Williams & Connolly was recognized by GlaxoSmithKline LLC (“GSK”) as “Litigation Law Firm of the Year” for successfully representing GSK in a landmark case regarding a purported breach of the implied covenant of good faith and fair dealing in a Delaware case involving patent licensing. Years ago, GSK settled a patent dispute with another pharmaceutical company in which GSK agreed to pay royalties on sales of one of GSK’s flagship products (Benlysta) as long as one of GSK’s patents remained in effect. After the royalty stream was sold to an investment vehicle called DRIT, and changes in the commercial landscape rendered GSK’s patent less valuable, GSK exercised its right under the contract to “disclaim” (i.e., give up) its patent and terminate royalties to DRIT. DRIT then sued GSK for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court rejected DRIT’s breach of contract theory, finding GSK’s termination of royalties to have been expressly authorized by the agreement, but nonetheless allowed DRIT’s implied covenant claim to reach the jury. At trial, the jury found that GSK’s disclaimer was in bad faith, and the court ordered GSK to pay damages in the form of continued royalties to DRIT as if no disclaimer had occurred.
Facing a damages award likely to exceed $100 million, GSK turned to W&C for representation on appeal. On March 3, 2021, the Delaware Supreme Court ruled unanimously in favor of GSK, holding that the implied covenant of good faith cannot override the exercise of a contractual right. The opinion rejected DRIT’s expansive view of the implied covenant, safeguarding the stability of contracts governed by Delaware law. Partner Lisa Blatt argued the case before the Delaware Supreme Court. Other members of the Williams & Connolly team representing GSK include Sarah Harris, Kim Broecker, and Sumeet Dang.
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