A Lawyer Walks Into A [Public Disclosure] Bar . . . .
Earlier this month, in Silbershear v. Valeant,1 a federal judge denied a lawyer's attempt to act as a qui tam relator under the False Claims Act (FCA) based on information the lawyer uncovered in past litigation.
Prior to bringing his qui tam suit, the lawyer represented a plaintiff drug company in challenging the validity of defendants' patent. During the course of that litigation, the lawyer discovered articles that were not previously disclosed to the US Patent and Trademark Office (USPTO) during the defendants' initial patent application. The Patent Trial and Appeal Board (PTAB) struck down the validity of defendants' patent, citing the articles as evidence that the patent relied on "obvious" information.
Armed with information he learned from the PTAB litigation, the lawyer-turned-relator headed west to the Northern District of California looking for a payday. He alleged that by failing to disclose those material articles to the USPTO, defendants fraudulently obtained their patent, a patent that allowed them to artificially raise the price of a pharmaceutical drug they manufactured, making a false claim out of "each and every" prescription covered by Medicare, Medicaid and other government healthcare programs.
The court rejected his efforts, finding that in effect, he had "simply seized upon a favorable patent decision in a case he litigated and added the new punchline of a false claim." The court held that the suit was barred by the FCA's 2010 public disclosure bar because the allegations of fraud—namely, the failure to disclose the articles to the USPTO—had previously been publicly disclosed during the PTAB proceedings. The court also suggested that the lawyer-relator could not qualify as an "original source" of the information on which he based his allegations.
The court's holding provided two important takeaways. First, in rejecting the lawyer-relator's plea to ignore the extensive line of precedential cases interpreting the pre-2010 version of the public disclosure bar, the court held that the 2010 amendment to the bar did not work a "sea change" such that prior case law is no longer relevant. Congress made clear that the 2010 amendment did not change the public disclosure bar's underlying goal of "striking a balance" between incentivizing whistleblowers with valuable information to come forward while discouraging "parasitic" lawsuits based on public sources. Nor did the 2010 amendment materially change the factors for determining when the bar applies.
Second, relying on Ninth Circuit precedent, the court explained that a disclosure to the government in the course of a relator's job does not suffice as a "voluntary disclosure" to the government that would satisfy one of the "original source" exceptions to the 2010 bar. The lawyer found the previously undisclosed articles through his representation of his client in the PTAB litigation. The court reasoned that in uncovering those articles and disclosing them to the PTAB, the lawyer, unlike the prototypical FCA whistleblower Congress envisioned, had not risked his job or reputation to blow the whistle on his current or former employer. He was not a volunteer who needed enticement to bring non-public information out of the shadows. Rather, his disclosure was required by the very terms of his employment; he was paid by his client to find information sufficient to challenge the validity of a patent. In addition, allowing a lawyer to qualify as an original source based on information obtained in the course of performing legal work could perversely incentivize the lawyer to turn his or her attention away from the client's best interests and instead focus on the possibility of a personal bounty. It was also unclear to the judge why a lawyer, rather than the client who paid for the lawyer's work, should be allowed to cash in on the fruits of the earlier litigation.
In the end, the lawyer became the punchline of this joke, at least for now. The court granted defendants' motion to dismiss but gave the lawyer until June 15 to file an amended complaint. Based on the court's opinion, the lawyer has an uphill battle to replead a case that will survive the public disclosure bar. We will continue to monitor the case and report back on any important developments.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.