Why is the USA Putting Its Patents At Risk Against Gilead?

Gaston Kroub

The US government’s patent lawsuit against Gilead filed last month got a lot of press. The DOJ’s own press release announcing the filing of the lawsuit called out Gilead’s reaping of billions of dollars via the sale of the company’s blockbuster HIV prevention drugs Truvada® and Descovy® — all while Gilead “repeatedly refused to obtain licenses for the use of the HHS patents.” While Gilead has so far refused to take a license, other companies selling HIV prevention treatments in foreign countries have done so.

It is admittedly unusual to see the USA as a named plaintiff in a patent lawsuit against a drug company. This move by the government has drawn criticism, mainly by those concerned about government legal actions against private companies. At the same time, it is well-know that initiating patent litigation is not without risk for patent owners, especially in this age of IPR (inter partes review ) an adversarial proceeding often initiated by patent defendants to elicit a second review of patents by the USPTO. With reported patent challenger win rates up to 80%, IPRs are a proven tool for killing patents asserted in litigation.

So why did the USA decide to put its (our?) patents at risk against Gilead? Moreover, why would the DOJ be willing to risk its existing license relationships for these HIV prevention treatments by attacking a sophisticated patent litigant like Gilead? For those unaware, Gilead has a long history defending its own patents in IPRs, while also acting as both a plaintiff and defendant in numerous high-stakes patent lawsuits.

From the outset, it is important to remember that patents are “negative rights” in that they allow the patent owner to attempt to stop (or collect damages from) anyone practicing their inventions without permission. In the US market for HIV prevention, Gilead is the undisputed market leader — thereby making the company the most important and valuable target for licensing the HHS patents. Which explains why the government has tried numerous times to get Gilead to license. From a damages perspective, it is highly likely that the potential recovery from Gilead far outpaces the revenues that the USA is currently garnering from its current licensees — explaining at least why the benefit of suing Gilead outstrips the risk of seeing the patents invalidated and potentially losing the existing licenses.

Moreover, the DOJ’s hand was forced a bit here, since Gilead had already filed IPRs challenging the HHS patents this past summer. Since the patents were already put at “maximum risk” by Gilead’s aggressive legal maneuver. the decision to sue was made that much easier for the government. Importantly, even if a patent survives IPR, a patent owner can’t collect damages unless it brings a lawsuit in Federal Court for infringement — and wins. As such, the fact that the government chose to sue is less surprising than how it may have appeared at first glance.

Ultimately, this is a very interesting set of parallel proceedings (the IPRs in the USPTO and the Delaware infringement lawsuit) that are of major interest to Gilead investors, as well as investors in companies who may be future targets of similar government lawsuits alleging infringement of HHS-owned patents. In our next post, we will take a look at the legal arguments being made in the IPRs (since those proceedings is at a more advanced stage than the nascent District Court case) — proceedings that every Gilead investor should be following closely.