Of course, the notion of a large company buying smaller companies, whole — in order to improve various aspects of the larger one’s patent estate is by no means a novel concept. It has been going on for many decades now, especially in the life sciences sector. So Merck’s purchase of Idenix is in many ways plain vanilla M&A.
Even so, this is what is wonderful about having an extremely well-versed, highly-expert, and soundly engaged readership, here: my anonymous helper(s) pointed out (on Thursday night) that the Whitehouse Station coined code-name for the project to acquire Idenix was. . . “Invincible“.
That may well be understood in the patent courts here, and in the U.K., as a suggestion that Merck was seeking to lock in a monopoly position, in its bargaining with Gilead over the en-vivo metabolite patents it (and Idenix) hold. That in turn could be called “patent trolling” (a frowned upon practice), albeit on a titanic scale, not yet seen anywhere on the planet — or, at least it could arguably seen that way. Idenix and Merck are asserting entitlements to 10 per cent of the world wide revenue from Sovaldi®. Sovaldi will likely book $6 billion in sales in this, its first year on market. Perhaps closer to $10 billion, next year. So, that 10 per cent could be worth $600 million to $1 billion a year to Merck, without having to supply any product (i.e., ramp any real ongoing expenses) — the whole truckload of cash would be just essentially pure profit to Merck, once the legal fees were paid. A pure-play margin and cash-flow enhancer, company wide — if ever there one was. And that’s powerful business motivation.
Interestingly, Merck is on trial right now, in the United Kingdom, but traveling mostly incognito, under the name Idenix, as it litigates with Gilead over this U.K. patent estate (seeking a largely similar royalty). Here is that bit, from Friday, London time (via Financier Worldwide — now be sure and do go read it all):
. . . .Last year, Idenix commenced a program of asserting its patent rights against Gilead, with infringement lawsuits filed in the US, then in France, Germany and the UK. The UK courts are well known as a venue for the speedy resolution of disputes. In particular, the English Patents Court will sometimes hear claims in relation to a granted patent well ahead of the courts of other countries, not least because an early decision can sometimes promote settlement between the litigating parties.
Idenix’s patent infringement claim in the UK court against Gilead started in early October, with the trial likely to last about three weeks and a decision likely to be made public in November 2014, or possibly in early December. A win by Idenix on the issue of patent infringement would entitle it to claim a significant chunk of royalties from the UK sales of Sovaldi, but such a win would be contingent upon Idenix’s patent surviving a validity challenge from Gilead, which is being aggressively pursued. This is a common tactic in patent litigation, for those accused of patent infringement. If the validity of the patent can be successfully challenged, i.e., if a challenger can prove that the patent monopoly should not have been granted, it may escape the consequences of a finding of infringement. . . .
Fascinatingly high stakes patent poker, on a truly global scale. Of course, we learned the code name via the SEC complaint filed about insider trading on the deal news (thanks go to Ed, Pharmalot!).
Often here it seems, some of the best information turns up. . . in unlikely government-supplied public sources. So it goes on a rainy Saturday. To be clear, taking normal action to enforce one’s patents is not a monopoly law violation in any country. But jury-rigging the give and take (where Idenix, the smaller company here might have accepted a lower royalty). . . well, that at least might draw an arched eye-brow expression, from the various patent courts’ able jurists. We shall see.