Case Studies: Intellectual Property

Leading Biopharmaceutical Company Awarded $150 Million In Damages

Summary
In 1985, Amgen, Inc. (Amgen) entered into a licensing agreement with Johnson & Johnson, allowing Johnson & Johnson, through its subsidiary, Ortho Biotech (Ortho), to promote and sell its own version of Amgen’s red-blood-cell-production drug, epoetin alfa (EPO), to non-dialysis patients. Amgen retained the exclusive rights to market and sell EPO to the U.S. dialysis market. Amgen claimed that Ortho breached the licensing agreement by targeting Amgen’s U.S. dialysis patients with Ortho’s product, resulting in lost sales to Amgen and hundreds of millions of dollars of lost profits.

Background
Amgen, the world’s largest biotechnology company, produces a synthetic protein called epoetin alfa, or EPO. Marketed under the name of Epogen, this man-made protein stimulates red blood cell production in the kidneys and is prescribed to those suffering from anemia caused by kidney disease.

At the time of Epogen’s development, Amgen was still a young, small biotech firm with modest cash reserves. So, in 1985, Amgen entered into a strategic marketing partnership with consumer products giant Johnson & Johnson, through its subsidiary unit, Ortho. Amgen licensed the rights to Ortho to promote and sell Ortho’s own version of EPO, Procrit, to non-dialysis patients throughout the United States and most of the world. Amgen retained the exclusive rights to market and sell EPO to the U.S. dialysis market.

The relationship between Amgen and Ortho was strained after it became apparent to Amgen that Ortho was penetrating Amgen’s exclusive U.S. dialysis market with Procrit. With billions of dollars in Epogen sales potentially at stake, Amgen filed an arbitration claim in 1995 alleging that Ortho breached its licensing agreement by improperly selling Procrit in Amgen’s exclusive U.S. dialysis market.

Solution
Experts in damages, as well as the economic, financial, and accounting aspects of matters involving intellectual property and breach of contract, Kenrich personnel were retained by outside counsel to help Amgen identify, analyze and prepare testimony related to instances of marketplace infringement and other violations of the license agreement by Ortho.

Kenrich professionals performed detailed analyses of the numerous instances of alleged improper sales made by Ortho into Amgen’s market, as well as extensive demand and pricing analyses of the market for EPO and its alternatives and of other comparably competitive pharmaceuticals. Kenrich professionals also prepared detailed damages models and analyzed the financial impact of the infringement of the U.S. dialysis market.

Result
In October 2002, an arbitrator ruled that Ortho had improperly sold Procrit in the U.S. dialysis market that was exclusive to Amgen under the license agreement. The arbitrator found that Amgen was entitled to substantial compensation for the breach, and ordered Ortho’s parent company, Johnson & Johnson, to pay $150 million in damages plus Amgen’s significant attorney and consultant fees in the matter.

Through the identification, analysis and documentation of instances of marketplace infringement and their other work, Kenrich professionals were able to assist Amgen in reaching a favorable outcome from the arbitration proceeding and in protecting a top-selling product valued at more than $2 billion in annual sales at the time of the ruling.