The Settlement That Wasn’t

Shareholders of Alnylam Pharmaceuticals may be forgiven for heaving a sigh of relief when news broke of a Settlement between Alnylam and Max Planck on the one hand and the Whitehead Institute and the University of Massachusetts (UMass) on the other hand which seemed to resolve the Tuschl II ownership issue and finally put an end to the lengthy and costly Tuschl Litigation (follow filings and commentary here).

At the heart of the dispute was Alnylam’s fear that Merck could gain access to the siRNA 3’ overhang feature if UMass got its way and certain data concerning such overhangs were left in the US Tuschl I patent application. UMass found itself to be in a particularly tough spot since whether it gave in to Alnylam’s demands or not, somebody, Alnylam or Merck, would be quite unhappy with them. So when Alnylam announced that it had ‘reach[ed] settlement in litigation regarding Tuschl patents’ and noted that Alnylam granted as part of the settlement UMass the right to sublicense the U.S. Tuschl II patent family to Merck (emphasis mine), it seemed like Alnylam, UMass, and Merck achieved the impossible and untied the Gordian Knot that Tuschl II had become.

Exhibits (Exh. 10-2 and 10-3) filed as part of Alnylam’s quarterly securities filings, however, strongly suggest that the settlement effectively solved nothing and only delayed/slightly shifted the problem. Importantly, there is no evidence that Merck agreed to or conceded anything with this settlement. In fact, the filings indicate that Merck was not part at all of the settlement negotiations as it had yet to see its details. The Merck reference is only a reference that UMass will present Merck with the option to utilize Tuschl II in the US. The only reason why Merck would remotely see any value in this is if Alnylam succeeded in stripping away the 3’ overhang claims from Tuschl I.

But even then, I very much doubt that Merck would be agreeable. One insight into its current thinking about Tuschl II comes from a recent opposition that Merck filed against that patent estate in Europe. On April 4 2011, that is after the news of the Tuschl Settlement, it and others (including Pfizer and Silence Therapeutics) appealed a recent decision by the EPO to uphold Tuschl II. In Europe, it will be the objectives of Merck and UMass, still responsible for Tuschl I patent prosecution there, to eventually get a broader Tuschl I issued and/or invalidate Tuschl II. Personally, I’m wondering whether the EPO will eventually raise the same double patenting issue the USPTO raised.

The main problem with solving the Tuschl situation is that when Alnylam sold its licenses to various Big Pharma companies, they must have been under the impression that Merck had either only limited or no rights at all to Tuschl II. After all, at least some of that half a billion dollar plus was for the strategic value that Tuschl II would give them. This is why Alnylam adds that the Tuschl II sublicense to Merck, or rather the offer of such a sublicense, is subject to certain 3^rd party obligations, pretty much meaning that Novartis will not easily give up on the exclusivity of its 31 target picks. Rest assured, Merck, having invested more than anybody else in RNAi Therapeutics, will never agree to such terms.

Something about the Settlement seemed odd to me, and I’m sure to others as well. It is, however, clear to me now that peace between Merck and Alnylam has not broken out yet.

Tuschl Litigation Decidedly Shifting into Max Planck-Alnylam’s Favor

As often in life, involve money, and you will soon see who your true friends are. This rule also seems to apply to the fate of the Tuschl patent applications which more and more seem to go in Max Planck/Alnylam’s favor, and against the interests of UMass and Sirna Therapeutics/Merck, according to the latest coverage on the Tuschl Litigation Blog.

It has always been a mystery to me why Whitehead and the MIT would want to side with UMass in the first place, since as parties to the Therapeutic Use agreements between Max Planck, MIT, and Whitehead, Whitehead and MIT had nothing to gain, actually much more to lose, from UMass’ decision to go it alone and license the therapeutic rights to their part in the Tuschl invention to Sirna Therapeutics (now Merck) and to some degree also RXi Pharmaceuticals. Even more so given that Zamore's assignment of his interest in Tuschl-I to UMass is questionable in the first place.

It has equally been a mystery to me why Wolf Greenfield & Sacks, the patent law firm engaged by Whitehead to prosecute the Tuschl-I patent application on the behalf of Whitehead, Max Planck, MIT and UMass would seek to gain the benefit of inventive subject matter that obviously belonged to Max Planck only.

It is therefore no surprise then that MIT, Wolf Greenfield & Sacks, and finally The Whitehead have all decided after all that the legal exposure from the Tuschl Litigation does not make it worth to them any more to continue to support UMass' insistence on ownership over the use of 3’ overhangs in RNAi triggers and the discovery of efficient RNAi gene silencing in mammalian cells using short double-stranded RNAs by claiming the benefit of the '325 priority application filed by Max Planck in Europe.

Unless Zamore’s testimony will shock the field of RNAi, the testimonies of the 2 more impartial inventors named in Tuschl-I, namely Sharp and Bartel, make it clear that the 3’ overhang work was the accomplishment of Tuschl after he set up his lab at the Max Planck. This is also consistent with my view of RNAi history that is not only based on the publication history and authors on key papers, but has also been critically influenced by how the RNAi field in general has always felt about who was to be acknowledged for that body of work: Tuschl. Science is such a gossipy endeavor after all that I would have expected to have heard rumors if Tuschl wasn't the inventor of the 3’ overhung siRNA.

So now it seems like UMass is the last man standing, and unable to move forward with the Tuschl I patent application. The fact that UMass has not surrendered yet let’s me speculate that not only do they stand to lose future benefits under the Tuschl patents, but that they feel considerable pressure from Sirna Therapeutics-Merck. Understandably, given that the $1.1B value Merck placed on Sirna Therapeutics much depended on perceived access to the mammalian and 3’ overhang data. Should UMass never have been allowed to license IP which erroneously cross-referenced the patent application of another party? Or might the pressure be one day on former Sirna Therapeutics, many of who have left Sirna after the acquisition, should Merck believe that they have been misled?

A less conspirational explanation for this mess, of course, would be honest human mistakes, such as misunderstanding the rules for citing priority documents or scientists signing off on legal declarations that they do not have the time to read, much less fully understand. But with billions of dollars at stake, what started as honest mistakes may quickly become interpreted as, and actually also have led to ‘malpractice’ and ‘deceptive behavior’. Money.

Follow the Court Proceedings of the Tuschl Tussle

The ‘RNAi Litigation Blog’ is a service by John Leavitt and his colleagues Doug Naab and Scott Lloyd from the technology Research and Advisory firm Nerac that provides a great deal of background information on the Tuschl case and real-time summaries and insights of the court proceedings. As you will remember, this case touches on the ownership of the fundamental Tuschl I and II RNAi trigger patents and of which the outcome could decide what kind of economics Alnylam will be able to extract from its IP and what type of workaround strategies Alnylam’s competition will have to adopt (primers on the Tuschl Tussle and the potential fallout can be found here and here).

The most recent entry on the RNAi Litigation blog was on a hearing held on April 12 about Whitehead’s and UMass’ (the defendants) motion to dismiss the plaintiffs’ (Max Planck and Alnylam) First Amended Complaint. A lot of the hearing seem to have concerned Zamore’s assignment of his rights to the Tuschl I invention to UMass which the plaintiffs strongly feel Whitehead was contractually obligated not to have allowed. After all, it is UMass’ involvement in all of this which makes this case so important because UMass then decided to go it alone and essentially licensed all of the Tuschls most importantly to Sirna Therapeutics (now Merck). This could very well substantially deprive Alnylam of the economic benefits of its, what it believed to be exclusive rights to Tuschl II. To me, it actually seems quite fantastic how UMass believes that the one month that Zamore worked at UMass until the first filing of Tuschl I would now entitle them to the entire Tuschl inventions. Should the plaintiffs prevail in the assignment question alone, then much of the risk to Alnylam’s future business dealings would be taken off the table, unless of course events would escalate in such a way that both the Tuschl patents explode because the USPTO declared the patents invalid because of mishandling of inventorship. The defendants first line of defense is to claim statute of limitations on the assignment question to which the plaintiffs responded that they only became aware of the fact that Whitehead allegedly deceived them in their recent discovery and that they were first damaged in 2007 as Tuschl II ran into problems at the USPTO because of the way Whitehead prosecuted it.

There was an awkward moment in the hearing when the judge asked why Sirna/Merck was not part of the case as it appears that overlooking for a moment the few million in royalties that UMass may enjoy, it is Merck that stands to lose their $1B investment should they end up with a therapeutically useless Tuschl I. It appears, however, that UMass will have to bear the brunt instead because it apparently told Sirna/Merck that they were able to provide access to the inventions described in both the Tuschl patents. Maybe not surprisingly, Merck (‘outside pressures’) also appears to be the reason why attempts to settle this case have failed miserably.

The next important milestone in the case seems to be which counts will eventually be admitted. Unfortunately, it seems as if the judge is not keen at all to delve into the technical details of the case and would rather let the USPTO agonize over it. I am afraid, however, that in order to understand and solve any of the counts at hand, she would eventually have to refresh her high-school biology...

Well, instead of my second-hand account, why not bookmark and visit the 'RNAi Litigation Blog' here directly.

While Alnylam Focuses Suit on Whitehead and UMass, a New Tuschl Loophole Approach Gains Traction

Not a day goes by in RNAi Therapeutics land without hearing the sounds from the RNAi trigger IP battle grounds. Today is no exception…

Wading through the court documents from the Alnylam-Max Planck suit on how the Whitehead prosecuted the Tuschl I (T-I) patent application (aka the 'Tuschl Tussle'), it struck me that while it was Whitehead, their hired patent counsel, and UMass that apparently conceived of the strategy of how to incorporate data from the T-II patent into T-I against the interests of Alnylam and Max Planck, the MIT seemed to merely go along unwittingly. As a result, MIT not only became a victim in that they were deprived of the benefits from the therapeutic agreement they were part of with Max Planck and the Whitehead, which to my knowledge anticipated equal sharing of the profits from therapeutic licenses derived from the combined T-I and T-II estate, but also because they ended up as defendants in the suit.

Perhaps realizing this, Alnylam announced today that it will leave the MIT off the hook in return that they will be bound by any ruling in favor of Alnylam/Max Planck. It could also help drive a wedge between the former co-defendants as the MIT will now feel less fearful about telling their side of the story which could turn out to be quite revelatory. The MIT should have every reason to be unhappy with the Whitehead and the way T-I was handled. The argument that Whitehead, and implicitly, the MIT, aided UMass for political reasons, thereby leaving therapeutic licensing money on the table, never really flew with me since a) institutions just don’t give away money like this, and b) I could never imagine a research institution of the stature of Whitehead as being nationalistic and therefore anti-Max Planck.

While the Tuschl Tussle is going on, there is another Tuschl loophole movement in the field that appears to be gaining some traction. It initially started with mdRNA’s claims that the mere inclusion of a single ‘funny-looking’ nucleotide into an siRNA, unlocked nucleic acids (UNAs), would help it get around the Tuschls. It long cited evidence by outside patent counsel that supposedly supported their belief that they had freedom-to-operate in the RNAi trigger space. The news that Quark Pharmaceuticals had just initiated dosing for their 5^th (!) clinical RNAi program for a neuroprotective agent of the eye, it reminded me of their similar claims about ‘proprietary siRNAs’. To find out about the nature of these claims, I looked up what potentially applicable patent applications they had filed, and came up with the following main claim:

"1. A compound having structure (IX) set forth below:

(IX) 5' (N)x - Z 3' (antisense strand)

3' Z'-(N')y- z" 5' (sense strand) wherein each of N and N' is a ribonucleotide which may be unmodified or modified, or an unconventional moiety; wherein each of (N)x and (N')y is an oligonucleotide in which each consecutive N or N' is joined to the next N or N' by a covalent bond; wherein Z and Z' may be present or absent, but if present is independently 1-5 consecutive nucleotides covalently attached at the 3' terminus of the strand in which it is present; wherein z" may be present or absent, but if present is a capping moiety covalently attached at the 5' terminus of (N')y; wherein x =18 to 27; wherein y =18 to 27; wherein (N)x comprises modified and unmodified ribonucleotides, each modified ribonucleotide having a 2'-O-methyl on its sugar, wherein N at the 3' terminus of (N)x is a modified ribonucleotide, (N)x comprises at least five alternating modified ribonucleotides beginning at the 3' end and at least nine modified ribonucleotides in total and each remaining N is an unmodified ribonucleotide; wherein in (N')y at least one unconventional moiety is present, which unconventional moiety may be an abasic ribose moiety, an abasic deoxyribose moiety, a modified or unmodified deoxyribonucleotide, a mirror nucleotide, and a nucleotide joined to an adjacent nucleotide by a 2 '-5' internucleotide phosphate bond; and wherein the sequence of (N)x is substantially complementary to the sequence of (N')y; and the sequence of (N')y is substantially identical to the sequence of an mRNA encoded by a target gene."

As the red highlight shows, the ‘proprietary’ claim of the Quark siRNAs rests on the sense/passenger strand similarly containing at least one ‘funny-looking’ nucleotide. I was disappointed, however, that the specifications did not explain why this should have any unique advantages. Since in addition to novelty (that's where they will likely try to focus their arguments on), a patent has to also fulfill the demands of non-obviousness and utility, I have my serious doubts that this and the usiRNA patent applications will stand up to closer scrutiny, and if they did get by any patent offices, Alnylam would ultimately challenge them. It suggests, however, that while patent protection for these RNAi triggers is unlikely, a number of players increasingly view this strategy as a way to at least gain independence from the Tuschls. The exact reasoning behind this is mysterious to me, since these modifications should already be explicitly covered by the Tuschls when they refer to 'nucleoside analogues' which usiRNAs are. And even if the Tuschls did not explicitly mention them, it would appear obvious that an siRNA is an siRNA whether it contains a limited number of ‘funny’ nucleotides or not.

As I said, I have yet to hear a convincing argument by the companies what their belief is based on. Just stating that they believe so is not enough to convince investors and potential partners. I am always willing to listen to such arguments.