Yet Another Value Podcast - Valorem Research's Lionel Hutz talks LQDA v. UTHR hearing at the Federal Circuit + argument review

Episode Date: December 11, 2023

Lionel Hutz, Editor of the Valorem Research Newsletter on Substack, joins the podcast today to discuss the Liquidia vs. UTHR hearing at the Federal Circuit that took place on Monday, December 4, 2023. Lionel's LQDA write up: https://www.valoremresearch.com/p/lqda-v-uthr-premium-update Chapters: [0:00] Introduction + Episode sponsor: Alphasense [1:35] What was the $LQDA hearing recently on Monday, December 4, 2023, and Lionel's initial thoughts on the hearing [6:16] Arguments UTHR was drilling down on [10:14] How Lionel thinks of the quality of UTHR's arguments [13:56] Judge performance and thoughts on their performance during the hearing [27:00] Question from Judge for LQDA about dissemination of abstracts / would we have this problem of dissemination if that conference was in 2023 vs 2004 [37:26] Next steps post-hearing: reversal or remanding, if remanding (sending back to the PTAB court) - what is the most likely issue, if reversal - what is the most likely reason [49:02] Odds on outcome of the $LQDA hearing Today's episode is sponsored by: Alphasense This episode is brought to you by AlphaSense, the AI platform behind the world's biggest investment decisions. The right financial intelligence platform can make or break your quarter. AlphaSense is the #1 rated financial research solution by G2. With AI search technology and a library of premium content, you can stay ahead of key macroeconomic trends and accelerate your investment research efforts. AI capabilities, like Smart Synonyms and Sentiment Analysis, provide even deeper industry and company analysis. AlphaSense gives you the tools you need to provide better analysis for you and your clients. As a Yet Another Value Podcast listener, visit alpha-sense.com/fs today to beat FOMO and move faster than the market.

This episode is brought to you by AlphaSense, the AI platform behind the world's biggest investment decisions. The right financial intelligence platform can make or break your quarter. AlphaSense is the number one rated financial research solution by G2. With AI search technology and a library of premium content, you can stay ahead of key macroeconomic trends and accelerate your investment research efforts. AI capabilities like smart synonyms and sentiment analysis provide even deeper industry and company analysis. Alphasense gives you the tools you need, to provide better analysis for you and your clients. As yet another value podcast listener,

visit alpha-sense.com slash FS today to beat FOMO and move faster than the market. That's alpha-dash-sense.com slash FS. All right, hello, welcome to the yet another value podcast. If you like this podcast, we'll out if you could rate, subscribe, review it, wherever you're watching or listening to it. Obviously, five-star helps that's on.

If you're going to do a one-star rating, just get out of here, turn off the podcast and forget about the review. With me today, I'm happy to have one, I think for the fourth time, my friend, the people's great, cartoon guests, Lionel Huss. Lionel, how's it going? It's going great. Glad to be back. How are you doing? Doing great. Hey, before I get to anything, let me start with the disclaimer. I always do. Nothing on this podcast is investing in advice. That's always true. Maybe it particularly true today

because the situation we're going to talk about is pretty binary. It's an heavily legal situation. I am not a lawyer. Ryan is a cartoon lawyer. But, you know, people should just keep in mind the binary nature. This is an investment advice. Please do your own research and consider that risk. Anyway, Lionel, we're having you on today for two reasons. A, you launched a paid substack, add Valerum, substack, ad Valerum, right? Valerum, just the Valerum. Yeah. Valerum research, which I'm going to consider myself a day negative one subscriber, but I am a very happy sub, and I want people to be sure to go check that out if you've enjoyed Lionel's research on. We've done Laquidia. We've done Twitter back in the day. Oh, my God, I missed the Twitter.

better days, but I know you've got a very detailed write-up on the Laquidia hearing we're going to talk about there. So people should absolutely go check that out. But the reason we're having you on today is because Laquidia, we did a podcast a few months ago on Laquidia, you and me, that covered all of the business, the history, everything there. So people can go listen to that for a full background. But on Monday, they had a big hearing that I listened to over the live stream you were in person for. And we kind of wanted to do an update because this hearing is, it's kind of the whole shebang. So I'll pause there. And let's start with this. The hearing on Monday, what was the hearing on Monday?

Yeah, so the hearing on Monday was the Federal Circuit arguments that came out of the PTAB ruling. So it's a patent trial and appeal board. So if you'll recall, you know, we had the parallel litigation between Liquidia and United Therapeutics. One of those litigation matters was happening in district court, federal district court, and one was happening at the patent trial and appeal board, which is basically like the court system. for the U.S. patent and trade office. Liquidia lost the federal district court litigation, at least with respect to this patent that we'll be talking about today, the 793 patents, but they won at the PTAB. What's interesting is both of those litigation matters get appealed to the same place

to go to the federal circuit. And what's perhaps more interesting is, you know, the grounds for each of those decisions was totally different. It's kind of like, you know, you're a kid and like, you know, you want to buy candy and like, go to one parent with one argument and like it doesn't work so you go to the other parent with a different argument that's kind of like what the situation was that we were in both of things got appealed in the federal circuit back in the summer uh the federal circuit upheld the district court ruling of infringement and now this was kind of the the final uh action of all

of this you know related to this 799 patent that liquidity uh was ruled to infringe this is the the final countdown they did this oral argument at the federal circuit And if they win, if the decision from the PTAB is affirmed, they will be commercializing their pulmonary hypertension drug, eutrepia, in 2024. And if they lose, there is an injunction, there's a stay, a regulatory stay that is preventing them from commercializing. And the patent that is an issue has a life out until 2027.

So that's kind of where we stay. Perfect. So, again, liquidity, for our purposes, Liquidia won originally. this is the appeal. Liquidio wins the appeal. The original ruling is upheld. Lequidia will be monetizing their drug likely in 2024. Liquidia loses. The appeal is overturned or it can be remanded to the district court. We can talk about that later. Then liquidity is not monetizing, right? So that's kind of the whole thing. So let's start. I guess just overall, we can dive into the individual opinions and the individual opinions and what each side was arguing in a second. But just overall, what we're, your thoughts on the on the hearing what both sides were arguing first of all it is much nicer to be sitting in this federal circuit hearing as a spectator and not as somebody that actually

has to be prepared to argue so that was fun uh but uh you know look these these litigation matter you know when you get to the federal circuit this is um this this is the kind of top fear of litigation these arguments are super condensed uh so it's 15 minutes per side And so I had written an article, the first article I published on Valorum on, it was last Saturday. And that kind of laid for three arguments that United was making to appeal this ruling. And each of those arguments had two subparts. And so as you can imagine, 15 minutes aside, you know, you don't have a ton of time. You've got to pick your best arguments and argue those.

And so that's exactly what United did. They picked, if you go back to my article, they kind of picked one B largely and then two B. And they argued those in front of a three-panel, a three-judge panel, and Liquidia was defending. Yep, that's great. So let's see, yeah, the 15 minutes was interesting. And, you know, this was the last argument of the day. So as I was listening to the live stream, I was listening to the prior ones. And I was picking up on like, oh, you know, they getting three minutes. for rebuttals and everything. Let's start with, if I remember correctly, it was UTHR went first, if I'm remembering how the trial went correctly. So let's start with what were the arguments

that UTHR was not just making, because again, you covered them in the, we covered them in the first podcast and you covered them in your Saturday post, not just arguments they were making, but which ones did you think they were really drilling down on and trying to win the most on? Well, what's interesting is, you know, they really wanted to talk about the prior art references, the Boswinkle, Jeskinjaja, and they had one sort of, I'm going to call them friendly. Maybe that's the wrong word. But they had one kind of friendly judge on the panel who was entertaining that argument, but actually redirected United's counsel.

Do you just want to say, I know I keep saying referring to the prior finance, do you just want to say what that argument was so people know what we're talking about? Yeah, yeah. So the first argument, one B is whether or not the Bosn-B, Winkle, Jess and Jaha references constitute prior art, whether there's sufficient facts underlying this decision that the PTA made, that these prior art references, well, that these abstracts constitute prior art references, whether they were actually disclosed to the public. So it's all facts around, were these things actually given to members of the public? Was it presented? Did people of ordinary skill in the art have possession of this invention? prior to more than a year prior to United attempting to patent that in other words did they kind of wame this by way of disclosure the second argument that they were really making was that the laws winkle jesskin jaha references themselves um disclosed certain claim elements that would potentially invalidate but they disclose them only in conjunction with another united therapeutics patent this two 12 patent so when you read all of these things together the 212 patent, the Jesk abstract, and the Jaha abstract, is it obvious between those things that you would land on the invention disclosed in the 793 patent? And so the main issue in 2B is whether

or not the information disclosed in Jask and Jaha actually discloses the relevant dosing information, because again, this patent, the 793 patent relates to a method of treatment. of pulmonary hypertension with inhaled troposinil, and part of that method of treatment is in what dose do you deliver this inhaled troposinil? And so the question is, do the Voswinkle, Jess, and Jhaha references actually disclose that dosage level that is claimed in seven nine. Perfect. That's right. And so those are the arguments that, you know, there were UCHR made a bunch of arguments, but those were the two arguments that you felt UCHR was really trying to hammer home and hit the district judge with. Does they able to get 15?

minutes, right? So if they have a list of 100 complaints, you can't go through 100 complaints to 50 minutes. You kind of choose your best to go with them. So that's what you really thought that they were in or not. Yeah. And look, it's not like they waived their other arguments. I mean, I think, you know, you can certainly take a look back at my article that I published last week for for the full rundown. But I think it makes the most sense to talk about, you know, the arguments that they did in fact argue today because that is them signaling to the court, hey, these are our best arguments. This is where there might be any amounts of ambiguity left as far as, you know, our briefing. We want to clear that up. We want to make sure that we kind of bolster this argument

as much as possible because, again, you know, they really only need to win on one of these arguments, right? If it's reversed, then that's it. So, you know, they're kind of going after the gold and making sure that they're putting forward their best foot. And before I ask this question, I want to remind listeners, so the trial was live streamed on YouTube. However, it's live street as audio only, right? So I listened to it, but I was not there. Lionel was there in person. So he obviously hit the audio because he's not deaf and he was there in person. But he could also see the visuals. And you know, if you've ever been in a courtroom, sometimes a judge will say something. And if you're listening, you might think one way. But if you kind of see their face

when they're saying it and see how they're responding, you might take it a different way. So I want people to keep that in mind when I ask Lionel this question. But to Lionel, I want to ask how you received first, I'm going to ask you how you kind of heard the UTHR arguments and everything. And then I'm going to ask you how you thought the judges were responding based on both their questions and the, they're kind of how they were looking. But let's start with how did you kind of think U.S.HR did make you do arguments? Look, I mean, I've kind of gone through the full analysis on like what I think of the quality of the arguments. So I guess, you know, the, the relevant discussion is the quality of the oral advocacy. I can tell you that, um, I can tell you

that between the two sides, I thought Laquidia had a much more coherent kind of level presentation. If you go back to the audio when United's Council is sitting down, Judge Laurie, I've been said, you know, counsel will give you three minutes for rebuttal, and perhaps when you come back up, you can stop yelling at us. You know, United's Council, when you're listening to the audio, the attorneys are much louder than the judges just because of the microphone placement and the judges are a little bit soft-spoken anyway, but it was hard to tell just from the audio only just how enthusiastic, I'm going to say, United's Council was. I mean, I can only say I am passionate when I see injustice and that's why I'm talking

too loud, which as a loud talker can be passionate, you know what? I've got a little soft spot for that argument. Yeah, look, I get it. I'm not trying to, you know, say that I've never ever been there, but that, you know, look, I was, I was looking at the back of his head, right? Because I'm looking at the faces of the judges. And, you know, you could tell, like, his neck was getting red. He was kind of overheating a little bit. And I don't need to pick on him at all, but, like, you know, with that comment that Judge Laurie made, it was, it was very clear that, you know, the oral advocacy itself was was a little bit alarming to them. I mean, Judge Prost, who didn't actually ask any questions of counsel, was almost like pressing back in her seat, kind of like, you know, trying to get away from the noise a little bit.

So that was a little bit funny, but that's, you know, that is not necessarily indicative of the quality of the arguments. I did think, though, that from a quality perspective, I mean, look, I've given my analysis, I think that what, what United is arguing is a little bit of a stretch. I think in places they are maybe a little bit insincere with how they have characterized the level of support. But again, you know, look, we all know what's at stake here, and we know how much United is making every single day that Eutropia is not on the market. So it's not tremendously surprising. And I don't think there are arguments that are in bad faith or frivolous, but they're maybe not always the most sincere. And now a quick break to remind you that this episode is brought to exclusively by Alpha Sense, the AI platform behind the world,

biggest investment decisions. Alpha Sense gives you the tools you need to provide better analysis for you and your clients. As yet another value podcast listener, visit alpha dash sense.com slash FS today to beat FOMO and move faster than the market. That's alpha dash sense.com slash FS. Let me, there's two questions. And again, this is a podcast to you because if you, if you haven't followed this case really closely, like again, we're not going to go through all the arguments because you wrote them down. We did a full podcast on them. Like, we would just be recreated that podcast. But this is, again, this hearing is the whole shebang. So if you're, you've been following that this is a very important thing. There's two questions I'm going to ask.

Hey, at, again, I want to focus on what the judges were doing because there, anybody who's been listening to JetBlue Spirit knows, like, there is one judge. He makes the ruling and that ruling kind of determines everything. Obviously, you can appeal and stuff. But, you know, it's a one man show. Here, you have a panel of three judges. They make the ruling. So it's kind of a three-man show and how they're questioning, how they're responding is kind of the most word thing. So there's two questions I want to do. The third was going to be that can you stop shouting me? But the first, at one point, one of the judges asked, I believe it was UTHR or something, that it seemed like it was very supportive of UTHR, but I couldn't really catch what they said.

They were maybe too far away from the mic, maybe it was just live screen. Do you remember, did you hear that question or do you kind of know what they were getting at when they asked that question. Well, if it was anything that was supportive of United, then it probably came for Judge Raina. So I guess let me take a step back and just say, so the three judges on this panel were Judge Proust, Judge Lorry and Judge Rana. They are all veterans of the court. None of them is like, you know, a newbie. They didn't slap me on the court and be like, hey, go figure out an law, Andrew. Yeah, well, I say that because after the procedure, the way this thing goes is after the oral arguments, they go back to chambers and the most junior judge

speaks first and gives their analysis. And they do that as sort of like this deference to make sure that junior judges don't just latch on to more senior judges. I actually, I should have looked this up before this. I don't know which of them is the most junior because none of them are particularly junior. So I don't think it really matters. But anyway, so I say this because, so Judge Prost didn't ask any questions of counsel. She was on the left. Judge Laurie was in the center. He was the one who, if you're listening to the audio, asked the questions that were most favorable to liquidity. He was asking a lot of questions like counsel. So this is just, you're just trying to like double patent here, right? Like, you're just trying to get,

you had this two 12 patents and then you just made these tiny little incremental changes. Now you're trying to get additional coverage. That was Judge Laurie speaking. And then Judge Ringner was the one who was asking the questions that were most favorable to United. So he was saying the things like, you know, you didn't have a declarant who, who actually certified that they received this copy of this after there were 20,000 attendees. Couldn't get a damn warm. Like, that's insane.

I mean, he didn't say that's insane, but that was kind of the tone. That was Judge Raina. He is historically the most patentee friendly judge of all of them. So it was not surprising that it came from him. So he asked that question about, do you have a declarant? So that relates to the argument 1B, were these references distributed? Was the underlying evidence sufficient to establish a theater disclosed?

And then he also at one point kind of redirected United's counsel to talk about 2B, where he said, look, I'm more concerned about, and I think he literally said, I'm more concerned about it. He said, I'm more concerned about this argument that the Voswingle references don't disclose the claimed limitations. and that relates to the dosage that we refer to. So those are the three judges. That's kind of, you know, the general, you know, tone of the court. Prostin and Lorry are not patentee unfriendly. In other words, unfriendly to United, but they're certainly less friendly to patentees than Rana.

Rana is kind of like, if you got a patent, if the USPVO gave you a patent, surely they must have done something right surely you know you are entitled to some amount of monopoly coverage on your right to exclude in this field so uh raida is the one that was was largely favorable to a few people who listened you know obviously i talked to a lot of people who are around this case said hey look if you listen to the case and if you look at their histories i think based of the question it's clear that lori is probably going to rule in favor of liquidity Yep. Raina is probably going to rule in favor of UCHR, and then the whole thing will come down to Prost is the third judge, right? So the whole thing will come down to Prost. Would you agree

with people who were kind of saying that? I think that's fair. I mean, so first of all, dissents of the federal circuit are kind of this like hot topic, contentious issue. So dissents are allowed. You wouldn't see a dissent in like a Rule 36 because a Rule 36 would just be, you know, everyone saying, yep, we agree, rubber stamp it, move on. You can't, you know, But there are dissents. That being said, if you see an opinion that doesn't have a dissent, it is a, it's a group decision. One judge will draft it, but it's really a great effort.

So it's not necessarily accurate to say, oh, this was a Judge Lorry decision or this was a pro's decision or whatever. But that characterization in terms of like the slant that, you know, Rana is probably leaning more united. Lori is leaning more Liquidia. And what makes it the most interesting is, you know, Prost didn't ask any questions, right?

So it's like we didn't really get a ton from her in this hearing, although, you know, we got a little bit of body language. And then, you know, we do have her historical precedent to look at. And there's a little bit about, I mean, we can talk about, you know, specific cases that she's, you know, been involved in and where she's had dissenting opinions,

where you know that it is actually her opinion, Because if it's not a dissent, if it's just her issuing the opinion, you don't really know is, you know, did she just drafted or did, you know, are these mostly her original thoughts? So anyway, happy to go wherever you want to. Let's focus on her for now. So I want to talk her body language and I want to talk her historical things. But let me ask before we even get to her body language. There were two cases heard before this. One of them was the one right before this was Google versus someone. I can't remember who, but I made a note in my things to ask you. I thought, the Google lawyer in that case. He had to sound like Saul Bidman, which I thought was kind of funny. I don't know if that's I don't know what he looked like. Just to me, he sounded like Saul Goodman. You didn't look like Sal Goodman. That is the that's a name partner at was it, Kecker Van Nest. It's like Bob Van Nest. He is a seasoned

litigator, truly seasoned in every sense of the word. The guy's a pro. Hey, and sounding like Saul Goodman, like is Saul Goodman, you know, he can talk his way out anything. It's not a bad thing. But anyway, The two trials before, the reason I was asking is Judge Raina was the woman who's kind of the third, the swing vote if I laid that up. Bruce, I'm sorry, Chris. She talked a lot during the prior two trials.

That's mine. And then she didn't talk at all during the liquidity thing. So I'm going to ask you about her in a second, but I just want to ask, why didn't she talk a lot during the liquidity? And she was talking a lot during the other two? Did she have a more senior role of the other two cases? Or was that just the way the cooking crumbles, I guess? So I'm speculating, but I will say, I have seen other speculation that it said, yeah, maybe she just wasn't prepared. Maybe she just didn't have time to prep up.

Knowing what I know about Judge Proz, that is wrong. I am confident that's wrong. She is always prepared. The very first case was this case, it was a whole issue around statutory standing or constitutional standing. And whether in Michigan or Texas, if you have you up, I remember. Wisconsin, yeah, yeah. It was, it is such a thorny issue and nuance. and she was all over it, right?

Like she was, you know, bringing up cases that were decided 20 years ago. She's bringing up, you know, her own decisions, all their, you know. She knows this stuff like the back of her hand. And I think that kind of a related point, like she's a public servant. Like her whole career, to my knowledge, has been in public service. I think she was like chief counsel to maybe like a senator or something. But she's always been, you know, in public service. And she cares a lot about the process of law, kind of in the same way to we talk about, you know, Judge Young with JetBlue and Spirit.

I mean, one of the things that she has been really instrumental in cultivating is this age of, like, lower amounts of dissent. Like she wants to move toward queer rules where there's less room for dissent, where people have more predictable out. outcomes. And she has been incredibly instrumental in, for example, I don't know if you're familiar with the Alice decision. It was a 2014 Supreme Court decision that is about patentability. It's about section 101, 35 U.S.C. 101. And, you know, we can get into kind of like the case lineage and why that might matter here in terms of cases that came later. But she was instrumental in coming up with the framework that would later be blessed by the Supreme Court. It was a case that went up to the federal circuit, she issued a dissenting opinion. She was essentially overruled. It went to

the Supreme Court. The Supreme Court kicked it back down, came back to her. And then she set forth this framework that was later adopted and kind of gave everyone clarity on what patentability really is. And so she cares a lot about process. She cares a lot about making sure rules are clear and people have predictable litigation outcomes. And, you know, I don't know totally where I was going with that, but a little bit of a background. Well, I don't think she, she was so, like she's so vocal in the prior to cases and then she didn't say anything in this case. Yeah, I guess I can't say with certainty. I think she probably understands that she's the swing boat here. You know, she, Judge Raina is known as the patentee friendly guy

and Lori less so. So she probably understands that she doesn't want to necessarily give anything away. She's also probably just trying to listen. You know, I think these arguments are not particularly complex to understand. They're complex in that evidence is a little bit complex and the procedural history here is complex because we had this kind of like dual ruling from the PTAB and it's messy and that's like why it was interesting to invest in from the first place because it was just like

such a poor hack job by the ALJs of the PTAB. But I think she understands that she's kind of the swing vote and she was just being respectful and trying to appreciate the full scale of both sides. What would you say her body language was and did you pick up like, you know, I've certainly seen it for and it's not like I've spent crazy amounts of this time of court, but you know, where if somebody says something and you can almost see the look of her on a judge's face for like, oh, that was terrible or ooh, that wasn't really, did you pick up on any body language or her responding to any commentary by either side? It was a little tough because she had like, I don't want to call like a sour expression on her face, but like if there was any hint of anything, it's like a little bit of a sour expression. And she was kind of like pressing herself back in her seat a little. that when United's counsel was speaking, just because he really was, like, shouting at the judges. And so the problem with picking out signal from that noise is that was going on the entire time, right?

She was, you know, so you're trying to pick up like, oh, did she appreciate this argument or not, you know, did she, was she thinking she was going to be critical of this? And because she was, I think, so taken aback by just the volume in the room, it was a little bit hard to get noise or her signal out of all of that. noise, but that literal noise. But I think, you know, my impression was that, you know, Liquidia's counsel simply did a better job arguing their case. And I think they have a bit more of a straightforward case. They did do one thing, which I thought was surprising, which was they stated that these abstract in evidence were in fact the abstract books.

And we can talk about that argument and why that's kind of a new thing and a little bit surprising to me. But on the whole, Liquidio's argument is fairly straightforward. It's fairly simple. And of course, they have the benefit of the burden of proof here, that they have the lower court ruling. And so we're reviewing these decisions for substantial evidence larger. There's arguments they make that are reviewed de novo, but these two things, one A and one B or one B and two B, sorry, are substantial evidence standards. We can talk to books in a second, but I think this would be the part for anyone to be like, didn't listeners trying to catch up, this would probably be the

question. And as a non-season court listener, this was the question I had. The judge who I would say was more in favor of UTHR, I can't remember which one, Raina, I believe. Lori, yeah. At one point, during the liquidity brief, said, hey, and you started to allude to it, said, hey, liquidity, like, look, basically your argument is in 2004, the UTHR head researcher went to a conference and presented all of these findings. And then, you know, 15 months later, they tried to patent these findings. And because they presented and did an ad tract at this conference and they did it more than a year prior to the patent, the patent is invalid. You know, it was already common knowledge at that point. And the conference was 20,000 people. It was dock viewers. It was people, you know,

people of subject matter expertise or actually I remember what is teachable of ordinary skill. There you go. Yeah. It was 20,000 people of ordinary skill. So that validates it. And And, you know, Liquidia's got the journals and the libraries. And my favorite line from the original thing was, you know, you, H.R. hired an expert and the expert's very cease. But you, sir, are no librarian, which just sticks in my mind all the time. Anyway, the judge who's most friendly to the HR asked liquidity and said, hey, look, you've got all this evidence. You're pointing to abstracts.

You're pointing to library articles. That's great. There were 20,000 people at a conference. And you don't have a single person who is willing to declare. that they were at this conference and that they received this abstract. Because if you had one person who could declare that, clearly this was done more than a year before the ad. Instead, you kind of backdoor all these ways.

You know, you say this library has a file that they had this reference and this library has a screenshot of this reference. But you just don't have a single person who can say, I was there. I got it. 20,000 people. And I think they kind of said, come on. Doesn't that, how does that even fall into, like, reasonableness? So I want to ask you, what did you take away from that question?

And what was Likwitya's response? Well, you did a great job of summarizing it. You know, I think the takeaway, so that came through Judge Rana, who is, you know, patentee friendly. And one of the things that he said when, you know, Liquidius' first response, the Liquidius Council said, well, a declaration isn't necessary. And he was about to continue. And Judge Raina said, well, I know it's not necessary. You're right about that.

But that is a tension. And that's the exact quote. He said, there is a tension. And what he's referring to is kind of a tension in the case law, where there's currently case law that says circumstantial evidence of dissemination is sufficient. But the tension is like at what level is sufficient? And there's not perfect clarity. The case that's sorting set forth, this whole idea that circumstantial evidence,

evidence could work is a case called Enri Klopfenstein. It was, I think, about a case where, you know, there was like a publication that was in a German library and it was like only in German and it's like, all right, well, it's publicly accessible, but like not the people in the U.S. and it's in German. So like, this really counts. And so anyway, the decision is all about like what really counts as evidence of public dissemination. And it's important to note that, you know, liquidity is absolutely right. You don't need a declarant. the problem is, you know, the case law that we have where they've said you don't need to declare are typically smaller conferences. And so, you know, Judge Rainer was like, geez, we've got 20,000

people here. Like, that's so many people. But this is where, you know, it's worth kind of getting a little bit deep into some of the case law because we don't have a case that's perfectly on point in the federal circuit. But there actually is a case that's pretty darn on point that came out of the district in Delaware. And the kings that came under the district, of Delaware said where there are these indicia of dissemination, where the abstract has things like the room in which the presentation was going on and it's got a date and time so that people can show up to the conference, all these other things. That is sufficient to constitute evidence of dissemination. And it does not need to be corroborated by any

declaration. And in fact, the case that United cites, this Norian case in their briefing that says, you know, that they say supports their idea that, you know, not having a declarant is not substantial evidence. The case that they point you, if you look, if you go back in the case law and look at the ruling on the 50B motion, which is the judgment as a matter of law that happens after a trial, the judge in that case said that this type of abstract booklet that might be ended out at a conference is quote, too casual a dissemination

to expect to have years later. I think in that case it was something like six years later. We're talking about almost 20 years later. This was a 2004 conference. So, yes, things, 20,000 people, but like, I mean, are you telling me that you would hang on to a

piece of paper, you know, that just contained abstract and contained the full journal articles? You're going to this. conference you know you're an expert in the art you're like i'm a doctor if i really care about in these presentations i already subscribe to the to the you know journal the american artist's i'm getting that full thing in a link i'm getting you know all the details later i can go talk to this uh presenter or you the doctor i can go to always say this is the age of the internet now

i can probably look it up later like are you really going to hang on to a piece of paper for 20 years and and you know the pushback on that is well you could have gotten a declarant to just say say they did receive it. You don't actually need to produce it. You could have gotten a declarant to say, yes, I remember receiving it. But even that is tough to remember 20 years later. And again, the Kings law would say that it's not necessary to corroborate. Now, my caveat with all of that is that the District of Delaware is not binding on the Federal Circuit. Typically, you only cite Federal Circuit case law in the Federal Circuit. But not all District Court case law is created equal. And you have to look at which district courts are actually hearing

patent cases. And among the patent hearing courts out there, District of Delaware is at the top. It's District of Delaware. And then I would probably say Eastern District of Texas and Northern District of California, maybe then Northern District of Illinois. But like, the important thing is at the top is the District of Delaware. And when we remember that we're reviewing all of this for substantial evidence. And the substantial evidence standard means that a reasonable person might have come to the conclusion that the lower court came to. Not that they would have come to the same conclusion as the lower court, that they might add. That will suffice. That will meet the standard. Well, I think the district of Delaware is pretty damn reasonable, particularly the judge that presided

over that case that I mentioned. She was, you know, a patent expert wrote all sorts of patent rules. I mean, it's hard to say that that's not a reasonable judicial opinion to kind of, maybe not set precedent, but at least instruct and inform what the president might be here. Can I just, what, there was a great summary. Can I ask just one more question? So you mentioned, look, this thing is 20 years ago. And I do think if you ever listen to the podcast serial, they have this great hook for the first season where they're like, hey, can you tell us what you did like last Thursday. And nobody can't remember, right? I can't remember what I did last Thursday.

And they say, okay, now I'll try and tell us what you did like four weeks ago. And they say, hey, this kid couldn't remember what a school day went. Very interesting. But I do think about that where, you know, you go to a document and say, hey, can you remember this conference 20 years ago if you got this presentation? And if I were talking about, what the point? But you know, I do see something to it's 20,000 people. And, you know, I think about I've got a few friends who love baseball and, you know, they clip every box score and something. And so I've got a few friends like, my wife actually, she still has a lot of her OT notes.

from college and grad school. And I'm always like, hey, do you need those? We haven't opened the box that they're in in five years and they're taking up a lot of space. She's like, yes, I need those. Yes, we can't throw away. They're very valuable. And I'm like, okay, you know, with 20,000 people like, there has to be one doctor there who like, is kind of, you know, we're reticentous like that.

But remember, are you, you know, we're litigating this year later. You're going to have to go back and interview people that were there and say, hey, I know you were there. Can you tell me who your most anal retentant colleague was who was also there? Who was the most pedantic, nipicky, you know, son of a gun that was in that conference? And can you put me in contact with him so that he can sign a declaration, which is perjury if it's not true. That's what I was going to ask. Like, how could you get somebody?

Because it's perjury. Like, is there any incestive or too high? If I'm a doctor, I mean, you hear these stories about doctors, you know, somebody's like, you know, choking on a plane and they're like, not my problem. Like, I can lose my license, you know? Like, most people help, but like, whatever, you hear these stories. You think a doctor is going to, like, put their license at risk by what? way of burgeoning themselves in a case that has nothing to do with them. They have no stake in this case. Why, the cost is huge, the potential risk is huge and the benefit is zero.

Two follow questions. This, it's also important to remember this is in 2004. So this is like right before things really start getting hitting the digital age, right? So if this same situation happened today, right, and we're litigating it five years for now, my two questions would be, first, let's see it happen today, and we're litigating it a year from now for some reason. I don't think patents would work. But would it be more reasonable for a judge to say, hey, you know, we're in court in 2024. The trial happened in 2023. Find me one doctor who would certify this. Or even there, would the standard kind of be using the abstract is fine. So I guess what my kind of pushback would be. I think because everything is so digitized,

there would probably just be better records of the decision. That was going to be my second question. Today is everything so digitized? We wouldn't have this problem. just didn't imagine that like all these types of issues of like publication story and some abstract you know same crazy library out in the middle of nowhere like yeah those are kind of old school issues and I suspect we'll see a lot less of them in in the future I'm laughing because just in my list of questions my next the next thing I had written was can you stop shouting at me which we've already done but I was just about say can you stop shouting at you I didn't stop shouting at you I did excited about this stuff too I'm probably been shouting at

you well so but I want to wrap this up by talking next steps and then overall thoughts, but let's do this. First, again, there was a lot, you know, I thought liquidity did a good job. There were a few questions where they said, hey, why couldn't you produce this? And the liquidity extra was really in top of them. Actually, we did reduce that. Refer to like appendix 2738 B.D. Part 82 or something I thought was in true. But was there any points that either side made that you were particularly impressed by or particularly like kind of you struck a, it struck a chord with you? Well, I think that argument in particular, that was the first time that liquidity has actually stated that some of the versions of the

abstracts in the record were these quote abstract books. And the reason we can talk about, you know, my kind of assessment of remand and why that might be a risk, but like that is the first time that they have used that description that things are abstract books in all of the briefing. And in fact, in the PTAB's final written decision, they say things like these were abstracts published in the, you know, the respective journals, and Jessica and the aha journals. and prevent it at this kind of. But they say these abstracts were the one published in these journals.

And so they don't actually say these are the abstract booklets that were actually handed out to attendees. Now, there's some of the circumstantial evidence like they refer to these rings and there's an advertisement for a drug in one of them. So it's like why, you know, this is the type of stuff that goes into like a, you know, a publication that actually gets distributed to people at a conference who might be, you know, you know, the ones who are like, oh, I'm going to prescribe, you know, whatever it is, you know, when my pension comes in next with this issue. I mean, there are circumstantial evidence, but it was the first time that Liquidia actually stated these are the abstract books, which diverged a little bit from what they've said previously, and that's what makes me a little bit nervous.

They're not wrong, and I think the circumstantial evidence supports it. But the problem is the PTAB's final written decision doesn't actually say, doesn't confirm that. And so my concern is that the federal circuit might, just might, send this thing back down for clarification as to whether or not this was an abstract book. And they could also do it on the 2B argument. But that one in particular makes me a little nervous. That brings me nice, that brings us nicely to my next question. So just as we start to wrap this up, I believe the next sets are, right? I think there are four past this could go. You could get Rule 36, which I think is

the, and you just I'll ramble and then you just correct everything I say wrong. Rule 36, it could come any day and the judges would just say, Liquidia wins, right. There could be an affirmance, which would likely come in the next two months, call it, which would be the judges saying

liquidity wins, affirm the patent board trial. There could be an overturn where the judges say, hey, actually the PTAB board was wrong. UCHR should have won and liquidity flat loses there. And then there could be a remander remanding which is hey send it back to the ptab board you know their ruling was fine but

we have issue with this piece the ptab board meets to think this piece through and then the putty would probably win again but you know we'd probably go through a whole new trial and we're talking a year or two extra so i'll pause there did i get the four steps correct correct anything i'm wrong correct if there's a fifth step just correct walk me through the four steps that we could see yeah so nothing to really add on the remand or the reversal that's that's uh spot on. Within the potential ways it can be affirmed, there's really three. There's the rule 36, which I think is very unlikely, or I should say, not that likely. That would be like, could come today. It could come before this podcast post. And then if we post this podcast and people are popping

champagne bottles and listen to it as a certain. I hope that happens. But, but yeah, I can explain why I think that's unlikely in just a second. And then on the two types of affirming opinions, You can have a non-precedential opinion, which would be a, it's limited to like five pages. It's shorter and typically comes out a little faster. Or there could be precedential opinion, which is like the full-blown opinions that, you know, you see in like your legal case, your textbooks in law school. And that could be a little bit longer. I don't, I don't suspect, I mean, there's a world where they feel like this prior art issue and dissemination.

warrants a precedential opinion. I really doubt it. I don't think there's really enough meat on this bone to call anything here presidential. I think it's more likely to see a non-precedential five-page opinion. Among the affirmance worlds, I think, you know, that is the most likely. The Rule 36th, it's been going around on Twitter a lot. A lot of people think it's like, you know, 50% chance of happening. Statistically, it does happen approximately 50% of the time of affirmances, or maybe like,

I think it's maybe like a third, a third to third between Rule 36 affirmance and precedential. But you have to look at what types of paces those are. And it's actually, it's a little less common for affirming key tab decisions of invalidity. And the reason for that is that there are two statutes. It's still for anyone who's super interested. It's 35 USC section 144 or 15 USC section 1071A4. And those basically create what a lot of. lot of people would say it's a mandate for the federal circuit to issue a full opinion for decisions

coming out of the P-Town. And for decisions where an invalidation is the ultimate ruling, it gives a lot of people a lot of hellburn to see Rule 36 affirmances. And a lot of people want that to completely go away. And so I think it's a little less likely that we see that because of what type of case we're looking at here. If we, so that was great. So affirmance, remander, affirmance, reversal, or remanding, if we see a remanding, so sending this back to the PTAP court, what do you think the most likely issue is we would see the, the judges say, hey, PTAP, we just need you to lay out her work a little further on this

issue, so we're remanding it. Yeah, I think they might say, hey, we need you to decide, are these abstracts that are in the record, are these, in fact, the abstract books, you know, show your work. either say they are the abstract books or say they are not the abstract books, but there is sufficient circumstantial evidence to justify your decision. I mean, if you recall back the very first podcast that you and I did, you know, I think I said something like the ground that they laid forth. They said, you know, oh, liquidity makes this argument that these these preferences are in libraries, but that's not all they do. And then they go to the next thing. And they like didn't

really say like, well, but what about that first argument? Like, is it good enough? Is it? And that's like why we were interested in this in the first place is because, you know, there was this ambiguity here. And unfortunately, when they, you know, they asked the, when United asked the press central opinion panel to review this and they kicked it back and, you know, the final decision was reissued. They really didn't correct everything. They corrected this research aid argument, but they didn't correct these other things or didn't elaborate. So it just, you know, it's unfortunate. But at the same time, you know, these judges at the PTAB or ALJ administrative law judges. They are not professional judges. These are

like academics or practitioners. And I think the federal circuit largely knows that and largely wants to defer to the PTAB because, you know, this is this is the agency that granted the patent. If that agency wants to take it away, it should kind of be their decision. If that's great, and we'll get into odds in a second, but if this is reverse, right? So UCHR wins, the patent is a Pell. What do you think the most likely route it would get reversed on, right? Because you can reverse on any of the multiple different issues, but what issue do you think would be most likely? Yeah, I think it's this to be arguments of dosing. I think it's really unlike. I mean, my odds, I think, I find it less likely

that we get a reversal and more likely that we get a remand approximately in kind of commensurate scope. So like my negative outcomes for liquidity are I think percentage wise are approximately the same, but just, you know, comprise the different constituents between. remand and reversal. But, you know, there's a world where they say, look, this testimony from doctors, Gonda, and Hill was insufficient to establish

that the Voswinkle reference in which disclosed concentrations of this active ingrediential plant, that doesn't actually tell you how much of the medication was delivered into the lungs of a patient. And And so it would not have been obvious to some view of skill in the art, seeing a concentration or whatever was 16 micrograms per milliliter or whatever.

It wouldn't have been obvious to something, looking at that, to say, hey, we know what the ultimate absolute value of dosages would be that the 793 has now claimed. So we have to reverse because, in fact, you fail the 103 to. You fail obvious. It's not obvious to a person's ordinary skill in the heart. And, you know, Dr. Gonda and Dr. Hill, their stigments are a little bit conclusory. I mean, they kind of say, hey, more doctors know about this stuff. But they're not like, I don't know, Lewetics engineers or whatever, right?

So it's like, you know, you do hope your doctor knows how much of an active ingredient is actually getting delivered into your lungs. But at the same time, like, there aren't the guys who are, you know, inventing inhalers. And so there's a little bit of a question, a little bit of attention. It's like, are these guys really the right people to testify that they know what quantity of this stuff gets delivered in your own? And now a quick break to remind you that this episode is brought to you exclusively by AlphaSense, the AI platform behind the world's biggest investment decisions. AlphaSense gives you the tools you need to provide better analysis for you and your clients. As yet another value podcast listener, visit Alpha-Sense.com slash FS today to beat FOMO and move fast.

than the market. That's alpha-sense.com slash fs. Would I be wrong? And it's really hard for a non-employer who doesn't have tons of patent familiar. Like these trials go fast, right? It's 15 minutes each side. They're recent through it. But would I be wrong when I told you, hey, I think both Liquidia and UTHR focus more on the on the issue of prior art and if the 2004 conference if it was disclosed versus this issue of dosage, which I think to me suggests. both sides think that's where the real sticking ground is. I'm not saying UCHR didn't focus on the dosage,

but I think if it was 15 minutes, I'd say they spent like 45 seconds or a minute of it. This is from memory, but would I be wrong in that or was I misremembering? I mean, I think you're spot on. And, you know, Judge Raina kind of led United's counsel to that 2B dosing argument because I think he was like, I've heard enough.

I kind of get it. But certainly United's Council had he been left to his own devices. I think would have probably talked about that issue for, you know, six or seven minutes. So, like, I think it was that, you know, significant to him. And but for Judge Raina will be gone a lot longer. Perfect. Last question.

Let's talk odds. Again, now, financial advice. I am not a lawyer. But just, you know, if I gave you three routes and the three routes are affirmed in some way, shape, or form, reversed or remanded, what would you just kind of lay out the rough odds here? Yeah, I mean, I kind of wrote in my article and, you know, their ballpark, so all you can see, you know, ballpark numbers that may or may not be exactly identical. But, you know, I'd say 80, 85% chance there are for me. I do think Judge Prost is, is largely kind of in support of the liquidity position. I would put the remand odds at maybe 10-ish percent. You know, one out of every 10 of these decisions might get kicked back down. and then I don't know by 10% tops whatever's left for a reversal

I don't I think the reversal is a little least And I know you had done this for previously what is the base rate like if I ignored this as liquidity versus UTR UCHR I just said hey there was a decision at the PTAB it's up at the it's up at the court what are the base rates of a formal reversal

and remanding Yeah I wish I I wish what I said was vastly different than what I'm about to say so that I sound it's larger but the affirming, the rate at which cases are affirmed out of the PTAB, these invalidity rulings is about 85%. Okay. So I think it's, you know, about as good of odds as you kind of typically get here. Well, you could get better, right?

Because I guess the court. I'm saying, yeah, it's in line with, you know, averages. Yeah, I guess the court could have rejected a bunch of appeals, right? Just in like there's no grounds for appeals reject or this stupid. But yeah, it's just a little surprised to me because, haven't talked to you, haven't talked to you, haven't talked to your court watchers, I feel like people are telling me, and again, I am not a lawyer. I think this is a good case having read it on my own, but I am not a lawyer. I have to, but I feel like a lot of the people I've talked to and just listen to you feel like this is a better than average appeal case. I'm just surprised that you're kind of with the base rates, but the base rates are very high already. So yeah, look, I think I was, you know, higher than base rate historically. I think, you know, there's just this chance that like United has, has like, created enough confusion. to warrant a remand. I don't think they have a strong case.

I think, you know, if I'm, you know, truly being intellectually honest, it probably is a better than average case. But I think just because of the insufficiency, I think Laquity has a good case. I think it has better than average case. But the ALJs, the panel they got at the PTAB, were worse than average ALJs. And I think that's where the tension really comes from.

And again, it's why it made it interesting because you're like, man, they've got this great case. and there's this huge potential spread on what I can make here. But, you know, ALJ is that they're not professional judges. You kind of, you know, play the hand you're dealt. Well, I don't, I thought we were going to have a quick 30-minute update pod. I was like, man, you know, but here we are. It was a 30-minute hearing and we just filled an hour-long podcast, breaking it down.

I feel like the- I could continue talking to. There's so much here, but I know. I love listening to the binge mode podcast. You know, they break down like Marvel TV shows, and they'll do a Marvel TV show that's 40 minutes, and they'll do a two-and-a-hour-long podcast. on it. I feel like we just did that. But look, I appreciate you coming on. Again, I'm going to pitch Ballorum. I was a day negative one subscriber. I think it's going to be great. I'm really excited for you to really focus on the special situation research. I can't wait. And I am excited

because sometime in the next week, JetBlue and the government will file their post-closing trial briefs. And you and I are going to do an emergency podcast within 24 hours or so. So Lionel, brush up on your Baker Hughes precedent, brush up on step one, two, and three. We're We're going to break everything down. I'm excited for that. I think that's going to be a screamer, but appreciate it. Everybody should go give Blairham a look and looking for us talk to you next week. Thank you so much. Great. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.