“In your experience, studying pharmaceutical companies and their revenues, is that rate of return one that a company would consider commercially successful?”
“In this business, making any positive rate of return on research and development is considered commercial success. Remember, only three out of ten prescription drugs in this country even pay back their research and development costs. So a twenty-two to twenty-six percent return is a great success.”
Palmieri tapped a key and a pie chart came up, each slice of a different size and color. Numbers and dollar signs were inside each segment. Seeley had found the chart buried in an appendix to Chaikovsky's expert's report, and instructed Palmieri to include it in his slide show. If Seeley was right, the chart would be as important to the jury as any of the others; probably more important.
“Can you tell the jury what this chart represents?”
“This is the same estimate of revenues that Vaxtek will earn from sales of AV/AS over the life of its patent, but each segment represents a different country or region of the world.”
“Why did you slice up the world this way?”
“Because the revenues from each region will differ.”
“Because of different population size?”
“In part. But the big difference is the amount Vaxtek will be able to charge for AV/AS in each region. If you look at the red segment at the top, that's the United States, where they will be able to charge around two hundred and fifty dollars for each inoculation. But if you look at the big yellow segment at the bottom, that's sub-Saharan Africa, and the average price there is forty-five dollars, less than one-fifth of what they can charge in the States-and that's only with subsidies from governments and foundations.”
From the first day of the trial, Seeley was concerned about the impact on the jury of the protesters outside, and he instructed Palmieri to include the slide to let the jurors know that, in voting to uphold the patent, they would not be pricing Cordier's patients in Lesotho out of the market. Still, when he first saw Chaikovsky's chart, he was surprised that the African price was $45 and not $15 as Leonard had told him it would be.
“Does this mean Vaxtek will lose money on its sales in Africa?”
“No, they won't be losing money on individual sales. But…”
“But?”
“If forty-five dollars per inoculation is all they could charge around the world, they'd never make back what they invested in discovering and developing AV/AS.”
Palmieri cocked his head at the screen, as if something there puzzled him. “What would happen to prices in the United States if distributors in South Africa, say, who are buying AV/AS for forty-five dollars a dose, start exporting it to the States. How could Vaxtek maintain the two hundred and fifty dollar U. S. price, if it has to compete in this country with vaccine one-fifth the price?”
Chaikovsky's smug smile widened into a grin. “That's what the U. S. patent is for, isn't it? To keep out lower-priced drugs from other countries.”
Palmieri grinned, too. “In the courtroom, Professor, I get to ask the questions, and you get to answer them.”
The give and take was perfect, but it didn't calm Seeley's concerns about the young partner. He could write off Palmieri's coolness in their early encounters to the jitters of dealing with a new first chair. But the negligence with the motion papers and his witness's lodging was harder to dismiss. So was his continued resistance to Seeley's direction, like insisting that they keep Steinhardt as the lead witness, even though Pearsall himself had wanted to place him lower in the order. If Palmieri wasn't exactly working to undermine Seeley's case, he didn't seem to be enthusiastically supporting it, either.
Chaikovsky said, “I was assuming when I made these charts that Vaxtek's patent would be upheld and that it would be able to exclude low-price competitors.”
“And if the jury voted to strike down the patent? If Vaxtek couldn't keep the cheap drugs out?”
“Vaxtek would lose all of the almost half-billion dollars it invested in AV/AS.”
Palmieri snapped the laptop closed. “Your witness.”
Fischler fired off three brisk questions before she even reached the lectern. The man-tailored suit was intentionally aggressive, Seeley thought, but the oxford button-down and patterned silk tie were what a law student might wear to her first moot court argument.
“These charts you fabricated, Professor Chaikovsky, are they based on assumptions?”
The witness winced. “It's pronounced Chi-kof-ski. Like the composer.”
The break in rhythm momentarily ruffled Fischler. She had loosened her severe librarian's bun today and the ponytail bobbed. “Are your charts based on assumptions, Professor?”
“The charts are based mainly on data, but, yes, like any diagram, they depend on certain hypotheses.”
“And these hypotheses of yours, are they the same as assumptions?”
“You could say so, yes.”
“It doesn't matter what I say, Professor, the jury wants to know what you say.”
“Yes, for these purposes, a hypothesis is the same as an assumption.”
Fischler addressed the witness, but faced the jury. “Is it correct that one assumption behind your charts is that Vaxtek will face no competition in its sales of AV/AS?”
An alarm went off in Seeley's mind. He looked over at Palmieri, whose fingers floated over his keyboard.
“Yes, they make that assumption.”
Fischler's eyes were still on the jury, not the witness. “And why did you make that assumption, Professor?”
“Because the effect of a patent is to exclude competition-”
“Professor, are you aware of any patented drugs that face competition from other patented drugs?”
The bailiff had not raised the lights, and in the pale shadows, the smugness drained out of the witness's expression.
Seeley couldn't believe that Palmieri had failed to prepare his witness for the question.
A detectable tremor in her voice, Chaikovsky said, “Yes, of course.”
“Can you give me an example?”
“Well, there are several patented cholesterol-lowering drugs, called statins, on the market.” She glanced at Palmieri, who nodded gently, and after a moment she, too, understood that Fischler's sole aim was to rattle her. “The difference is that there is no pharmaceutical comparable to AV/AS that doesn't infringe Vaxtek's patent, and that means AV/AS will not have any competition.”
Fischler's line of questioning had been a bluff. Other companies were working on AIDS vaccines but, without industrial espionage, there was no way St. Gall and its lawyers could know what they were working on, or how far they had progressed. Palmieri would need to time his objection carefully.
“Do you know how many other pharmaceutical companies are investigating an AIDS vaccine? Two? A dozen?”
“I can't give you an exact number,” the economist said.
“So in your charts, and in your testimony, you just assumed that there were none.”
“Keep her honest,” Seeley said to Palmieri. To himself, he acknowledged that, at the moment, the best they could do was to disrupt Fischler's pace.
Palmieri rose. “Objection, Your Honor. Outside the scope of direct.”
“This is an expert who's on the stand, Your Honor. We have latitude to examine the basis of her testimony.”
“Overruled.” Then, more gently, to Fischler: “I'm sure you will find a way, Counselor, to phrase your question so that it stays within bounds.”
“So, Professor, for all you know, a dozen other companies might have done the same research as Vaxtek and were just a little late getting to the Patent Office.”
“Objection.” Palmieri was on his feet again. “This violates the parties' stipulation on priority.”
“Counselor?” Judge Farnsworth seemed amused by the sparring.
Fischler said, “The stipulation is as to priority of invention, Your Honor, not the race to the Patent Office.”