Biopharmaceutical Report I
Alnylam’s (NASDAQ:ALNY) trade secrets litigation case against Dicerna (NASDAQ:DRNA) could see the jury influenced by emotive arguments of document theft, as opposed to entertaining the finer details of nuanced trade secret law, lawyers said.
Alnylam acquired Merck’s (NYSE:MRK) RNAi subsidiary Sirna for USD 175m in 2014, however 18 months later Alnylam initiated legal proceedings for trade secret misappropriation against Dicerna – a separate RNAi company that also bid for Sirna -- related to GalNAc technology. Dicerna is alleged to have misappropriated trade secrets surrounding Sirna’s technology by hiring scientists laid-off by Merck, who took confidential documents with them.
Lawyers noted that even those versed in law may find trade secret law’s nuances challenging, and the case’s emotive nature could influence a jury of laypeople, favoring Alnylam. Lawyers noted that a settlement is likely, with the vast majority of trade secrets cases settling before going before juries. Lawyers added that while Dicerna may not have significant grounds in its antitrust case accusing Alnylam of stifling R&D, it could use it as leverage to force an early settlement in the trade secrets case.
A Dicerna 10Q statement notes the court has set a trial date of 23 April 2018 for the trade secret case. Alnylam noted it believes in the merits of its case but declined to comment on pending litigation. Merck and Dicerna did not respond to requests for comment.
Jury trial clouds potential judgement
A jury trial makes it challenging to say which company will have the upper hand based on legal merit, said Patricia Carson, partner, Kirkland & Ellis, New York. Juries often seek a moral or ethical decision, and if jurors think Dicerna has done something wrong, for example the alleged theft of documents, they may side with Alnylam, said Justin Beyer, partner, Seyfarth Shaw, Chicago, Illinois. The jury may find some of the document theft arguments more compelling – and definitely more intriguing – than the finer details of what is and what isn’t a trade secret, said Beyer and Annsley Merelle Ward, senior associate, Bristows, London, UK.
This news service reported on 7 February that Dicerna’s key defence may rest upon the idea that the information used to generate its technology was public and thus not a misappropriated trade secret. It also reported that Merck’s procedures to protect internal documents could come into question.
Most people, including lawyers, do not understand the nuanced factors of trade secret law, so “buzzwords” used by lawyers on both sides will likely seek an emotive impact on the jurors, said Ward.
"Most of these trade secret lawsuits end up in a settlement, tipping the odds in this case as well"
Dicerna could well lose the case if it goes to trial, as the American public is generally proprosecutor and pro-plaintiff, especially in cases where something is acquired improperly, Beyer said. Dicerna’s lawyers could also appeal to public interest, asserting that Alnylam is trying to monopolize RNAi therapeutics that could help people, said Ward. Dicerna’s most advanced candidate is the Phase I DCR-PHXC for primary hyperoxaluria, while Alnylam has seven clinical programs in development ranging from Phase I to FDA registration.
Quantifying actual damages may be challenging as neither company has yet a marketed product from which accounting information can be analysed, said Beyer and Ward. However, damages can also be assessed to compensate for savings in R&D time and money in reaching a specific point and the investment attracted as a result of the misappropriation, although all must be proven, said Ward and Beyer.
While a jury could be susceptible to persuasion by some facts in the case – such as the scientists leaving Merck with documents – the judge will give clear instructions to jurors about what the law is, with both sides offering counterarguments, a biotechnology industry attorney said. Thus, he said, while some facts may sway a jury in theory, that is unlikely as juries frequently do well at weighing evidence.
Settlement possible before the trial
Most of these trade secret lawsuits end up in a settlement, tipping the odds in this case as well, said Beyer. There are many reasons for companies to settle as a trade secrets owner may not want to broadcast its secrets to the other side -- usually their competitor -- and when the trial approaches the judge will increasingly pressure the parties to limit redacted materials or materials only discussed in a closed court room, Ward said. Avoiding negative publicity or any chilling effect on investment opportunity may also motivate the defendant as well as trade secrets owners to settle.
A settlement could involve a structured royalty payment, a lump sum agreement, some sort of licensing deal, periodic accounting or any combination of these, said Ward. The court would likely also order the destruction of any documents that the defendant may still have and may prevent Dicerna from using the confidential information, she noted. In addition to a royalty structure or cross-licensing of technologies of mutual interest, there could also be an agreement between the two companies over what each one could do with the respective products they develop, such as what indications they could pursue, the trade secrets attorney said.
Beyer noted he believed a royalty agreement was most likely for a settlement, wherein Dicerna would pay a percentage of any future sales of the product to Alnylam.
Antitrust case could be settlement tactic
On 9 August 2017, Dicerna filed an antitrust law suit accusing Alnylam of scheming to undermine Dicerna from developing metabolism disorder treatments using RNAi by filing its trade secrets litigation case.
It’s possible that the trade secrets litigation could influence the decision of the antitrust suit, as both arise from the same series of events, said Carson. Beyer pointed to the Noerr-Pennington Doctrine, which notes that one cannot be charged or found to be in violation of antitrust law for suing someone in another court. He added for this reason, he questioned the credibility of Dicerna’s complaint. Neither of the companies have marketed or competing products, and these are often critical to antitrust cases, he noted. Ward agreed noting that Alnylam cannot be said to have a dominant competitive position, which is key to antitrust law.
Beyer noted that he believed the motive behind Dicerna’s antitrust case against Alnylam is to sway the dispute toward an early settlement. Even if Alnylam has a strong case, it will likely want to avoid a lengthy federal antitrust case, which could be costly, he explained. Ward agreed, saying no company wants to be embroiled in an extended antitrust case so it is likely Discerna’s strategy will be to help settle.
Reporter, New York
Alaric DeArment covers cancer drug development for BioPharm Insight. He served as associate editor of Drug Store News from 2008 to 2014, covering branded and generic drugs from development to distribution, retail and specialty pharmacy and regulatory affairs. In 2011-2012, he edited the book Contestation and Adaption: The Politics of National Identity in China. A native of Seattle, he graduated with honors with a bachelor degree in journalism from Ball State University and also lived in China from 2001-2004.
Hamish has a BSc in Neuroscience from the University of Sussex and is primarily covering the neuroscience indications for BioPharm Insight. Prior to joining us he was assistant commissioning editor for a well-known collection of biomedical journals at Expert Reviews, including Expert Review of Gastroenterology & Hepatology, Expert Review of Clinical Pharmacology and Expert Review of Respiratory Medicine.