Case 1:14-cv LPS Document 589 Filed 09/22/17 Page 1 of 19 PageID #: 37866

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1 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 1 of 19 PageD #: N THE UNTED STATES DSTRCT COURT FOR THE DSTRCT OF DELAWARE DENX PHARMACEUTCALS LLC and UNVERSTA DEGL STUD d CAGLAR, Plantffs, v. GLEAD SCENCES, NC., C.A. No. 14~846-LPS REDACTED VERSON Defendant. Steven J. Balck, John G. Day, and Andrew C. Mayq, ASHBY & GEDDES, Wlmngton, DE Calvn P. Grffth, Ryan B. McCrum, Mchael S. W ~nsten, and Bradley W. Harrson, JONES DAY, Cleveland, OH AnthonyM. nsogna and John D. Knton, JONES DAY, San Dego, CA John M. Mchalk and Lsa L. Furby, JONES DAY, Chcago, L Stephane E. Parker, JONES DAY, Atlanta, GA Jennfer L. Swze, JONES DAY, Washngton, DC Attorneys for Plantffs Martna Tyreus Hufnal, Douglas E. McCann, Elzabeth M. Flanagan, Joseph B. Warden, and Santosh V. Coutnho, FSH & RCHARDSON P.C.,1Wlmngton, DE Frank E. Scherkenbach and Jenny Shmuel, FSH & RCHARDSON P.C., Boston, MA W. Chad Shear, FSH & RCHARDSON P.C., San Dego, CA. Jonathan E. Snger and Tasha.M. Francs, FSH & flchardson P.C., Mnneapols, MN Corrn N. Drakulch, FSH & RCHARDSON P.C., Atlanta, GA Attorneys for Defendant September 22, 2017 Wlmngton, Delaware MEMORANDUM OPNON

2 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 2 of 19 PageD #: s~tv STARK, U.S. Dstrct Judge: Pendng before the Court are several requests for relef made by Plantffs denx Pharmaceutcals. LLC and Unversta Degl Stud d Caglar ("denx") aganst Defendant Glead Scences, nc., followng denx's vctory n ajury tr~al n ths patent nfrngement acton. Pror to tral, Glead stpulated that t would not contest that, under the Court's clam constructons, ts accused treatments for Hepatts C vrus ("HCV"), sofosbuvr and ledpasvr/sofosbuvr (sold under the trade names Sovald and Harvon), nfrnge the asserted clams ofldenx's Unted States Patent No. 7,608,597 (the '"597 patent"). 1 (See D at 8 n.2) Followng a ten-day tral, the jury returned a verdct n favor ofldenx on all ssues that were tred. (D.. 518) Specfcally, the jury found that Glead's nfrngement was wllful, that denx was enttled to damages equal to a 10% runnµg royalty on Glead's adjusted net sales revenue from the accused products - for a total damages fglre of $2.54 bllon - and that Glead had faled to prove that the asserted clams of the '5 97 patent were nvald due to. lack of enablement, lack of wrtten descrpton, antcpaton, or obvousness. (d.) denx now asks the Court to exercse ts dscreton to enhance damages based on the jury's fndng of wllful nfrngement. 2. denx further asks the Court to declare ths case "exceptonal," wthn the meanng of 35 U.S.C. 285, and exercse ts dscreton to requre Glead, as the non-prevalng party, to pay denx's attorney fees. Fnally, denx requests that the 1 The '597 patent s enttled "Methods and Compostons for Treatng Hepatts C Vrus." t was ssued on October 27, (D.. 1 Ex. B) ' 2 At the August 2017 hearng on denx's moton- although not at any pont pror to the hearng- denx specfcally asked the Court "to at least double" the damages award. (See D ("Arg. Tr.") at 142) That s, denx asks the Cotlrt for at least an addtonal $2.54 bllon, whch would brng the total judgment aganst Glead to at least $5.08 bllon. 1

3 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 3 of 19 PageD #: Court's award of pre-judgment nterest (whch Glead does not oppose) be determned based on the prme rate, and not the T-bll rate, the latter beng the lower nterest rate advocated by Glead. 3 For the reasons set forth below, the Court whl deny denx's moton wth respect to enhancement of damages and attorney fees and granf the moton wth respect to the prejudgment nterest rate. 4. The Court Exercses ts Dscreton to Not Enhance Damages Based on the Fndng of Wllful nfrngement When damages resultng from patent nfrngement are found, "the court may ncrease the damages up to three tmes the amount found or asses,sed." 35 U.S.C. 284 (emphass added). n : Halo Electroncs, nc. v. Pulse Electroncs, nc., 136 S. Ct. 1923, 1932 (2016), the Supreme Court explaned that 284 means "[d]strct courts enjoy dscreton n decdng whether to award enhanced damages, and n what amount." See also f. at 1934 ("Secton 284 gves dstrct courts dscreton n metng out enhanced damages."). Halo further explans that "enhanced damage,s are generally approprate under 284 only n egregous cases.... [Enhanced damages are] not to be meted out n a typcal patent 3 denx also urges the Court to award a runnng royalty of greater than 10% for Glead's ongong, post-judgment nfrngement. (See D at 17-23) The Court wll not address ths porton ofldenx's moton, as the partes have agreed to stay ther dsputes relatng to ongong royaltes. (See D at 1; see also D (grant~ng "partes' jont request to stay")) 4 Stll pendng before the Court s Glead's m6ton for judgment as a matter oflaw, remtttur, or a new tral. (D.. 535) n due course, the Court wll ssue a separate opnon resolvng Glead's moton. The nstant Opnon s Wrtten based on the assumpton - whch should not be msunderstood as a holdng or ndcatbn of the Court's forthcomng rulng-that Glead's moton wll be dened n full and, thereforej that the Court should resolve all ssues presented by denx' s moton that have not been stay~d. 2

4 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 4 of 19 PageD #: nfrngement case." d. at 1932 (emphass added). Halo contnues: "The sort of conduct warrantng enhanced damages has been varously de~crbed n our cases as wllful, wanton, malcous, bad-fath, delberate, conscously wrongful, flagrant, or- ndeed- characterstc of a prate." d. Yet... none of ths s to say that enhanced damages must follow a fndng of egregous msconduct. As wth any exercse of dscreton, courts should contnue to take nto account the partcular crcumstances of each case n decdng whether to award damages, and n what amount. d. at 1933 (emphass added). The party seekng enhanced damages has the burden of provng by a preponderance of the evdence that they should be awarded. See d. at Applyng ths law to the facts and crcumstances presented here, and after carefully revewng the tral record and the partes' brefng, and also havng heard extensve oral argument, the Court concludes that t should not enhance damages. * * * Before turnng to the explanaton as to why the Court s exercsng ts dscreton to not award enhanced damages, the Court frst addresses a. prelmnary matter. As detaled further below, many of the consderatons that go nto deten:t.nng how to exercse dscreton n ths context are somewhat untethered from fndngs of fa~t made (explctly or mplctly) by the jury. As explaned below, the Court wll prncpally be applyng the "Read factors." See Read Corp. v. Portee, nc., 920 F.2d 816, (Fed. Cr. 1992). 5 1 Several of the Read factors - such as the "closeness of the case," "behavor as a party to the ltgaton," and the "sze and fnancal 5 Both sdes devoted extensve portons of ther brefng and oral argument presentatons to applcaton of the Read factors. 3

5 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 5 of 19 PageD #: condton" of the.accused nfrnger- relate to natters that were not before the jury and/or whch the jury would not have been n a poston to assess. See, e.g., Advanced Cardovascular Sys.,. nc. v. Medtronc, nc., 265 F.3d 1294, 1311 (Fed. qr. 2001) (notng that "closeness of the case" s factor "that a jury s not n the best poston to assdss").. Therefore, t s entrely approprate, even requred, for the Court to consder - based on ts extensve famlarty wth the entre course of ths case, as well as what t observed at tral - whlre, notwthstandng the jury's verdct n favor of denx, substantal contrary evdence was pr sented by Glead. The Court takes as true that Glead commtte~ wllful nfrngement, as the Court must do,. based on the jury's verdct. See d. at 1310 ("[C]erta~nly a judge cannot substtute hs or her factual determnaton for a jury's wllfulness fndng~"). Ths does not, however, prevent the Court from observng where, as the case may be, there was also substantal evdence presented by the wllful nfrnger, where the jury may have made ~ndngs that were not supported by the record, and where the jury heard no evdence and cannot be presumed to have made a partcular fndng. Thus, n the course of undertakng the part~ularzed assessment of the totalty of - crcumstances requred by Halo and other precedent, the Court wll, as approprate, take such consderatons nto account. *** denx's request for enhancement s predcat9d on several grounds. Frst, the jury, after beng properly nstructed, resolved factual dsputes ~nd found that Glead's nfrngement was wllful. Second, Glead - and ts predecessor, Pharnasset - engaged n a pattern of egregous msconduct. Thrd, the "Read factors" support ts request. As the Court explans below, none of d, 1 b. emx s contentons, smg y or m com mat10n, supp~rts a d ec1s10n to e nh ance d amages. 4

6 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 6 of 19 PageD #: Although denx understandably emphaszes the jry' s fndng of wllfulness, t ; 1 recognzes, as t must, that the jury's fndng s a nec~ssary but not suffc~nt bass for enhancng damages. "[A] fndng of wllful nfrngement does not mandate that damages be enhanced, much less mandate treble damages." Read, 970 F.2d at 826. As denx acknowledges (see, e.g., Arg. Tr. at 126), the jury's fndng merely "opens the; door" to the Court makng a dscretonary decson as to whether damages should be enhanced. See also WesternGeco L.L. C. v. on Geophyscal Corp., 837 F.3d 1358, 1362 (Fed. Cr. ~016) ("[T]he [Supreme] Court stressed throughout Halo that, f wllfulness s establshed, the queston of enhanced damages must be left to the dstrct court's dscreton."). 2 denx next contends that t proved egregous:msconduct by Glead and, for purposes of evaluatng denx' s moton, the Court accepts ths coptenton as true. Thus, as denx accuses, "Glead bult ts success on a pervasve course of gr9ss msconduct." (D at 7) No challenge to the suffcency of the evdence supporthjg the jury's fndng of wllfulness s before the Court. 6 Even f t were, substantal evdence supports the jury's express fndng of wllfulness as well as the jury's mplct agreement ~th denx that Pharmasset, and later Glead, 6 Glead challenged the suffcency of denx' ~ evdence of wllfulness at the close of all evdence. (See Tr. at 2029; D.. 509) But Glead's nost-tral argument on the suffcency of the wllfulness evdence was lmted to a cursory reference n a footnote n ts bref supportng ts renewed moton for judgment as a matter oflaw (see D at & n.14), whch s nadequate to put the ssue before the Court. See Jo An Wyeth & Brother Ltd. v. CGNA nt 'l Corp., 119 F.3d 1070, 1076 n.6 (3d Cr. 1997) (stat~g that "arguments rased n passng (such as, n a footnote), but not squarely argued, are consdered waved"); Robocast, nc. v. Apple nc., 2014 WL , at *1 (D. Del. June 11, 2014) (satne). 5

7 1. Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 7 of 19 PageD #: engaged n egregous msconduct. (See, e.g., D at 3-8) (summarzng evdence) More partcularly, the Court takes as true, am;ong other thngs, that Pharmasset' s founder, Dr. Raymond Schnaz, volated hs confdentalty oblgatons to denx, and shared wth Pharmasset scentsts denx's propretary dscoveres relatng to treatment ofhcv. Specfcally,. Dr. Schnaz "took" from denx the use of "two-prme (2')-methyl up modfed nucleosdes" as beng effectve n the treatment of HCV. Whether drectly or ndrectly, Dr. Schnaz mproperly shared ths denx nformaton wth Pharmasset scertsts, whose reactons ncluded bemoanng that they now needed a "cold shower" as they feared ther concurrent development efforts would be for naught, as there was nothng left for Pharmass:et to patent. (See PX-470) denx also showed that nternal Pharmasset documents - not avalable to denx untl t obtaned dscovery n ths ltgaton- referred to Pharmasset's compoun~ as an "denx dervatve[]," and showed an effort to replace smlar references to the "denx cojpound" or "denx sugar" wth references to the chemcal formulaton of the same compound. (S~e, e.g., Tr. at 619; PX-678) When Pharmasset's Jeremy Clark was descrbng to hs boss, Dr. Mchael Otto, Clark's breakthrough- the synthess of a 2'-methyl up 2'-fluoro down compound, later labeled PS he had denx's patent applcaton n hand. (See, e.g., Tr. at1006) The jury mplctly found that Clark and others at Pharmasset coped (and were asssted by) denx's work., denx s correct that ths course of conduct, yewed alone, favors enhancement of. damages. But, when consdered n context, the Court concludes that Glead's conduct does not warrant ncreasng the amount of money Glead must pay denx. 3 denx contends that applcaton of the Read factors, see 970 F.2d at , supports ts 6

8 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 8 of 19 PageD #: request for enhanced damages. The Court dsagrees~ j n totalty, these factors dsfavor an award of enhanced damages here. 7 The frst Read factor s "whether the nfrnge~ delberately coped the deas or desgn of another." As to ths factor, denx contends that "Gllad/Phannasset's delberate copyng and. msuse ofldenx's nventon presents a quntessental bass to enhance damages." (D at 9) ' Glead counters: "Phannasset affrmatvely revewed denx' s patent applcaton, determned ts compound of nterest was not ncluded n the closed lst of potental compounds descrbed by the patent, then proceeded to make and test that compound - a compound that denx tself was not able to make and test untl after t revewed Phannas$et's applcaton." (D at 2-3) Whle. substantal evdence was presented at tral on both s~es of ths dspute, 8 the jury presumably ' found the facts to be more consstent wth ldenx' s d1aracterzaton than Glead's. The Court 7 Even where several of the Read factors favj enhancement, t remans wthn the Court's dscreton to declne to enhance damages. See, e.g., ~prnt Communcatons Co. L.P. v. Tme Warner Cable, nc., 2017 WL , at *13-14 (D.Kan. Mar. 14, 2017) (fndng three Read factors n favor of enhancement, but concludng easel dd not nvolve "especally egregous case of nfrngement" and, thus, not awardng enhanced dhmages ). 8 For example, denx reles heavly on the statements of Phannasset's Dr. Leven Stuyver, ncludng that he felt he needed a "cold shower" aftef learnng of denx's patent applcaton, as "NOTHNG s left of our nventons," due to denx gettng there frst. (Tr. at ; PX-470) t s undsputed that Stuyver made these comments n November 2001 and that Phannasset's Jeremy Clark's work- on compound PS-6130-was performed n (See Tr. at 969) t follows that Stuyver could not have been statng that;clark's work-whch led drectly to Dr. Sofa's creaton of sofosbuvr a few years later - amounted to "nothng" and was wthn the scope of denx' s patent. Also, f the only thng Phannasset/Glead ddl was to "delberately copy" denx' s dscovery that a 2'-methyl up modfed nucleosde cofld be effectve n treatng HCV, that was not nearly enough to arrve at sofosbuvr~ t s undsputed that many 2'-methyl up compounds are nactve aganst HCV, and only sofosbuvr has provep to be sutable for use n humans. Pharmasset and Glead engaged n a massve effort to arrve at the ultmate cure. 7

9 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 9 of 19 PageD #: concludes that ths "delberate copyng" factor must, 1based on the jury verdct, be deemed to favor enhancement. Turnng to the second Read factor- "whethe the nfrnger, when he knew of the other's patent protecton, nvestgated the scope of the patent and formed a good-fath belef that t was, nvald or that t was not nfrnged" - the record shows that Glead had a "good-fath belef' that the '5 97 patent was nvald or not nfrnged. Dr. Ott0 testfed that, after beng made aware of the denx patent applcaton n 2001, he nstructed Phann.asset chemsts n the fall of 2002 to "look for the holes... areas that you don't beleve are be~g worked on by others that we mght work on and stll be able to get an nventon." (Tr. at 693)1 Around ths tme, Jeremy Clark conceved of the dea of a 2'-methyl up 2'-fluoro down nucleostle. (See, e.g., Tr. at 967) Dr. Otto further testfed that he and Clark beleved that the fluorne ~ompound was "a novel dea that clearly wasn't beng descrbed n [denx's] patent applcaton." (Tr. at 1011; see also d. at ) Dr. Otto explaned that Clark approached hm wth Je dea for PS-6130 wth denx's patent applcaton n hand, and that Clark "thought hs dea las novel." (Tr. at ) Ths was mportant to Dr. Otto because Pharmasset "had lmt~d resources" and he dd not want hs researc~ers "wastng... tme on workng on somethfng that wasn't a novel dea." (Tr. at 1007) The jury was not nstructed on good fath-the Court had strcken, as untmely, Glead's ' non-nfrngement defense of good fath 9 - and the jury presumably found that at some pont n 9 denx s correct that the Court struck Glea~' s "good fath belef of non-nfrngement defense" when t was rased, for the frst tme, n Glead's summary judgment brefng. (See D.. 367; D at ) The Court struck the good-:fath defense n July 2016, notng that Glead had yet to dsclose "who, f anyone, at Glead~ subjectvely beleved Glead does not nfrnge, how they formed that belef, and when theylformed that belef." (D at 137) denx s ncorrect, however, n assertng that "Glea<l has no evdence that t had a good-fath belef that t would not be lable for nfrngement." (D at 11) Whle the Court made the 8

10 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 10 of 19 PageD #: tme Phannasset or Glead acted n bad fath. (See D~. 516 at 25) Gury nstructon 5 on "Wllful nfrngement") Even so, there s evdence of Glead ~ n the persons of at least Clark and Otto - havng had a good-fath belef after revewng denxs patent applcaton that a 2'-fluoro down compound would.be outsde the scope ofldenx's clams and, therefore, non-nfrngng. Ths factor, then, does not support enhancng damages. Glead's "behavor as a party to the ltgaton," the next Read factor, dsfavors enhancement. denx contends that Glead "took unrfasonable postons" by watng untl just before tral to concede nfrngement, by requestng b~furcaton despte prevously opposng t, and through ts handlng of ts "Merck work" obvousness defense. (D at 13-14) The ' Court strongly dsagrees wth denx' s portrayal of tlls ltgaton... As the Court has prevously observed, Glead has not "conceded nfrngement;" nstead, Glead decded that t could not preval on an nfrng~ent dspute based on a clam constructon wth whch t dsagreed. (See D at 141) The CCourt encourages - and expects - ltgants to narrow ther cases as tral approaches, focusng on the strongest, and most mportant, of the manfold contentons they have consdered at earler stages of the case. Moreover, just as Glead refned ts case whle preparng for tral, so, too, dd ~denx, ncludng by droppng a prevously-. asserted patent (U.S. Patent No. 6,914,054) n ts entrety and several prevously-asserted clams. of the '597 patent. (See D at 4) See generally\ Sprnt, 2017 WL , at *14. ("[A ]lthough Sprnt complans that Tme W amer Cable sgnfcantly narrowed ts defenses at tral, such a decson to focus on the strongest argumlnts (lke Sprnt's own narrowng of clams. ~~~~~~~~~~- correct case-management decson, gven the nadeqbaces - n terms of tmng and substance - of Glead's dsclosures, ths s not the same thng as ~ayng that, as a factual matter, there s no evdence of Glead havng had, at the pertnent tme, a good-fath belef of non-nfrngement. 9

11 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 11 of 19 PageD #: for tral) s not mproper, and the Court s not persuaded that Tme W amer Cable otherwse. over-ltgated the case."). Whle the Court rejected Glead's eventual request for bfurcaton, t was not mproper for Glead to have reevaluated ts,oston on bfurcaton n lght of case developments, ncludng ts decson not to contest n;frngement. And the Court permtted (despte denx's objectons) Glead's presentaton o:fts Merck-work defenses. n,sum, the ltgaton conduct factor does not favor enhancement] Glead's "sze and fnancal condton" are lajge and healthy, respectvely, whch as a general matter could support enhancement. Under Je crcumstances here, however, these consderatons do not mert any weght. Ths factor l often gven weght aganst enhancement n stuatons where, for nstance, the other Read factjrs strongly support enhancement but the nfrnger s n such perlous fnancal condton that l award of enhanced damages mght put t out ofbusness. See, e.g., Vrgna Panel Corp. v. Mac Panel Co., 887 F. Supp. 880, 885 (W.D. Va. 1995), affd, 133 F.3d 860 (Fed. Cr. 1997) ("[Defendant's] fnancal condton s such that a. large enhancement of damages could drve t out of Busness. Although an enhancement of., damages s partly motvated by punshment, ths court does not consder t approprate to levy a l punshment whch under these crcumstances perhapf could be equvalent to an organzatonal death sentence."); see also Krppelz v. Ford Motor qo., 670 F. Supp. 2d 815, 822 (N.D. ll. 2009) ("Defendant's sze and fnancal condton should be[ vewed both relatve to the Pl~tff and also ndvdually to ensure that enhanced damages would not unduly prejudce the defendant's non-nfrngng busness.") (nternal quotaton marks rmtted). Furthermore, as Glead explans,. although t has "undoubtedly profted from sofosbuvr, Glead also took a major rsk n acqurng. Phannasset for $11 bllon, before t knew whether sbfosbuvr would succeed n Phase FDA. 10 [

12 1 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 12 of 19 PageD #: clncal trals or that denx's lead compound would fal." (D at 12-13) The next Read factor, "closeness of the case,'' strongly dsfavors enhancement. Notwthstandng the jury verdct, and the speed wth whch t was returned (n approxmately two hours) (see D at 5), nearly every aspect ofths lease was "close" n the sense that t easly could have gone the. other way. t s true, as denx olbsenes, "The Court construed the clams twce, adoptng denx's proposals n full each tme; ~ce dened Glead's motons for summary judgment; and dened all of Glead's Daubert moto~s seekng to exclude part or all ~f the.. opnons of sx denx experts." (D at 2) But what s omtted from ths rectaton of some of the ltgaton events s that almost all of these dec1sons were dffcult, and the Court serously consdered rulng aganst denx on most of these dsputes, partcularly on clam constructon. (See, e.g., D at 8 (statng n clam constructod opnon: "The patent's falure to expressly dsclose fluorne at the 2' down poston does gve tll Court pause... "); D at 17 (descrbng Glead's wrtten descrpton defense as "feasonable nterpretaton of the record"); D at 141 (recognzng that Court's clam constructon "may ultmately be shown to be wrong" on appeal)). denx has admtted that Glead would not ltyrally nfrnge under Glead's proposed constructons (see D at 27)- so, had the Court not been persuaded (after two rounds of. clam constructon brefng and two clam constructpn hearngs), and wth "some pause," to agree wth denx, ths case almost certanly would have been resolved n Glead's favor. Moreover, durng the post-tral motons hearng earljer ths month, the Court heard more than two hours of oral argument on Glead's nvaldty de~enses, a reflecton of (at mnmum) the reasonableness of those defenses and the challengnj ssues nvolved. (See, e.g., Arg. Tr. at 5-11

13 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 13 of 19 PageD #: ) denx s smply wrong when t asserts that "ths case was not close." (D at 5) 10 The next two factors - the "duraton" of the rnger' s "msconduct" and "[r ]emedal acton" t has taken-do not favor enhancement. Even acceptng denx's poston that Glead's msconduct began n 2001, when Dr. Schnaz volated hs confdentalty agreement wth denx (see Tr. at ), the record cannot reasonably be understood to show an unnterrupted 16-year saga ofunremedated wrongs. Pharmasset ousted Dr:. Schnaz n (See Arg. Tr. at 147) 11 Further, t s undsputed that denx's patent dd not ssue untl October 2009, Glead dd not. launch an accused product untl December 2013, an~ Glead dd not know untl December when ths Court ssued ts clam constructon order-that the clams cover 2'-methyl up 2'- fluoro down compounds. REDACTED REDACTED REDACTED REDACTED Smlarly, there s no evdence of a "motvatrn for harm" that would support enhancement. The record can only reasonably be un~erstood as showng that Glead's "motvaton" - n addton to a healthy proft motvej whch denx (qute rghtly) shares - was to 10 Whle "[p ]roof of an objectvely reasonable' ltgaton-nspred defense to nfrngement s no longer a defense to wllful nfrngement," WELP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed. Cr. 2016), the Court can consder such a defe~se as part of ts dscretonary enhancement decson, see WesternGeco, 837 F.3d at.1363 ("After Halo, the objectve reasonableness of the accused nfrnger's postons can stll be relevant for.the dstrct court to consder when exercsng ts dscreton."). 11 Whle the jury dd not hear evdence of ths~ the partes agree. the Court may consder "materals outsde the tral record." (D at 8 (c~tng ncube Corp. v. SeaChange nt', nc., 313 F. Supp. 2d 361, (D. Del. 2004), aff'd, 4$6 F.3d 1317 (Fed. Cr. 2006)); see also Arg. Tr. at 14 7). [. 12

14 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 14 of 19 PageD #: develop a cure to a devastatng, lfe-threatenng dse~se. "[T]he fact that the nfrnger acted pursuant to a fnancal motve does not dstngush ths case from the garden-varety nfrngement. case." Sprnt, 2017 WL , at * Turnng to the next factor, the jury may have tound that Glead "attempt[ed] to conceal ts msconduct." The jury heard that nternal Pharmasse documents were modfed to remove references to denx (.e., chemstry meetng mnutes ;that orgnally read "denx compound" were changed to read "2'-C-methyl-Cytdne"). (Compare PX-782 wth PX-789) But even. denx presented evdence that Pharmasett dd not entrely conceal ts work. t was undsputed at tral that Pharmasset, and ts scentsts, pursued a pat~nt on PS-6130, the applcaton for whch was made publc n January (See DX-7 (U.S. latent No. 7,429,572); see also Tr. at ) Even before that, DL Schnaz hmself had appatently nformed denx's Dr. Sommadoss of. 12 denx (D at 15; Arg. Tr. at ) ~alogzes ths case to Johns Hopkns Unversty v. CelPro, 978 F. Supp. 184, 196 (D. Dd. 1997), where Judge McKelve trebled damages for wllful patent nfrngement notwthstandng the nfrnger's contrbutons to "sav[ng] lves, to fght[ng] cancer, and mprov[ng] the human condton." However, other factors entrely mssng here supported Judge McKelfve's decson. He wrote of the defendant, CellPro: Behnd the scence, the medcne, anj the potental for treatng cancer patents are nvestors who hav~ demonstrated that ther prmary motvaton s not humantar~nsm, nor even responsble captalsm. The record n ths case demonstrates that CellPro' s motvaton, as expressed by the word~, conduct, and testmony of t[ s] founders, s greed. They are pre~ared to stretch the boundares of marketplace competton to maxmze ther returns. They wll delberately take what s not thers, ptld ther fles and fnancal dsclosures wth weak and msleadng opnons of counsel, and.. ltgate to delay and frustrate... d. There s smply no way to contort the record before ths Court and reach the same conclusons about the motvatons of Pharmasset or Glead. 13

15 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 15 of 19 PageD #: Phannasset's work. (See DX-202) Sofosbuvr's nv~ntor, Dr. Sofa, cted denx and an denx scentst, Dr. Paulo LaColla, n publcly-avalable re~earch papers. (See Tr. at 2136) And n , Dr. Sofa made a publc presentaton of the strcture of sofosbuvr. (See DX-2749; Tr. at. 1076) The "concealment" factor, n sum, only weakly favors enhancement. 13 Havng assessed each of the Read factors, andl gvng each approprate weght under the. partcular crcumstances presented here, the Court 1ncludes that an award of enhanced damages s not at all warranted. Only two factors favor enhanbement: delberate copyng by Glead and attempts by Glead to conceal ts msconduct. Most pf the other factors - a good fath belef n non-nfrngement, behavor n the ltgaton, the clos6ness of the case, the duraton of msconduct and remedal actons taken by Glead; and the lack of a motvaton to harm denx - dsfavor enhancement. The remanng factor, Glead's sze Jd fnancal condton, s essentally neutral. n sum, then, the Read factors demonstrate that the qourt should exercse ts dscreton to deny denx's request for enhanced damages. *** Addtonal consderatons further support the Court's concluson. As denx correctly observes, "enhanced damages are desgned as a punfve or vndctve sancton for egregous nfrngement behavor." (D at 3) (nternal quotaton marks omtted) Here, however,.. Glead's conduct does not warrant ether a "puntve' or."vndctve" response from the judcal 13 When consderng the evdence of "concealment;" t s dffcult to overlook that ldenx concealed ts vew that Glead had unlawfully taken denx' s nventon. t was not untl denx fled ths lawsut, n December 2013, that anyone at denx told anyone at Pharmasset or Glead ofldenx's copyng allegatons. Ths was despte ld~nx havng long known of Pharmasset and Glead's work on 2'-methyl up compounds. (See, ej, Tr. at 1070; DX , DX , DX (nternal denx document~, from 2006 and 2009, whch descrbe PS as the "Pharmasset compound")) 14.

16 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 16 of 19 PageD #: system. Whle the Court does not, of course, "bless" the type of underhanded corporatepracy the jury mplctly found Glead commtted, gven that the result of that msconduct s a cure for a potentally-fatal dsease afflctng mllons of people around the world, and gven that the jury's damages award s already the f(lrgest damages verdct ever returned n a patent tral (compensatng denx for what t lost), addtonal sancton s just not warranted. 14 Another consderaton n decdng whether to enhance damages for wllful patent nfrngement s deterrence of undesrable conduct. See generally Halo,136 S. Ct. at The Court cannot confdently state that t should wsh to deter the conduct the jury mplctly found Glead commtted. Even fully acceptng denx's vew of the evdence as t pertans to Dr. Schnaz, Jeremy Clark, Dr. Otto, and the rest, the fact s that denx dd not synthesze (or at mnmum dd not recognze that t had syntheszed) the key 2'-methyl up 2'-fluoro down compound that led to a cure for HCV untl well after Pharmasset dd so. (See, e.g., Tr. at 1183; DX-202) Throughout tral, denx emphaszed that ths compound, now known as sofosbuvr, consttuted an mprovement by Pharmasset and Glead on denx's nventon. (See, e.g., Tr. at 2104 (Plantffs counsel argung n closng that "they took the great nventon that [denx] came up wth, artd they made t better")) n fndng wllful nfrngement, the jury may well have agreed wth denx's characterzaton of the partes' respectve roles - and may have found that the cure for HCV was dscovered due only to the combnaton ofldenx's groundbreakng dscovery of 14 denx has not contested Glead's contentoµ that sofosbuvr has saved more than 1 mllon lves. (See, e.g., D at 1; see also Tr. at 1071) t s further undsputed that experts estmate that approxmately 2% of the entre world populaton - about 1 70 mllon people, ncludng 3.2 mllon n the Unted States -have HCV. (See Tr. at 1233) Also undsputed s that the latest varant of the treatment, sofosbuvr combned wth velpatasvr, has been shown to cure 95% or more of HCV cases regardless of genotype. (See D at 4) 15

17 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 17 of 19 PageD #: potent 2'-methyl lp nucleosde actvty aganst HCV wth Glead's revolutonary refnement of that nventon (by puttng fluorne at the 2'-down poston and developng a prodrug that could be delvered effectvely). The Court- and, more generally, the patent system -wants to encourage, and not deter, nnovaton on exstng deas, and exploraton and n~estment (ncludng n the form of massve expendtures) n related nventons that may reasonaoly appear to be outsde the scope of another patentee's clams. As the Supreme Court reterated n Halo, "patent law reflects a careful balance between the need to promote nnovaton through patent protecton, and the mportance of facltatng the mtaton and refnement through mtaton that are necessary to nventon tself and the very lfeblood of a compettve economy." 136 S. Ct. at 1935 (nternal quotaton marks, omtted); see also State ndus., nc. v. A.O. Smth Co~p., 751F.2d1226, 1236 (Fed. Cr. 1985) (notng that patent system s ntended to encourage nnovators to develop alternatves to "compettor's products, even when they are patented, thus brngng a steady flow of nnovatons to the marketplace"). Here, wthout both partes' co~~.trbutons, humanty may well have been deprved of a cure for HCV. Under the totalty of crcumstances, socety's nterest n deterrence of wllful patent nfrngement does not justfy enhancng damages here. For all of the foregong reasons, denx's request for enhanced damages wll be dened.. The Court Fnds that ths Case s Not "Exceptonal" wthn the Meanng of the ~a tent Statute n patent cases that are deemed "exceptonal," a Court may award "reasonable attorney fees" to the "prevalng party." 35 U.S.C The Supreme Court has held that an "exceptonal" case s "one that stands out from other:s wth respect to the substantve strength of a 16

18 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 18 of 19 PageD #: party's ltgatng poston (consderng both the governng law and the facts of the case) or the unreasonable manner n whch the case was ltgated." Octane Ftness, LLC v. CON Health & Ftness, nc., 134 S. Ct. 1749, 1756 {2014). Ultmately, the Court must make a dscretonary decson based on the totalty of crcumstances. See d. A party movng for attorney fees must demonstrate, by a preponderance of the evdence, tha,t a case s "exceptonal." d. at Ths case was not "exceptonal" wthn the meanng of 285. For reasons that have already been descrbed n connecton wth the Court's decson on enhancement of damages, ths case does not "stand out from others" wth respect to: the "substantve strength" ofldenx's poston, nor the substantve weakness of Glead's poston. nstead, both sdes' postons had substantal mert and ths was a case that, qute understandably, went to tral - a tral at whch ether sde could have prevaled. Nor does ths case "stand out from others" wth respect to "the unreasonable manner" n whch t was ltgated. The Court does not beleve that ths case was "unreasonably" ltgated by ether party. Whle the case has been hotly contested, and has been marked by a tremendous number of dsputes, these are typcal realtes ofhgh-stakes patent ltgaton between compettors n a market presentng an opportunty for enormous profts. Hence, the Court wll deny denx's request for attorney fees.. The Court Wll Use the Prme Rate to Calculate Prejudgment nterest "As a general matter, prejudgment nterest should ordnarly be awarded n patent cases to provde patent owners wth complete compensaton.':' LG Dsplay Co. v. AU Optroncs Corp., 722 F. Supp. 2d 466, 475 (D. Del. 2010). The Court:has broad dscreton to determne the approprate nterest rate to apply. See Unroyal, lnc. 1 v. Rudkn-Wley Corp., 939 F.2d 1540, 1545 (Fed. Cr. 1991). 17

19 Case 1:14-cv LPS Document 589 Fled 09/22/17 Page 19 of 19 PageD #: Here, the partes agree that the Court should award denx prejudgment nterest. (See D at 25; D at 25) Ther dspute s only whether the Court should apply the prme rate, compounded quarterly, as denx proposes (D at 24-25), whch ranged from % durng the relevant perod (see D at 24), or should nstead apply the T-bll rate, whch was at tmes as low as % (see D at 12). 15 As requested by denx, the Court wll apply the prme rate. Ths s by far the most common practce n the Dstrct of Delaware. (See D at 24 n.4) (collectng cases) Further, for reasons set out n denx's bref REDACTED REDACTED. (See d. at 24-25) To Glead, gven the absence of evdence that denx (or Merck) had to borrow money because t was deprved of the money Glead should have pad t, the only rsk to be allevated by pre-judgment nterest s the "very low rsk" of non-payment by Glead. (D at 25) Whle the Court planly has dscreton to vew the stuaton as Glead suggests, decsons of ths Dstrct have used the prme rate even when there was no evdence that the patentee was borrowng money or experencng a rsk of non-payment. See XpertUnverse, nc. v. Csco Sys., nc., 2013 WL , at *11 (D. Del. Nov. 20, 2013). Thus, the Court wll grant denx's request wth respect to prejudgment_ nterest. V. Concluson denx's moton wll be dened n all respects except wth respect to denx's request for prejudgment nterest to be calculated usng the prme nterest rate. An approprate Order follows. 15 The partes agree also denx s enttled to supplemental damages. (D at 25) 18