The owner of a patent for technology employed in the manufacture of a drug used in certain cancer therapies alleged that the pharmaceutical company that developed and manufactured the drug had infringed its patent.
The owner of a patent for technology employed in the manufacture of a drug used in certain cancer therapies alleged that the pharmaceutical company that developed and manufactured the drug had infringed its patent. The plaintiff’s claim comprised both past and future royalties through the expiration of the patent. The patentee’s expert applied a 10 percent running royalty to sales of the cancer drug, based on the opinion that such a royalty was justified by reported royalty rates of between 10 and 20 percent of drug revenues and on an alleged absence of comparable license agreements for technologies employed in the manufacture of drugs.
The pharmaceutical company retained Mary Woodford, a vice president of Cornerstone Research, to assess the validity of the patentee’s claim. Ms. Woodford found that there was a substantial body of existing license agreements for comparable technology that commanded much lower royalty rates than the rate proposed by the patentee. Ms. Woodford also explained that the assumption that royalties would have continued through patent expiration failed to take into account other acceptable alternatives that would have been available to the pharmaceutical company at the time of the hypothetical negotiation and failed to recognize that the pharmaceutical company had, through an unrelated transaction, obtained a license to the patent-in-suit late in the damages period. Ms. Woodford concluded that a low single-digit royalty rate on past sales of the cancer drug would represent a reasonable royalty.