and reports of the results.

What’s important here for other parties bringing trade secrets claims before the ITC?

Dittmann: This case highlights that the ITC can be a powerful forum for resolving IP disputes in the life sciences space. The ITC Chief Judge recommended, based on a theft of trade secrets, a seven-year exclusion order prohibiting the importation of non-FDA approved accused products, as well as a cease-and-desist order prohibiting all U.S. activities related to non-FDA-approved accused products (including prohibiting clinical trials). This case presents a unique pathway on an expedited schedule, only available at the ITC, for parties to stop the development of drugs in clinical trials.

What comes next here?

Reynolds: The respondents have filed a petition for review of certain of the Chief Administrative Law Judge’s decisions, but not for all adverse determinations. Respondents have not challenged certain determinations of misappropriation. Because the Chief Judge’s decision is firmly based on the documentary evidence, particularly emails and documents from the respondents that contain verbatim copies of Viking’s trade secrets, and testimony from Viking’s renowned experts, it is unlikely that the Chief Judge’s decision will be completely overturned. Also, the adverse inferences imposed as a sanction also support the Chief Judge’s ruling on the injury requirement, and the adverse inferences imposed are the adverse inferences that the respondents recommended as just in response to Viking’s sanctions motion. The ITC’s final determination is expected in February 2025.

What will you remember most about getting this result? 

Reynolds: This win for Viking was hard fought. There were many sleepless nights for our team. We knew that we were on the right side, but that the law needed to catch up. We struggled with the best way to present our legal theories but ensured that they were rooted in the legislative history of Section 337 and Congress’s express intent to protect pharmaceutical research industries. Even when the Office of Unfair Import Investigations at times seemed to be against us, we just kept advocating for our theories to ensure that Viking obtained the right result—exclusion of drug products made using its trade secrets.

Dittmann: What I will remember most about getting this result is the pride I felt when the court acknowledged the significant harm caused to a pharmaceutical company based on unlawful clinical trials and other product development activities, even when its product was still in development and not yet on the market. This recognition reinforces the importance of fair competition and the impact that unlawful actions can have, even before a product is launched. It also highlights the vital importance of protecting intellectual property and the integrity of the pharmaceutical industry.