if a license is available from a third party, we may have to pay
substantial royalties, fees and/or grant cross-licenses to
intellectual property rights for our products; and
redesigning our products or processes so they do not infringe,
which may not be possible or may require substantial monetary
expenditures and time.
We will be obtaining our bupropion SR, zonisamide SR, naltrexone
SR, our finished Contrave and Empatic tablets combining these
components, and our Contrave Titration Packs, Empatic Titration
Packs and bottles used to package these tablets from third-party
manufacturers. Each aspect of product design, formulation,
manufacturing, packaging, and use has the potential to implicate
patent rights. For example, we are currently negotiating with
potential licensors for rights to new formulations of bupropion
SR for commercial purposes that we believe may improve the
intellectual property profile of our Contrave and Empatic
product candidates and avoid potential infringement of
third-party patent rights. In order to secure rights to a new
formulation of bupropion SR, we may choose to pay a combination
of up-front fees, milestone payments
royalties on net sales of products. However, we cannot be
certain that we will be able to enter into a definitive license
agreement on commercially reasonable terms or at all.
Accordingly, we are also developing our own formulation of
bupropion SR that we believe will not infringe third-party
patent rights. If we do not obtain licensed rights to a
bupropion SR formulation or successfully complete the
development of our own formulation, we could be exposed to
potential patent infringement liability from third parties who
hold patents on various formulations of bupropion. In any event,
while we continue to use our existing formulation for clinical
trial purposes, we will need to demonstrate in a small
Phase I trial and additional preclinical studies comparable
bioavailability and bioequivalence of the bupropion SR
formulation used in our clinical trials to the bupropion
formulation we will use commercially. We expect we will be able
to conduct these studies concurrently with our pivotal trials.
No assurance can be given that patents do not exist, have not
been filed, or could not be filed or issued, which contain
claims covering these or other aspects of our products,
technology or methods, as implemented by us or by
manufacturers with whom we contract. Because of the large number
of patents issued and patent applications filed in our field, we
believe there is a risk that third parties may allege they have
patent rights encompassing our products, technology or methods.
Such third-party patent rights, if relevant, could prevent us
from adopting or marketing a particular formulation or product,
or could expose us to patent infringement liability.
we have entered into a settlement agreement designed to prevent
the parties to the agreement from asserting infringement and
other specified claims against our Empatic product candidate in
the United States, if an acceptable settlement of foreign patent
rights cannot be reached, or our efforts to assert patent rights
outside of the Unites States prove unsuccessful, we could be
prevented from marketing and selling our Empatic product in
On June 12, 2004, we jointly filed a lawsuit with Duke,
against Elan Corporation, plc, Elan Pharma International Ltd.
and Elan Pharmaceuticals, Inc., which we refer to collectively
as Elan, Eisai, Inc. and Eisai Co., Ltd., which we refer to
together as Eisai, and Julianne E. Jennings, a former employee
of Elan, in the U.S. District Court for the Middle District
of North Carolina, Durham Division, to resolve a dispute over
rights in an invention relating to the use of zonisamide to
treat obesity. We alleged in this lawsuit that scientists at
Duke made the invention, and that Elan improperly used
information supplied by the Duke scientists to file a U.S.
patent application on the invention, in which Ms. Jennings
(then an Elan product manager) is named as the sole inventor.
This patent application was later assigned by Elan to Eisai.
Duke also filed a U.S. patent application on the invention at
issue, which patent application is exclusively licensed to us.
On December 14, 2006, we, Elan, Eisai, Duke and
Ms. Jennings entered into a settlement agreement to settle
the lawsuit. Upon execution of the settlement agreement, the
lawsuit was dismissed with prejudice.
Under the terms of the settlement agreement, the parties have,
subject to limitations set forth in the agreement, released each
other from all claims and demands arising under the laws of the
United States or any state within the United States
existing as of the date of the settlement agreement that arise
out of or relate to the lawsuit or the specified Duke and Eisai
patent applications. The releases do not apply to the