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Feb. 1 — A biopharma's fears that its stock price will drop if a co-founder puts his disputed patent rights for a liver disease treatment up for auction aren't enough to justify an order to stop him, a federal district court ruled Jan. 28 (Intercept Pharm. Inc. v. Fiorucci, D. Del., 1:14-cv-01313, injunction denied 1/28/16).
The company alleged in litigation filed in October 2014 in the U.S. District Court for the District of Delaware that Stefano Fiorucci, who left the company and voluntarily disposed of his founders stock before Intercept’s stock price skyrocketed, was falsely asserting co-inventorship of key patents held by Intercept.
The New York-based company asked the court for a declaratory judgment of non-inventorship in the patents-at-issue and a temporary restraining order to stop him from his plans to auction off his rights in the patents.
But the court denied the TRO, saying that what Fiorucci was doing was basically selling his intellectual property as if he were using a quitclaim deed on real estate, auctioning whatever rights he had in the property, even if there turn out to be none. The court also said that there was no precedent that a speculative drop in stock prices has ever justified a TRO.
According to Intercept's complaint, Intercept and Fiorucci are parties to sponsored research agreements under which Fiorucci assigned all of his rights in patents related to his research under the SRAs to Intercept.
The 2008 terminated agreement between the parties required Fiorucci to provide Intercept with assistance in perfecting the assignment, prosecution and maintenance of any patents arising from his research, and subsequent consulting agreements prevented Fiorucci from using any proprietary material for his own benefit or that of third parties.
On Jan. 9, 2014, after Fiorucci had disposed of his founder shares, Intercept announced the successful results of clinical trials on obeticholic acid (OCA), a novel bile acid analog and first-in-class agonist of the farnesoid X receptor (FXR), currently being developed in a phase III trial for primary biliary cirrhosis (PBC), as well as phase II trials for several chronic indications including nonalcoholic steatohepatitis (NASH).
Between Jan. 8, 2014, and Jan. 10, 2014, Intercept’s stock price jumped from approximately $40 per share to almost $450 per share. Venture capital investment in the company soared . Intercept's stock price subsequently declined, closing at $106.23 on Jan. 29.
Intercept asserted that, disappointed in his missing out on Intercept’s success, Fiorucci made unsupported claims of co-inventorship of U.S. Patent Nos. 8,546,365, 7,858,608 and 7,932,244 (all titled “Bile acid derivatives as FXR ligands for the prevention or treatment of FXR-mediated diseases or conditions”).
Intercept sued for a declaration of non-inventorship and breach of the SRAs, CAs and the termination agreement.
In response to Intercept's motion for a TRO to stop Fiorucci's planned auction of his patent rights, the court, in an order authored by Judge Richard G. Andrews, wrote that a TRO can only be issued on a showing of a reasonable likelihood of success on the merits, irreparable harm if an injunction isn't granted, a balance of hardships tipping in the mover's favor and a favorable impact of the TRO on the public interest.
Although the court wrote that Intercept appeared to have “a good case on the merits,” it concluded that the company hadn't demonstrated irreparable harm.
Andrews wrote, “Plaintiffs sole argument that it will suffer irreparable harm is that Defendant's public auction will suggest to shareholders and potential investors that there is a cloud over Plaintiff's title to its most important patents, causing its stock price to drop. Plaintiff cannot point to any case law, however, suggesting that a potential drop in stock price alone can meet the irreparable harm prong for injunctive relief.”
He added, “I cannot conceive how the possibility that a company's stock price will drop due to an opposing litigant's public reassertion of his already-public litigation position creates a likelihood of irreparable harm justifying the ‘drastic and extraordinary remedy' of injunctive relief,” quoting Intel Corp. v. ULSI Sys. Tech., Inc., 995 F.2d 1566, 1568 (Fed. Cir. 1993).
Andrews wrote that Fiorucci was, in effect, seeking to sell his interest in a lawsuit by quitclaim deed, whatever the merits of that interest may be, and that Intercept's motion for a TRO effectively sought to ensure that the lawsuit remained against Fiorucci, rather than against a third-party purchaser of Fiorucci's purported rights.
“I do not think that having to enforce its patent rights against a third-party purchaser of Defendant's interest in these patents, rather than Defendant himself, would cause irreparable harm to Plaintiff,” the court stated, denying Intercept's motion for a TRO.
Intercept is represented by Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Del., and Fiorucci by O'Kelly & Ernst LLC, Wilmington, Del.
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