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January 2017: Victory for Pfizer in Trade Secrets Jury Trial

January 2017

The firm recently won an important victory for Pfizer Inc. in a trade secret misappropriation case tried in California state court.

In 2000, Pfizer conducted a small clinical trial aimed at obtaining approval from the Food and Drug Administration (“FDA”) to market a then-promising new COX-II pain medication, Bextra, for use in a surgical setting. Pfizer hired plaintiff San Francisco-based non-profit Ischemia Research and Education Foundation (“IREF”) to assist in this clinical trial and, in so doing, licensed IREF’s trade secret databases which contained detailed observations of thousands of patients who had undergone coronary artery bypass graft (“CABG”) surgery. After obtaining inconclusive safety results, Pfizer planned a second, larger clinical trial in the same CABG population. IREF again offered to license its databases and to provide its network of doctors who could participate in the study. Pfizer declined to license the IREF databases, but hired IREF for other services, including the appointment of IREF’s lead biostatistician, Dr. Ping Hsu, to the trial’s data safety monitoring committee. Following this second trial, IREF’s founder, CEO, and now lone board member, found analyses of IREF’s databases allegedly done in connection with the clinical trial on Dr. Hsu’s computer at IREF’s offices. Dr. Hsu was placed on leave, and within minutes of DHL delivering a document preservation notice, he booted his laptop, burned data to CDs (which were never seen again), deleted the burn logs, and erased hundreds of files from his computer.

IREF sued Pfizer and Dr. Hsu for trade secret misappropriation in 2004. The case was tried in 2008, and the jury found that Pfizer had directly misappropriated IREF’s trade secrets, had conspired with Dr. Hsu to do so, and that Dr. Hsu was Pfizer’s agent. With interest, the judgment was almost $60 million. The Court subsequently granted Pfizer’s motion for a new trial.

Quinn Emanuel was retained and successfully bifurcated the case twice, once to try liability against Pfizer only, and a second time to isolate Pfizer as the sole defendant in a damages trial. Following appeal of the new trial order and remand of the case, a seven-week liability trial commenced in 2015. Through persuasive motions in limine and bench briefs, we successfully excluded highly inflammatory evidence, including that of Dr. Hsu’s document destruction. By the end of the case, IREF’s lawyers were so worried about having over-reached that they dismissed the direct liability and conspiracy claims, leaving only agency claims to go to the jury. Of the 159 trade secret computer files at issue, the 2015 jury found that Dr. Hsu had misappropriated only seven while acting within the scope of his agency for Pfizer.

IREF’s lawyers withdrew and new counsel substituted in to try the damages phase. Despite the limited liability findings, IREF insisted the case was still worth $55 million, which, after interest, put Pfizer at risk for over $100 million. Following strategic motions in limine, IREF’s damages theory was narrowed and its damages claim reduced to $29 million. The damages trial lasted nearly three weeks. Notwithstanding the liability verdict against Pfizer, Quinn Emanuel succeeded in convincing the jury that Pfizer had not acted wrongfully and that the misappropriation by its agent resulted in only nominal unjust enrichment, not the windfall IREF sought. After having the case for less than 24 hours, the jury returned a verdict of $165,000.