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October 12, 2003

P---d Off

Natural Biologics LLC really knows how to p--s off a federal judge (bad pun intended). Earlier this month, the judge seriously hammered Natural Biologics for misappropriating trade secrets relating to the processing of horse urine. She hit Natural Biologics even harder than usual, essentially putting them out of the business – and for somewhat unusual reasons.

Concealing Evidence, Giving False Testimony

Natural Biologics was -- note the past tense -- in the business of making a generic version of Premarin, a hormone replacement therapy drug of Wyeth (formerly American Home Products Corporation). Both drugs are made using estrogens extracted from pregnant mare urine.

Federal Judge Joan Ericksen found that Natural Biologics knowingly misappropriated Wyeth's trade-secret information about its estrogen-extraction process by getting the information from a former Wyeth employee. She also found that the former Wyeth employee knew he had no right to provide the information to Natural Biologics.

As if that weren't enough, the judge found that the president of Natural Biologics destroyed documents, concealed other evidence, and gave false testimony in deposition and at trial (!). He did so, she said, in an effort to conceal the misappropriation.

The Hammer Drops

If you're found liable for misappropriation of a trade secret, normally you'll be enjoined from continuing to use the secret and ordered to pay damages. Even so, you'll usually be allowed to stay in business, as long as you don't use the secret in doing so.

But it's never a good idea to let a judge think that you've destroyed evidence or given false testimony. This principle was driven home for Natural Biologics when the judge concluded that:

Because Natural Biologics attempted to conceal its misappropriation of the Brandon Process by destroying evidence, giving false testimony, and improperly redacting evidence, the Court concludes that Natural Biologics cannot be trusted to avoid using the misappropriated process and cannot be trusted to obey an Order that permits them to exercise any discretion..

Consequently, the judge did not merely enjoin Natural Biologics from using the misappropriate trade secrets. She went even further – she ordered them, among other things:

  • to stop “producing, manufacturing, selling, offering for sale, distributing, importing or exporting any material or product consisting in whole or in part of estrogens from urine”;
  • to destroy all of its documents concerning its estrogen-extraction processes; and
  • to destroy "any material or product consisting in whole or in part of estrogens from urine resulting from any Natural Biologics Process."

In effect, the judge put Natural Biologics out of the generic-Premarin business entirely. And it sounds like conceivably the president of Natural Biologics may be facing still more legal troubles of his own. (Wyeth v. Natural Biologics, Inc., No. 98-2469 (D.Minn. 10/02/2003), available at CourtWeb)

Possible Lessons

1. Be careful in talking to a competitor's former employees. It won't look good if it even appears that you were trying to learn about the competitor's trade secrets.

2. In litigation, don't play hide the ball. If the judge or jury concludes that you were trying to conceal evidence, or that you otherwise can't be trusted, you're likely to be in big trouble. (This is a variation of the aphorism that the cover-up is often worse than the crime, a lesson that Arthur Andersen, Richard Nixon, and a host of others have learned the hard way.)

3. Never, ever, give false testimony in a court proceeding. If the judge or jury decide you're a liar, it may well be game over.

October 12, 2003 in Intellectual Property, Litigation, R&D; | Permalink

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