Wilmer Cutler Pickering Hale and Dorr is facing the prospect of making $214 million in payments to one of its clients, in what would be an unusually large settlement of a malpractice claim.
Whether Wilmer will be forced to make the payments is still up in the air, depending largely on the outcome of litigation and on legislation moving through Congress. William Perlstein, Wilmer’s co-managing partner, who signed a settlement in February outlining the possible payments to New Jersey-based pharmaceutical company The Medicines Co., said on Tuesday he’s confident it will prove unnecessary.
The amount of money at stake potentially puts the case among the largest public settlements for legal malpractice ever, people who work in the field say.
The malpractice claim has its origins a decade ago, when Wilmer was representing The Medicines Co. in its bid to extend the patent for Angiomax, an anti-blood-clotting drug. The U.S. Patent and Trademark Office ruled that Wilmer lawyers filed the extension application at least a day after a key deadline — a decision that threatened to cost the drug company five years of exclusive drug sales.
In a major win for Wilmer and The Medicines Co., a federal judge last year vacated the patent office’s decision and cleared the way for the patent extension to go forward. If nothing changes, Wilmer is not expected to have to pay the $214 million.
The issue is still alive, though, because one of the drug company’s competitors has appealed to the U.S. Court of Appeals for the Federal Circuit. The case is pending there. (The patent office decided not to appeal.)
The agreement Wilmer signed in February is a contingency in case the Federal Circuit reverses or there’s another unexpected development. So, if a generic version of Angiomax is sold in the United States before June 15, 2015 as a result of the deadline issue, the firm would owe $214 million, $99 million of which would be covered by the firm’s insurance.
Payments from Wilmer itself would be limited to $2.875 million per quarter, the equivalent of $11.5 million a year. (The firm’s profits per partner in 2010 were $1.33 million.)
The settlement has received scant attention since The Medicines Co. mentioned it in February in a news release and in a filing with the U.S. Securities and Exchange Commission. On Tuesday, the Capitol Hill newspaper Roll Call reported on legislation moving through Congress that would codify last year’s ruling in the Eastern District of Virginia — to the financial benefit of Wilmer and of The Medicines Co.
Perlstein said Wilmer will be able to handle the settlement, regardless of how the litigation turns out in the Federal Circuit.
“It is a contingent agreement where we have every expectation that no payment will have to be made. If the payment does need to be made, we will handle it. We take our obligations seriously,” Perlstein said in a phone interview. He added about last year’s decision: “We are confident the court’s decision will be upheld and that the payment obligation will not have to be carried out.”
The relationship is apparently still amicable. The Medicines Co. is still a client of Wilmer, and the drug company never sued the firm over the patent deadline issue. A spokesman for the drug company said on Tuesday that no one was immediately available to answer questions.
The full text of the settlement, which was filed with the SEC, hints at the potential involvement of another large law firm, Ropes & Gray. The settlement agreement expressly does not release Ropes & Gray from “any or all past, present or future claims,” but it does not describe the firm’s role in the dispute. A spokesman for the firm said late Tuesday he had no details to provide.
Wilmer and its professional liability insurer have already agreed to pay The Medicines Co. $18 million as compensation for extra legal costs. A team from Sidley Austin, including Washington partner Peter Keisler, is representing the drug company on appeal.
The language to codify last year’s district court ruling is included in broader legislation to overhaul the nation’s patent system. The legislation passed the full House, and its Senate sponsor, Sen. Patrick Leahy (D-Vt.), is pushing for his colleagues to act on it soon.
Lobbying records show that Wilmer has for several years employed lobbyists to work on the issue of filing deadlines at the Patent and Trademark Office. Most recently, it has employed the Ken Cunningham Group of Alexandria, Va., at a cost of $200,000 during 2010. The Medicines Co. has spent far more.
Nine-figure claims for legal malpractice are rare. According to AON Risk Services, which insures law firms and tracks settlements, the largest publicly reported settlement it has found was for $108 million in 2004 in a case related to the now-defunct Dallas firm Jenkens & Gilchrist. Some settlements do not become public.
Another larger insurer, the Attorneys’ Liability Assurance Society, said in its most recent annual report that its total losses for 2010 on claims related to intellectual property totaled $228.9 million.
Bennett Wasserman, head of the legal malpractice group at New Jersey’s Davis, Saperstein & Salomon, estimated he’s seen “at least a dozen” claims of a size similar to the one between Wilmer and its client. Large malpractice claims are more common in high-stakes areas like intellectual property and mergers and acquisitions, he said.