How worrying is Revolution Medicine’s infringement letter to Erasca for ERAS-0015?
Zachary Silbersher
Erasca, Inc. is a clinical stage oncology company developing drugs focused on RAS/MAPK pathway-driven cancers. In January of this year, the company announced encouraging early clinical data for one of its candidates, ERAS-0015. Then, in late April, the company received a letter from a potential competitor, Revolution Medicines, Inc. (“RevMed”). The letter alleged that Erasca’s ERAS-0015 candidate infringes RevMed’s patent, that Erasca misappropriated trade secrets and that Erasca improperly compared pre-clinical data for its candidate with RevMed’s drug. How concerned should Erasca’s investors be of RevMed’s allegations?
To set the table, a few things should be clarified. RevMed’s letter itself does not appear to be public, but only Erasca’s description of the letter. Further, RevMed has yet to commence any publicly-filed litigation in district court. A filed lawsuit would include a complaint that would presumably more clearly delineate what RevMed is alleging. Given all that, the best we can do is handicap this situation based upon Erasca’s 8-K description of RevMed’s letter.
RevMed’s most potentially damaging allegation is that Erasca’s ERAS-0015 is infringing RevMed’s patent, U.S. Patent No. 12,409,225. We do know that RevMed is alleging that ERAS-0015 infringes the ‘225 patent under the doctrine of equivalents. That suggests that RevMed is tacitly acknowledging that ERAS-0015 does not literally infringe the ‘225 patent.
When one company alleges that another company infringes a patent, the patent holder, or patentee, must typically prove literal infringement. RevMed’s ’225 patent is a compound patent. To prove literal infringement of a compound patent would require showing that ERAS-0015 is the same compound as claimed in the ‘225 patent. The compound in the ’225 patent is claimed in such a way that certain positions can be substituted for different options. Thus, the patent itself claims the compound with some possible variations, iterations or substitutions. Even so, as long as ERAS-0015 falls within those possible variations or substitutions described in the patent’s “claim,” then RevMed can show literal infringement.
Here, however, RevMed has tacitly conceded that Erasca’s ERAS-0015 is not close enough to the compound claimed in the ‘225 patent to show literal infringement. That is presumably why RevMed is alleging infringement under the doctrine of equivalents. The doctrine of equivalents is best understood as an exception to proving literal infringement, rather than an equally viable alternative to proving literal infringement. The general policy behind the doctrine of equivalents is that competitors should not be permitted to evade liability for patent infringement where the differences between their product and the patented product are so insubstantial that it would be unfair, and imprudent, not to find liability.
That said, proving infringement under the doctrine of equivalents is very often an uphill battle. It is not simply a matter of putting the patented molecule next to the accused molecule and seeing how close they are. Expert testimony is required to opine that the differences are truly insubstantial. If this matter proceeds to litigation, there will likely be fierce disagreement between Erasca’s experts and RevMed’s experts over whether the differences between the two molecules are insubstantial enough to warrant liability.
One common way to assess equivalence is under the “function-way-results” test. Under this test, the jury could be asked to find that even though ERAS-0015 lacks a critical element required by RevMed’s ‘225 patent, ERAS-0015 performs the same function as the missing element, in the say way, to achieve the same result. There is potentially a healthy amount of subjective opinion inherent in that analysis, which is why there is potentially healthy room for the experts to disagree. If anything, this just means that finding liability against Erasca is far from assured.
Moreover, applying the doctrine of equivalents to a chemical compound patent is a unique exercise. There is not tremendous precedent for instances where it has been found. Approximately 10 years ago, the Federal Circuit arguably heightened the standard for finding infringement under the doctrine of equivalents for compound patents. (The Federal Circuit is the authoritative appellate court for patent cases.) The Court found that the caselaw for applying the doctrine of equivalence to compound patents was “sparse and confusing.”
The Court also found that the function-way-result test is likely inappropriate in the context of chemical compounds. The Court reasoned that, under this test, aspirin and ibuprofen could arguably be deemed equivalents, even though they differ substantially in structure. The Court suggested that for chemical compound patents, a more narrow test that focuses on whether the differences are truly insubstantial would be more appropriate. The take-away was that proving infringement under the doctrine of equivalents for chemical compound patents is no easy task.
One final wrinkle. The doctrine of equivalents is typically applied at the level of a single element. For instance, if a patent claims a chair that uses screws, and the accused chair uses nails instead of screws, the doctrine of equivalents asks whether that alternative element is itself equivalent with the missing element—i.e., whether nails are equivalent to screws. In other words, assessment of RevMed’s allegation against ERAS-0015 requires knowing which element from the ‘225 patent is actually missing from Erasca’s compound, and then assessing whether that element is insubstantially different. Erasca’s 8-K announcing RevMed’s letter does not specify which element of ERAS-0015 that RevMed has claimed to be an equivalent to what is required in the ‘225 patent.
RevMed’s letter also alleges that Erasca is liable for trade secret misappropriation. Erasca’s 8-K specifically states that RevMed alleges: “a third party misappropriated RevMed’s alleged trade secrets in connection with a patent relating to ERAS-0015, and that the Company is allegedly liable under the trade secret laws as a licensee.” The letter does not allege what the allegedly misappropriated trade secrets are or the circumstances of their misappropriation. That is not itself wholly surprising given that, if this matter proceeds to litigation, much of the information related to the purported trade secrets will likely remain sealed from the public.
Nevertheless, a few comments can be made. First, RevMed is not alleging that Erasca itself misappropriated the trade secrets. Rather, RevMed admits that any alleged misappropriation was performed by a third-party. That immediately waters down, to some extent, the likelihood of potential liability attaching to Erasca. Indeed, RevMed ties Erasca to the allegedly misappropriated trade secrets by claiming that Erasca is a licensee to a patent that included those trade secrets.
There are a lot of known unknowns here, which makes getting our hands around potential liability very difficult. Yet, even if it is true that Erasca is a licensee to a patent that included trade secrets misappropriated by a third party, which is presumably the patent holder, a lot of questions would still have to be answered in the affirmative to find liability attaches to Erasca. If Erasca is not using the patent, is not using embodiments of the patent that include the trade secrets, did not know they were trade secrets, or even had a good faith reason to believe they were not trade secrets – each of these unknowns present the possibility of a defense by Erasca. Put simply, RevMed’s trade secret misappropriation claim includes a host of potentially thorny factual questions that make liability difficult to assess from this distance, but also somewhat unlikely. The fact that RevMed is not actually claiming that Erasca stole anything itself undoubtedly means that RevMed has its work cut out for it in future litigation.
RevMed’s final claim relates to purportedly improper comparisons of Erasca’s drug and RevMed’s drug in public disclosures. Erasca’s drug is not yet on the market, and therefore, RevMed does not appear to be alleging what sounds like some sort of false advertising claim. More importantly, if Erasca’s drug is not yet on the market, it is not clear if RevMed can meaningfully claim that its drug has been harmed or that it has lost sales or profits from Erasca’s purportedly improper comparisons. Instead, any potential liability at this point would appear to be directed to Erasca’s investors rather than to RevMed. And even then, 10b5 liability based upon questionable comparisons to other drugs will have its challenges.
Erasca’s stock suffered a major hit after disclosing RevMed’s letter, although it is unclear if the stock price fell primarily due to other news. Either way, the letter itself, which is currently sparse on public details, shows there are more questions than answers over whether Erasca will truly face considerable liability to RevMed.