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Judge Carpenter Refuses to Overturn Jury Verdict in Licensing Dispute and Awards Plaintiff over $50 Million in Damages

February 21, 2020

In DRIT LP v. Glaxo Group Ltd., C.A. No. N16C-07-218-WCC-CCLD, Judge Carpenter granted plaintiff DRIT LP’s motion for determination of damages and entry of partial judgment and denied defendants Glaxo Group Limited and Human Genome Sciences, Inc.’s (“GSK”) renewed motion for judgment as a matter of law or a new trial, entitling DRIT to approximately $57,073,482 in unpaid royalty payments in addition to future royalty payments from GSK in accordance with the parties’ agreement.

This action arose from a patent license and settlement agreement entered into between GSK and third-party Biogen. This licensing agreement resolved a patent ownership dispute between GSK and Biogen concerning inventions relating to the treatment of lupus. DRIT was the assignee of certain rights previously held by Biogen under the agreement, which obligated GSK to pay DRIT certain royalties on U.S. sales of GSK’s lupus drug, Benlysta. However, on April 27, 2015, GSK filed a form with the U.S. Patent and Trademark Office to statutorily disclaim U.S. Patent No. 8,071,092 (the “092 Patent”), a royalty-bearing patent under the licensing agreement. That same day, GSK ceased paying royalties to the plaintiff on U.S. sales of Benlysta.

Following GSK’s disclaimer of the 092 Patent and non-payment of royalties, DRIT filed a complaint asserting counts against GSK for breach of contract and breach of the implied covenant of good faith and fair dealing. While the court dismissed DRIT’s breach of contract claim (Count I), DRIT’s claim against GSK for the breach of the implied covenant of good faith and fair dealing (Count II) proceeded to trial. DRIT was later granted leave to amend its complaint to add a separate claim for breach of contract (Count III), covering GSK’s failure to pay royalties in the time between when the disclaimer was filed and when payment was actually received by the Patent and Trademark Office, which the court severed for later resolution. Following a six-day jury trial on DRIT’s implied covenant claim, the jury delivered a unanimous verdict finding GSK liable for violating the implied covenant of good faith and fair dealing by statutorily disclaiming the 092 Patent. The parties then filed post-trial motions: DRIT to ask the court to determine damages and enter a final judgment on Count II of the complaint in light of the jury’s verdict, and GSK to request judgment as a matter of law or a new trial.

Despite GSK’s claim that GSK and Biogen expressly agreed that GSK’s royalty obligations under the licensing agreement would cease if a royalty-bearing patent was disclaimed, the court denied GSK’s motion, finding that there was sufficient evidence for the jury to conclude that GSK acted in bad faith by statutorily disclaiming the 092 Patent. Specifically, Judge Carpenter noted that testimony from GSK’s witnesses demonstrated that GSK made the decision to disclaim the 092 Patent “under suspicious circumstances,” and the evidence supported the conclusion that statutory disclaimer would not have been reasonably anticipated by the parties. Accordingly, Judge Carpenter held that there was no reason to disturb the jury’s verdict or to grant a new trial.

The parties also disputed the proper amount of damages that GSK owed to DRIT. In its post-trial motion, DRIT argued that it was entitled to damages that would put it in the position it would have been in absent GSK’s breach of the implied covenant of good faith and fair dealing. Specifically, DRIT contended that GSK owed royalties in accordance with the terms of the licensing agreement from April 28, 2015 (when GSK stopped paying royalties) until April 4, 2022 (when the 092 Patent would have expired had GSK not statutorily disclaimed it), plus interest. In response, GSK argued that DRIT should receive no damages because it failed to show they would have been reasonably foreseeable at the time the agreement was executed. Alternatively, GSK claimed that damages should be limited to the period from GSK’s last royalty payment to October 25, 2016, because even if GSK had not statutorily disclaimed the 092 Patent, GSK would have terminally disclaimed the patent, ending DRIT’s royalty obligations on October 25, 2016.

Ultimately, the court rejected GSK’s arguments and held that damages and interest should be awarded to DRIT through the date of the jury’s verdict, and that GSK was obligated to pay royalties to DRIT on a quarterly basis going forward in accordance with the licensing agreement. Judge Carpenter noted that the expectation of the parties to the agreement was that GSK would continue to pay royalties until the patent expired, which would normally have been 20 years after the date it took effect.

Furthermore, although the court had previously severed Count III of DRIT’s complaint for future resolution, the court held that final judgment should be entered on Counts I and II of the complaint as these counts have been finally decided as a result of the court’s dismissal of Count I and the jury’s verdict on Count II. Judge Carpenter noted that entering final judgment on these counts promoted judicial economy because the appellate process would ultimately determine the outcome of severed Count III for breach of contract.

Ultimately, the court entered judgment in favor of DRIT against GSK for royalty payments based upon sales of Benlysta made in the U.S. from the date GSK ceased making royalty payments through the date of the jury verdict (plus interest), as well as for royalties GSK owed DRIT through the second quarter of 2019 (plus interest), totaling $57,073,482 as of December 31, 2019. Furthermore, because the jury determined that GSK’s obligations to pay royalties on sales of Benlysta in the U.S. were not terminated in 2015, the court held that the rights and obligations of the parties remained in effect, including GSK’s obligation to pay future royalties to DRIT in accordance with the licensing agreement.

Analysis: This post-trial opinion culminates a multi-year litigation involving a dispute arising out of an intellectual property agreement. Consistent with well-established authority, Judge Carpenter refused to disturb the jury verdict, noting that “factual findings of a jury will not be disturbed if there is any competent evidence upon which the verdict could reasonably be based.” Mumford v. Paris, 2003 WL 231611, at *2 (Del. Super. Ct. Jan. 31, 2003). This case also highlights how the CCLD has become a favored venue for litigating contractual disputes with an intellectual property component (i.e., patent licenses or trade secrets).

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