It must have felt lonely for Peter Buckley at the Federal Circuit lectern Monday.
Unaccompanied by his client or co-counsel, the Fox Rothschild partner tried to explain to a hostile appellate court why the Alzheimer’s Institute of America shouldn’t have to pay $12 million in attorney fees for a bad-faith effort to shake down medical researchers.
A Pennsylvania federal judge socked AIA and its principal, businessman Ronald Sexton, for $3.9 million after concluding Sexton conspired with two scientists to hide their blockbuster Alzheimer’s discovery from their university employers. They then wielded a bogus patent against other universities and pharmaceutical companies that were using the discovery to advance Alzheimer’s research. A San Francisco judge tacked on $7.8 million under the Section 285 fee-shifting provision in a similar suit.
Buckley told the U.S. Court of Appeals for the Federal Circuit that Sexton should have received a jury trial on whether he knowingly intended to deceive the universities before those massive awards were imposed. “My client is not a scientist, he had nothing to do with the discoveries,” Buckley said. “He was represented by counsel at every step of the way.”
Federal Circuit Judge Todd Hughes sounded unmoved. “You had the opportunity to make all of those arguments to the district court in the context of the 285 proceedings. And the judge didn’t believe you,” he told Buckley.
On the other side of the aisle, Buckley faced a phalanx of attorneys representing Avid Radiopharmaceuticals, Eli Lilly and Co. and Elan Pharmaceuticals, which is now part of Perrigo Co. “AIA is invoking before this court a Seventh Amendment right that simply doesn’t exist,” Finnegan, Henderson, Farabow Garrett & Dunner partner L. Scott Burwell told the court. “There is no Seventh Amendment right to a jury determination of factual issues regarding the exceptional case analysis.”
The cases heard Monday, Alzheimer’s Institute of America v. Avid Pharmaceuticals and Alzheimer’s Institute of America v. Eli Lilly and Co., are among many AIA brought against university and pharmaceutical researchers over the last decade. Some companies settled for millions of dollars, while others fought back. Avid argued that AIA never owned the patent on a genetic defect known as the Swedish mutation that’s associated with Alzheimer’s disease. A Philadelphia federal jury agreed that AIA did not have standing to assert the patent. U.S. District Judge Timothy Savage of the Eastern District of Pennsylvania then awarded $3.9 million in fees.
Savage found that a group of scientists led by John Hardy at London’s Imperial College first discovered a similar defect known as the London mutation in the early 1990s. Imperial College struck a deal with Athena Neurosciences to fund future research in exchange for the intellectual property rights to the discovery and future discoveries by Hardy’s group.
Hardy felt it was “a terrible deal” and worked out a better one with Sexton, but Imperial refused to cooperate. When Hardy subsequently discovered the Swedish mutation, he hid it from Imperial and had one of his students, Michael Mullan, do the gene sequencing at the University of South Florida, where Hardy later moved his laboratory. The scientists and Sexton then misled the University of South Florida into waiving its IP rights in the Swedish mutation, Savage found.
U.S. Magistrate Judge Elizabeth Laporte of the Northern District of California adopted Savage’s findings and awarded $7.8 million split between Eli Lilly and Elan.
Buckley, who is taking over on appeal for Bryan Cave, argued Monday that Savage overstepped by awarding fees because the jury never made any findings about bad faith. He said that issue had gotten lost somewhat in the briefing.
“You did two-thirds of the briefing,” Judge Alan Lourie interjected. “That didn’t get lost.”
Buckley pointed to a Federal Circuit case that says a judge cannot make findings when awarding Section 285 fees that are contrary to jury findings, but Hughes said that decision is irrelevant.
“We have Octane Fitness from a couple years ago which very emphatically said it’s the providence of the district court to decide whether a case is exceptional or not,” Hughes said. “Can you cite me any precedent that requires a Seventh Amendment jury trial for a factual finding to support an attorneys fees award?”
Buckley insisted the Constitution requires it. “The district court made its own findings based on a limited record,” he said.
“Quit saying limited record,” Hughes said. “You had the opportunity to put in anything you wanted in the context of the fee proceedings.”
Arnold & Porter Kaye Scholer partner Deborah Fishman argued for Elan that Sexton was far from an innocent bystander. “He was the one who hatched the plan—was the evidence of trial—and involved both Dr. Mullan and Dr. Hardy in this plan.”
Judge Pauline Newman offered the only note of resistance, suggesting at one point that “bad faith is quite a loose concept” and there ought to be “rigorous standards” for establishing it.
Fishman said Sexton got the opportunity to make that argument during the fee-shifting proceedings. “Judge Savage just didn’t believe it because the evidence wasn’t credible, or the evidence didn’t support the inferences that AIA sought to draw from them.”
“That’s what judges do, isn’t it?” Newman said. “They decide who they believe.”
“That’s correct,” Fishman replied.
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