Silbersher v. Valeant Pharmaceuticals International, Inc

Background

This was a private whistleblower lawsuit under the federal False Claims Act and corresponding laws of 28 states and the District of Columbia. Zachary Silbersher alleged that the defendants fraudulently obtained U.S. Patent No. 8,865,688, which covered a method involving the drug Apriso. According to the amended complaint, the patent wrongfully excluded generic competition, allowing the defendants to maintain higher prices. Silbersher alleged that the resulting inflated prices made government payments for Apriso prescriptions false claims.

Silbersher was an attorney who had represented GeneriCo, LLC, in proceedings challenging the patent before the Patent Trial and Appeal Board and the Federal Circuit. He did not allege that he had been an employee or insider of any defendant. The Patent Trial and Appeal Board found the relevant patent claims unpatentable as obvious, and the Federal Circuit later affirmed. The amended complaint relied on the patent proceedings, prior-art references, and other public materials. The United States declined to intervene, and no state or the District of Columbia joined as a plaintiff.

Motions and legal standards

Valeant and Salix moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the complaint did not allege an actionable false claim, was barred by the False Claims Act’s public-disclosure rule, and did not plead fraud with the particularity required by Rule 9(b). Dr. Falk Pharma GmbH joined those arguments and separately challenged personal jurisdiction; the court had previously denied Falk’s personal-jurisdiction motion. Falk also joined the request to stay discovery.

The public-disclosure rule requires dismissal of a False Claims Act claim when substantially the same allegations or transactions were publicly disclosed through specified channels, unless the government opposes dismissal or the relator qualifies as an original source. An original source must either have voluntarily disclosed the information to the government before public disclosure or possess independent knowledge that materially adds to the public information and have provided it to the government before filing.

Public-disclosure rule

The court held that the public-disclosure rule applied. The Patent Trial and Appeal Board proceedings were a federal hearing or proceeding covered by the statutory provision addressing federal reports, hearings, audits, or investigations. The court also concluded that the allegations in Silbersher’s complaint were substantially similar to information disclosed in those proceedings. The complaint’s theory that the defendants withheld prior art and thereby obtained an invalid patent was based on the Patent Trial and Appeal Board’s findings; the additional allegation that the government paid for Apriso was an inference from the publicly disclosed information.

The court separately concluded that the news-media portion of the rule supplied another basis for dismissal. A Law360 article reported the Patent Trial and Appeal Board’s obviousness decision, connected it to Apriso, identified the relevant proceeding, and discussed the prior-art references. The court stated that a public disclosure need not expressly accuse the defendants of fraud if it discloses facts from which fraud can be inferred.

Original-source issue

The court found that Silbersher had not plausibly alleged that he was an original source. His complaint’s assertion that he was an original source was conclusory and unsupported by facts. The court also rejected the argument, raised in opposition to dismissal, that Silbersher qualified because he had disclosed the relevant studies during the patent proceedings while representing GeneriCo. It reasoned that this disclosure occurred as part of his work as GeneriCo’s attorney and was not voluntary disclosure of information for purposes of the statute.

The court further found that Silbersher had not alleged independent information that materially added to the publicly disclosed information. His references to inconsistencies involving the defendants’ patent statements did not adequately show a material addition. The court also found no allegation that he had provided information about the other patents discussed in the complaint to a relevant government agency before filing the lawsuit.

Disposition

Judge James Donato dismissed the corrected first amended complaint’s federal False Claims Act claim under the public-disclosure rule. The court declined to exercise supplemental jurisdiction over the remaining state-law claims after dismissing the federal claim. It declined to decide the defendants’ other arguments for dismissal at that time.

The court stated that amendment might not succeed but could not say it would be futile. It allowed Silbersher to file an amended complaint consistent with the order by June 15, 2020, without adding new claims or parties without prior court approval. The order expressly stated that failure to respond by that deadline would result in dismissal with prejudice under Rule 41(b). The motion to stay discovery was terminated as moot.