What does an obscure biopharmaceutical company have in common with some of California’s biggest tech ventures? Although it may seem that these businesses are worlds apart, business litigation related to that relatively unknown pharma company could have wide-reaching implications for other industries throughout the state. Legal issues such as the relationship between parent companies and subsidiaries are currently being addressed because of business torts that have been filed by the pharma company, Asahi Kasei Pharma.
That Japan-based business had entered a licensing deal with a local California startup known as CoTherix. The American company was working to obtain approval from the Food and Drug Administration for an angina drug created by Asahi. When CoTherix was purchased by another company in 2007, the new administrators ordered the subsidiary to stop testing the angina medication, citing potentially dangerous side effects. Needless to say, Asahi professionals were not pleased with this development.
The Japanese company engaged in a variety of legal maneuvers that ultimately led to CoTherix paying about $90 million in interest, damages and attorneys’ fees. Still not satisfied with the loss of the business relationship, Asahi sued for tortious interference in California court, claiming that the umbrella company that purchased CoTherix had unfairly manipulated the licensing agreement. A jury awarded that company hundreds of millions, and that judgment was upheld by an appeals court. The case may still be considered by the California Supreme Court.
Tech giants are understandably worried, as they believe they could be subject to business tort accusations because of their serial acquisitions. Companies that purchase subsidiaries and change their business models may end up in the hot seat if tortious interference is alleged. A California business attorney may be able to provide additional information for large companies who are interested in the ripple effect produced by the aforementioned case.
Source: Bloomberg Businessweek, “An Obscure Pharma Lawsuit Puts California’s Tech Titans on Edge” Paul M. Barrett, Mar. 12, 2014