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A Miami federal jury has found that a California-based drug company stole trade secrets concerning a new “miracle” drug from a Largo, Fla.-based rival and must pay that company $48 million in damages for tortious interference and unfair competition. The damage figure could rise, as U.S. District Court jurors still must decide punitive damages in the case of AlphaMed Pharmaceuticals Corp. v. Arriva Pharmaceuticals Inc. Oral arguments from both sides are scheduled for Jan. 3. The presiding judge is Cecilia M. Altonaga. The case arose after two founders of a drug company had a bitter split. The dramatic three-month trial featured evidence of documents pilfered from the trash, a corporate mole, the secret involvement of a former FBI agent, and a frantic race between two companies to get a “miracle” drug on the market. “This was about one company trying to destroy another company,” said James McDonald, a partner at Squire Sanders & Dempsey in Miami who, with co-counsel Douglas Rovens of Zelle Hofmann Voelbel Mason & Gette in Los Angeles, represents AlphaMed. “Arriva took trade secrets from the trash.” Calls made to Arriva corporate offices in Alameda, Calif., as well as to its attorneys at Akerman Senterfitt in Miami were not returned. The case is one of several filed around the country in the wake of a split between former partners and co-inventors John Lezdey, a chemist, and Alan Wachter, a physician. Both men were involved in the invention of a drug called Alpha 1-antitrypsin (AAT), which they claim can be used to treat maladies ranging from ear infections to emphysema. They served on the board of Arriva, a privately held company that is financially backed by Baxter Health Corp. The drug is not yet on the market. Arriva is engaged in clinical trials. Lezdey and Wachter parted ways in 1999 when, McDonald says, Wachter and others kicked Lezdey off the Arriva board. In 1999, Lezdey and his sons formed AlphaMed and began applying for patents for the drug. Wachter took the invention to Arriva, a privately held company. Meanwhile, Lezdey began applying for patents for the drug. In 1999, Wachter and Arriva filed four lawsuits in four different states against Lezdey and his family. The suits alleged that the Lezdey family violated fiduciary obligations to Arriva, Wachter and others. An Arizona judge sided with Wachter in his allegation of fraud and awarded a $17 million verdict against the Lezdeys. John Lezdey filed for bankruptcy in 2002. LAWYER BILLING RECORDS KEY In 2003, the Lezdeys filed suit against Arriva in U.S. District Court in Miami, alleging that Arriva had falsely claimed that it owned the right to the eye and ear uses for AAT, which John Lezdey had patented. The Lezdeys claimed that John Lezdey’s signature was required on any Arriva partnership and patent agreement. At the time, the Lezdeys had no evidence of any possible industrial espionage or theft of trade secrets. After the Miami case was filed, billing records submitted in the Arizona case by Wachter’s law firm to the court revealed to the Lezdeys that a former FBI agent named George Spinelli had been employed by Wachter and Arriva. The Lezdeys had been suspicious about how Wachter seemed to anticipate all their legal strategies. With the discovery of the former FBI agent’s involvement, they wondered whether Wachter and Arriva had committed industrial espionage. According to McDonald, boxes of discovery voluntarily turned over by Arriva in the Miami case showed that Arriva stole business plans and documents from AlphaMed’s trash. Arriva did not deny taking the items out of the trash, McDonald said in an interview. “Frankly, they kept good records,” he said. “That was the noose that hung them.” The plaintiffs also learned that an FBI agent contacted by Spinelli questioned AlphaMed’s chief financial backer, Robert Williams, who got scared off and dropped his backing, McDonald said. At that point, the Lezdeys amended the complaint in the Miami lawsuit to include the charges of misappropriation of trade secrets and tortious interference. Following a three-month trial, jurors deliberated for a week and handed down their verdict on Monday. The case was complex, McDonald said; jury instructions from Judge Altonaga were 11 pages long. On the first count, the jury found that Arriva and Spinelli used improper means to acquire trade secrets. But on that count the jury only awarded AlphaMed $1 in compensation from each defendant, both Arriva and Spinelli. But on the counts of tortious interference with a business relationship and unfair competition, the jury awarded AlphaMed $26 million and $22 million, respectively, in lost profits. McDonald said he expects Arriva to appeal. No criminal charges are pending in the matter. It’s unclear how the Miami verdict will affect the $17 million judgment the Lezdeys are appealing in Arizona, McDonald said.

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