WEBVTT - Berkshire, Google, Pega & Other Catalysts 0:00:13.680 --> 0:00:17.440 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:17.480 --> 0:00:21.400 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:21.440 --> 0:00:26.960 investment research platform of Bloomberg LP. This podcast series examines 0:00:27.000 --> 0:00:31.040 the intersection of business policy and law, and today we'll 0:00:31.040 --> 0:00:34.520 be looking at the litigation and policy catalysts that we're 0:00:34.520 --> 0:00:37.400 watching in November twenty twenty three and that we think 0:00:37.479 --> 0:00:42.159 will impact companies across a number of different sectors. My 0:00:42.240 --> 0:00:45.839 name is Elliott Stein. I'm a senior litigation analyst covering 0:00:46.560 --> 0:00:50.120 the financial sector. I'll be your host for today, October 0:00:50.159 --> 0:00:53.519 thirty first, twenty twenty three. As always, if you have 0:00:53.680 --> 0:00:56.320 any questions about any of the matters that we'll be 0:00:56.400 --> 0:01:00.440 discussing on this episode, please don't hesitate to reach out 0:01:00.440 --> 0:01:04.600 to us at your convenience with questions. So we'll be 0:01:04.680 --> 0:01:09.920 discussing a handful of sectors and topics today. First, our 0:01:10.040 --> 0:01:13.800 anti trust analyst Jen Ree will discuss a number of 0:01:13.880 --> 0:01:19.000 trials in her space, including the DOJ's case against Google oversearch, 0:01:19.480 --> 0:01:24.240 DOJ's suit challenging the Jet Blue Spirit merger, and Epic 0:01:24.400 --> 0:01:29.600 Games's trial against Google over the latter's play store. After that, 0:01:29.640 --> 0:01:34.160 Matt Schuttenhelm our TMT litigation and policy analyst will preview 0:01:34.360 --> 0:01:38.480 an anticipated decision on a motion by Meta to stop 0:01:38.520 --> 0:01:42.440 the FTC from blocking the company's use of teams data. 0:01:43.959 --> 0:01:48.800 After that, Tamlin Basin, our tech IP litigation analyst, will 0:01:48.840 --> 0:01:53.720 discuss Pegasystem's effort to reduce and possibly eliminate a two 0:01:53.800 --> 0:01:58.160 billion dollar jury award for Appian in a trade secrets case. 0:02:00.000 --> 0:02:03.480 Following that, Dwayne Wright, who covers healthcare policy for US 0:02:03.520 --> 0:02:07.880 in Washington, d C. We'll discuss an FDA proposal to 0:02:07.960 --> 0:02:14.000 extend medical device oversight to laboratory developed tests, and he'll 0:02:14.000 --> 0:02:17.640 also discuss the proposal to exempt orphan drugs that treat 0:02:17.680 --> 0:02:21.400 more than one disease from the drug pricing provisions of 0:02:21.480 --> 0:02:26.480 the Inflation Reduction Act. After that, Nathan Dean, our financials 0:02:26.520 --> 0:02:30.520 policy analyst, also in Washington, DC, will talk about a 0:02:30.560 --> 0:02:34.280 federal reserve proposal to lower the amounts that banks can 0:02:34.360 --> 0:02:39.519 charge for debit card transactions. He'll also talk about the 0:02:39.680 --> 0:02:44.120 Basel three end Game proposal to increase banks capital requirements, 0:02:44.480 --> 0:02:48.920 and he'll also briefly address what Mike Johnson's ascension to 0:02:49.000 --> 0:02:53.320 the House speakership means for a potential government shutdown. 0:02:53.360 --> 0:02:53.800 This year. 0:02:55.080 --> 0:02:58.079 Last, but not least, i'll discuss an upcoming hearing where 0:02:58.440 --> 0:03:03.800 Berkshire Hathaway's ener subsidiary, Pacific Corps, will try to trim 0:03:03.840 --> 0:03:09.000 its exposure in Oregon wildfire litigation, and also briefly talk 0:03:09.080 --> 0:03:15.080 about marketmaker Virtue's anticipated motion to dismiss an sec lawsuit 0:03:15.240 --> 0:03:19.359 accusing the company of failing to enforce in our information 0:03:19.480 --> 0:03:23.120 barriers around trade data. And finally, let me just add 0:03:23.160 --> 0:03:27.800 that our colleague Holly Frome, who covers consumer and industrials litigation, 0:03:28.320 --> 0:03:32.560 couldn't be on today's episode, but she is awaiting key 0:03:32.600 --> 0:03:38.080 court rulings in Buyer roundup litigation and also Peloton Securities 0:03:38.120 --> 0:03:41.840 fraud litigation. So if you're interested in those cases, please 0:03:41.880 --> 0:03:44.520 don't hesitate to reach out to her or to me, 0:03:44.600 --> 0:03:48.400 and I can point you in the right direction. As always, 0:03:48.440 --> 0:03:51.320 all of our research is available on the Bloomberg terminal 0:03:51.360 --> 0:03:54.920 at BI go. And just a quick word about Bloomberg 0:03:54.920 --> 0:03:57.720 Intelligence for those who don't know. We are the investment 0:03:57.800 --> 0:04:01.040 research platform on the Bloomberg term and all, providing in 0:04:01.080 --> 0:04:05.119 depth research on industries, companies and markets and delivering key 0:04:05.200 --> 0:04:10.360 data from BI analysts in their given industries. All right, 0:04:10.480 --> 0:04:12.040 So with all that out of the way, let's get 0:04:12.080 --> 0:04:15.320 started with the content. Jen Ree, let's bring you in 0:04:15.400 --> 0:04:19.720 to talk all things antitrust. As always, there's a ton 0:04:19.760 --> 0:04:23.720 of stuff going on in your coverage. You have three trials, 0:04:24.200 --> 0:04:27.640 at least three trials overlapping just in November. Two of 0:04:27.640 --> 0:04:30.560 them involve Google. The third involves Jeb Blue and Spirit. 0:04:31.240 --> 0:04:33.080 Why don't you come in and tell us what investors 0:04:33.120 --> 0:04:34.240 should know about these cases? 0:04:34.320 --> 0:04:36.480 You are, thanks, elliot. Yeah, let me start with Google 0:04:36.520 --> 0:04:40.080 since we have two trials, one of which is halfway through, 0:04:40.160 --> 0:04:43.120 so I'll talk about that first. And these are This 0:04:43.160 --> 0:04:46.520 is a lawsuit against Google over its search business. It's 0:04:46.520 --> 0:04:50.440 search browser, essentially by the DOJ in a group of states. 0:04:50.480 --> 0:04:53.919 It started on September twelfth, and it's basically been sued 0:04:53.960 --> 0:04:58.120 for illegally maintaining a monopoly in general search and search advertising. 0:04:58.240 --> 0:05:00.920 And they do this by paying a lot of money. 0:05:01.480 --> 0:05:04.360 It came out in trial about twenty six billion in 0:05:04.480 --> 0:05:07.479 just twenty twenty one to be set as the default 0:05:07.520 --> 0:05:11.000 search engine and essentially all the apps and various digital 0:05:11.040 --> 0:05:15.120 places a user would go to search outside of Microsoft's products, 0:05:15.120 --> 0:05:18.560 which obviously use BING. So the DOJ claims this has 0:05:18.600 --> 0:05:21.560 blocked rival search engines from access to the market and 0:05:21.600 --> 0:05:24.159 made it impossible for them to actually develop into a 0:05:24.160 --> 0:05:28.080 good competitor because there's this feed feedback loop. The more 0:05:28.120 --> 0:05:30.839 searches that are done, the more data a search engine collects, 0:05:30.880 --> 0:05:33.440 and then each search becomes better after that and they 0:05:33.480 --> 0:05:36.359 become the best search engine. And it also says that 0:05:36.360 --> 0:05:39.440 by dominating search, Google then dominates the search ads that 0:05:39.480 --> 0:05:41.480 pop up when you do your search, and they can 0:05:41.560 --> 0:05:44.960 charge high prices to advertisers. So we've got halfway done. 0:05:45.000 --> 0:05:47.880 The dj completed its case in chief, and we think 0:05:47.920 --> 0:05:51.640 it presented really compelling evidence to essentially meet the elements 0:05:51.640 --> 0:05:54.599 that it has to meet, and that is whether Google 0:05:54.640 --> 0:05:57.640 has a monopoly in a market that's properly defined as 0:05:57.760 --> 0:06:02.320 general search, and whether it has a foreclosed competitors from 0:06:02.360 --> 0:06:05.240 more than about forty percent of the outlets for distribution. 0:06:05.320 --> 0:06:07.920 I mean, these are all in question right whether that's 0:06:07.960 --> 0:06:10.760 the proper market or whether being a default search is 0:06:10.800 --> 0:06:14.000 actually foreclosure because a user can go in and change that. 0:06:14.800 --> 0:06:17.160 So at least right now on the question of whether 0:06:17.160 --> 0:06:19.680 there's wrongdoing, we're kind of leaning toward the DOJ. But 0:06:19.720 --> 0:06:21.919 the thing is, we only have half the picture. So 0:06:22.000 --> 0:06:25.359 the view could change because monopolization suits are judged in 0:06:25.400 --> 0:06:28.200 a very difficult, subjective way called the rule of reason, 0:06:28.600 --> 0:06:32.200 and this requires first determining whether there's conduct that causes harm, 0:06:32.279 --> 0:06:35.640 That's what we've done, but then asking whether the defendant 0:06:35.680 --> 0:06:39.400 has legitimate pro competitive justifications for that conduct. That's what 0:06:39.480 --> 0:06:42.680 Google's presenting now, it just started. And if it has 0:06:42.760 --> 0:06:46.240 valid pro competitive justifications for its agreements that are supported 0:06:46.279 --> 0:06:49.240 by the evidence, then essentially what the judge has to 0:06:49.279 --> 0:06:52.160 do is way which one is stronger. So it's really 0:06:52.200 --> 0:06:55.760 a difficult decision. It's very subjective. So once I see 0:06:55.760 --> 0:06:58.039 what Google presents, I could change my view on this. 0:06:58.800 --> 0:07:01.279 The trial is supposed to go through number sixteenth. I 0:07:01.279 --> 0:07:03.279 think we'll get a ruling in the first half of 0:07:03.360 --> 0:07:05.640 next year. Toward the end of it, I think either 0:07:05.680 --> 0:07:08.520 side will appeal if they lose. This trial is only 0:07:08.560 --> 0:07:11.480 on liability, that's it wrongdoing, So once it's done, there's 0:07:11.480 --> 0:07:13.880 going to be an entirely new trial to determine what 0:07:13.920 --> 0:07:17.040 the remedy should be. The DOJ will seek to have 0:07:17.080 --> 0:07:19.640 the company broken up. We don't think that's going to happen. 0:07:19.680 --> 0:07:21.680 It's more likely that Google is going to have to 0:07:21.720 --> 0:07:24.000 get out of the agreements that has to be the default, 0:07:24.400 --> 0:07:27.920 or share data with rivals, or provide a choice screen, 0:07:28.120 --> 0:07:31.680 or somehow educate users on switching defaults, or facilitate that. 0:07:32.160 --> 0:07:33.920 We don't even know what the dj is going to 0:07:33.960 --> 0:07:36.080 ask for, because no one has talked about any of 0:07:36.080 --> 0:07:39.240 this yet, because that'll be in the second trial, so 0:07:39.320 --> 0:07:42.080 it remains to be seen. Let me move over to 0:07:42.080 --> 0:07:44.880 Google play Store, so this is going to start pretty soon. 0:07:46.160 --> 0:07:49.120 This is a challenge to Google's Playstore policies by Epic Games, 0:07:49.160 --> 0:07:51.720 Indmatch dot Com. Now there used to be states and 0:07:51.840 --> 0:07:54.480 other consumers and developers in it, but they have all 0:07:54.520 --> 0:07:58.160 settled and the developers basically don't want to have to 0:07:58.200 --> 0:08:01.120 distribute through the play Store to get on the Android devices, 0:08:01.200 --> 0:08:04.000 or be required to use Google's payment system for the 0:08:04.040 --> 0:08:07.360 payment for apps or in app payments, and Google requires that. Now, 0:08:07.360 --> 0:08:10.160 this exact same case was pretty much brought against Apple 0:08:10.200 --> 0:08:13.440 by Epic Games, and Apple has largely won, although they're 0:08:13.440 --> 0:08:17.080 waiting to hear if the Supreme Court will review those decisions. Now, 0:08:17.120 --> 0:08:19.600 primarily because of that, we favor Google. But there's a 0:08:19.640 --> 0:08:22.920 wrinkle because this is a jury trial and that Apple 0:08:22.920 --> 0:08:25.760 trial was not. It was a judge trial and Apple 0:08:25.800 --> 0:08:31.280 won on really technical antitrust aspects. This jury may not 0:08:31.400 --> 0:08:33.600 look at it that way. They may judge the case 0:08:33.679 --> 0:08:36.320 more on what they view as fair or unfair conduct, 0:08:36.600 --> 0:08:39.160 and it's possible there could be a different outcome. This 0:08:39.240 --> 0:08:42.080 trial starts November six, that's going to run through mid December, 0:08:42.080 --> 0:08:43.920 and since it's a jury trial, we should get a 0:08:43.960 --> 0:08:47.040 decision in December now. Really, lastly, because I've taken too 0:08:47.080 --> 0:08:50.880 much time, lawsuits started today. This is the DOJ suit 0:08:50.920 --> 0:08:53.720 to Blockjeptly from buying Spirit. They view it as anti 0:08:53.800 --> 0:08:57.200 competitive because the deal would remove Spirit, an ultra low 0:08:57.240 --> 0:09:00.600 cost carrier, from the market, eliminates a lower cost option 0:09:00.760 --> 0:09:03.120 for consumers that might want the a la carte option 0:09:03.240 --> 0:09:06.120 Spirit offers. The companies have agreed to divest a bunch 0:09:06.120 --> 0:09:08.320 of assets for the routes that they both fly, but 0:09:08.400 --> 0:09:10.560 I think they have a big problem on the routes 0:09:10.760 --> 0:09:13.920 They don't fly where Spirit flies today but Jet Blue 0:09:13.960 --> 0:09:16.960 doesn't because Jet Blue's been clear it intends to retrofit 0:09:17.000 --> 0:09:19.800 Spirits playing to the Jetlue model, which means fewer seats 0:09:19.800 --> 0:09:23.280 and higher fares, which means lower output and higher prices 0:09:23.320 --> 0:09:25.960 which are antitrust harms. So I favor the DOJ on 0:09:26.000 --> 0:09:29.080 this one. The Tarleston Federal Court in Boston starts today, 0:09:29.160 --> 0:09:31.640 it ends December December fifth. I think we'll get a 0:09:31.679 --> 0:09:32.920 decision in January. 0:09:33.200 --> 0:09:33.440 With that. 0:09:33.600 --> 0:09:37.680 Back to you, Elliott, all right, good stuff, Jen, thank you. 0:09:38.200 --> 0:09:40.520 All right, Matt, let's bring you in to talk some 0:09:40.520 --> 0:09:44.080 more tech. I think last months on this call you 0:09:44.160 --> 0:09:48.680 previewed in October seventeenths here in involving Meta, the FTC 0:09:49.120 --> 0:09:51.920 and Meta's use of teens data, and now it sounds 0:09:51.960 --> 0:09:54.400 like you're waiting for the decision on that issue. Do 0:09:54.440 --> 0:09:56.040 you want to come in and give us more details 0:09:56.040 --> 0:09:56.360 about this? 0:09:57.360 --> 0:10:00.199 Yeah? Absolutely, Elliott. I thought i'd give an update on 0:10:00.679 --> 0:10:04.920 that story, especially because Meta just had its earnings release 0:10:05.160 --> 0:10:08.920 last week and it and it highlighted this issue as 0:10:09.480 --> 0:10:14.400 something that could be disruptive to its business if it 0:10:14.440 --> 0:10:19.600 goes the wrong way. So let's step back first, Well, 0:10:19.600 --> 0:10:24.520 what's an issue here? So, so, Facebook in twenty twenty 0:10:24.679 --> 0:10:27.720 entered into a settlement with the Federal Trade Commission after 0:10:27.760 --> 0:10:32.360 the Cambridge Analytica matter, and the company agreed to pay 0:10:32.400 --> 0:10:37.040 five billion dollars and agreed to a number of terms 0:10:37.520 --> 0:10:42.560 related to its privacy compliance. But the twist is that 0:10:42.679 --> 0:10:45.480 in May of this year, the Federal Trade Commission, now 0:10:45.559 --> 0:10:49.920 under Lena Kahn's leadership, said that it doesn't think Facebook 0:10:49.960 --> 0:10:53.600 has complied with with those promises, and so the FTC 0:10:53.840 --> 0:10:57.920 is going to unilaterally change the terms of those of 0:10:57.960 --> 0:11:02.720 that settlement, and it pose to add a couple terms 0:11:02.520 --> 0:11:05.640 that the company doesn't like very much, including a total 0:11:05.720 --> 0:11:10.040 ban on advertising to kids, as well as a requirement 0:11:10.080 --> 0:11:13.760 that anytime the company introduces a new feature or new service, 0:11:13.880 --> 0:11:18.679 it has to first get a clearance from an assessor 0:11:18.679 --> 0:11:22.320 that its privacy program is in good shape. So there's 0:11:22.360 --> 0:11:27.160 good reason for the company to highlight this as presenting 0:11:27.160 --> 0:11:30.800 a risk to the business. So let's talk about next 0:11:30.800 --> 0:11:35.640 steps here from an investor perspective. As Elliott said, there 0:11:35.679 --> 0:11:39.040 was a hearing October seventeenth here in DC on this, 0:11:40.360 --> 0:11:44.400 and that is about Facebook's effort, or Meta's effort to 0:11:44.520 --> 0:11:47.760 stop it before it can even start to say, look this, 0:11:48.600 --> 0:11:52.280 the Federal Trade Commission doesn't have the ability to unilaterally 0:11:52.559 --> 0:12:00.800 modify a court approved settlement, and that hearing on October 0:12:00.840 --> 0:12:04.959 seventeenth tested that effort to stop it before it even starts. 0:12:05.640 --> 0:12:09.200 In my view, Judge Timothy Kelly at that hearing didn't 0:12:09.240 --> 0:12:12.880 seem very warm to that idea. I think there's a 0:12:12.960 --> 0:12:17.800 general sympathy for Meta's position here, but I don't think 0:12:17.840 --> 0:12:21.040 that the judge had a sense that he has the 0:12:21.080 --> 0:12:26.040 authority to stop the process before it starts. So he 0:12:26.240 --> 0:12:29.720 told us that he's likely to rule before a November 0:12:29.800 --> 0:12:34.640 thirtieth date for the company to respond at the FTC, 0:12:35.160 --> 0:12:37.280 and so that tells us this month we're going to 0:12:37.280 --> 0:12:39.680 see his ruling, and so I think that sort of 0:12:39.760 --> 0:12:42.400 gives give shape to how this is likely to play out. 0:12:42.480 --> 0:12:46.240 I think Meta is likely to suffer an early loss 0:12:46.360 --> 0:12:50.560 when he releases his decision in the next couple weeks, 0:12:51.160 --> 0:12:53.800 and that will let the Federal Trade Commission move ahead 0:12:54.040 --> 0:12:57.520 with this process to modify the settlement along the lines 0:12:57.520 --> 0:13:01.320 of what it proposed. But that that's where, in my view, 0:13:01.440 --> 0:13:05.880 Meta's position gets much stronger legally. If the Federal Trade 0:13:05.920 --> 0:13:10.000 Commission moves ahead with these changes that it's proposed, I 0:13:10.000 --> 0:13:12.320 think the company's going to be in a very strong 0:13:12.520 --> 0:13:16.000 legal position to challenge it after the fact, and I 0:13:16.000 --> 0:13:20.960 think it will it will race into court to to 0:13:21.040 --> 0:13:24.520 try to stay anything as soon as the company as 0:13:24.559 --> 0:13:26.960 soon as the Federal Trade Commission imposes a date for 0:13:27.200 --> 0:13:31.080 those changes to take effect. So big picture, I'm not 0:13:31.280 --> 0:13:34.120 too concerned about a disruption to the company's business. I 0:13:34.120 --> 0:13:37.400 think it wins this fight, but near term there could 0:13:37.400 --> 0:13:39.640 be some bumps along the road. Let me pass it 0:13:39.679 --> 0:13:41.000 back to you, Elliott. 0:13:42.080 --> 0:13:45.360 Great, thanks a lot, Matt, all right, Tamlin, our man 0:13:45.400 --> 0:13:49.760 in London, let's bring you in. You're covering Pegasystem's appeal 0:13:50.440 --> 0:13:53.040 of a two billion dollar jury award that went against 0:13:53.040 --> 0:13:56.719 it in a trade secrets case. Sounds like you think 0:13:56.720 --> 0:14:00.679 Pegasystems has better odds of succeeding unappealed, and maybe the 0:14:00.720 --> 0:14:02.880 market st You want to come in and tell us 0:14:02.880 --> 0:14:03.320 more about that. 0:14:04.040 --> 0:14:07.679 Yeah, sure, thanks Elliott. Yeah. So, on November fifteenth, a 0:14:07.880 --> 0:14:11.120 Virginia Intermediate Appeals Court is going to hear arguments and 0:14:11.240 --> 0:14:15.360 Pegasystems did to overturn this two billion dollar damage of 0:14:15.400 --> 0:14:19.120 award that was awarded to rival Appian in a trade 0:14:19.160 --> 0:14:22.840 secrets misappropriation case, and we do believe it's highly likely 0:14:22.960 --> 0:14:25.600 that the amount is overturned. We actually give that an 0:14:25.600 --> 0:14:29.480 eighty percent likelihood of such a reduction. And moreover, we 0:14:29.520 --> 0:14:32.080 think there's a forty percent likelihood that their award is 0:14:32.080 --> 0:14:35.600 erased entirely. Now a little bit of background, So Peggas 0:14:35.600 --> 0:14:39.760 Systems and Appian compete in the business process management software space, 0:14:40.360 --> 0:14:43.520 and there's a lot of the history of litigation between 0:14:43.520 --> 0:14:46.720 the parties and the instant case was filed after a 0:14:47.080 --> 0:14:52.040 Appian hired Pega's former head of competitive intelligence and learned 0:14:52.040 --> 0:14:56.400 that Pega, through a third party software developed developer, had 0:14:56.480 --> 0:15:01.560 learned some various things about Appian's platform. File to complaint 0:15:01.760 --> 0:15:05.760 for trade secret misappropriation in a Virginia state court. There 0:15:05.800 --> 0:15:09.440 was a seven week trial and it concluded with a 0:15:09.520 --> 0:15:12.960 May ninth, twenty twenty two verdict in which the jury 0:15:13.000 --> 0:15:17.000 did award two point zero four billion dollars in damages. Now, 0:15:17.080 --> 0:15:20.120 if that amount holds, this would be the largest trade 0:15:20.120 --> 0:15:23.400 secret damages of the award in history, not just in 0:15:23.480 --> 0:15:27.480 Virginia but anywhere in US state or federal courts. It 0:15:27.520 --> 0:15:29.880 was already the largest damages award of any kind in 0:15:29.920 --> 0:15:32.760 the history of Virginia courts. And just to underscore what 0:15:32.800 --> 0:15:35.200 an outlier of this award was, what we did is 0:15:35.200 --> 0:15:38.800 we looked at other significant trade secret awards and compared 0:15:38.840 --> 0:15:43.320 the amount awarded to the combined pre vertict market caps 0:15:43.360 --> 0:15:47.040 of both parties in the litigation. Now, this award was 0:15:47.080 --> 0:15:50.840 twenty four percent of Pega and Appians combined pre market 0:15:51.200 --> 0:15:55.360 pre verdict market caps. No other awards top five percent 0:15:55.440 --> 0:15:59.280 in that metric. And for finalized amounts, that is amounts 0:15:59.280 --> 0:16:01.560 that have gone through all the appeals, the actual high 0:16:01.600 --> 0:16:05.360 water mark is zero point zero zero four percent. So 0:16:05.520 --> 0:16:08.040 again this is not at all in line with any 0:16:08.080 --> 0:16:11.560 trade taker's case that we could find. Now, how did 0:16:11.560 --> 0:16:13.800 it get so high. It got so high because the 0:16:13.840 --> 0:16:17.440 Dury instruction essentially shifted the burden of proof on damages 0:16:17.600 --> 0:16:21.040 to the defendant Pega Systems. So in trade secrets cases, 0:16:21.080 --> 0:16:25.200 a damage of the amount based on independence profits doesn't 0:16:25.240 --> 0:16:27.080 need to be precise, but it does need to be 0:16:27.200 --> 0:16:30.600 reasonably based on the profit that was actually stemming from 0:16:30.680 --> 0:16:34.560 the alleged theft. So Appian should have had to show 0:16:34.640 --> 0:16:39.440 some relationship between Pega's sales and Appian's trade secrets. That's 0:16:39.480 --> 0:16:43.000 not what happened instead, because of a Duran instruction, and 0:16:43.040 --> 0:16:46.240 the judge gave Appian pretty much simply had had to 0:16:46.280 --> 0:16:49.440 point to all of the revenue Pega had generated since 0:16:49.480 --> 0:16:52.520 this alleged trade secret depth of place, and the CORE 0:16:52.680 --> 0:16:55.560 asked Pega to prove what amount of that revenue had 0:16:55.600 --> 0:16:58.600 no relationship to the trade secrets. Now, proving that kind 0:16:58.640 --> 0:17:02.960 of negative relationship is a incredibly, incredibly difficult and that's 0:17:03.000 --> 0:17:05.439 one of the reason why it's not actually required in 0:17:05.480 --> 0:17:07.840 trade cickets law. And it's not just us saying that. 0:17:08.400 --> 0:17:11.520 An amicus brief pointing out the error in this during 0:17:11.560 --> 0:17:14.800 instruction was filed by the American Intellectual Property Law Association, 0:17:15.440 --> 0:17:19.159 So we're quite confident in the Abell's court will either 0:17:19.400 --> 0:17:22.840 reduce the damage's amount or remand for a new trial. 0:17:23.440 --> 0:17:26.000 We also think Pega has a decent likelihood of totally 0:17:26.040 --> 0:17:29.760 eliminating the award based on its argument that Appian failed 0:17:29.760 --> 0:17:33.320 to identify protectable trade secrets in the first place and 0:17:33.560 --> 0:17:37.280 or failed to adequately safeguard those secrets. Now, a win 0:17:37.359 --> 0:17:40.080 on either of those would wipe out the damages amount entirely. 0:17:40.720 --> 0:17:44.280 So again, arguments are November fifteenth, and it is a 0:17:44.320 --> 0:17:47.280 decision could be expected from two to five months after that, 0:17:47.359 --> 0:17:49.400 so really we're looking out of January to March twenty 0:17:49.440 --> 0:17:53.760 twenty four. Timeline I showed. However, note that We do 0:17:53.920 --> 0:17:56.679 think there's a good chance that this issue goes all 0:17:56.680 --> 0:17:58.760 the way up to the Virginia Supreme Court, so final 0:17:58.920 --> 0:18:02.199 resolution could actually be a few years away. I'm with that, 0:18:02.240 --> 0:18:03.800 Alphin back to you, Elliott. 0:18:04.400 --> 0:18:07.800 Great stuff, Thanks Camlin. All right, let's move on to 0:18:07.880 --> 0:18:12.679 healthcare and bring in Dwayne right to talk some healthcare policy. Dwayne, 0:18:12.720 --> 0:18:16.840 you've written about an FDA proposal to extend medical device 0:18:17.000 --> 0:18:21.960 oversight to laboratory developed tests, and I think you also 0:18:21.960 --> 0:18:23.879 want to talk a little bit about a proposal to 0:18:24.000 --> 0:18:27.600 exempt orphan drugs that tread more than one disease from 0:18:27.720 --> 0:18:30.720 the drug pricing provisions of the IRA. You want to 0:18:30.760 --> 0:18:33.320 come in and tell us more about both of these issues. 0:18:33.680 --> 0:18:38.320 Sure, thanks Elliott. So last month in October, the FDA 0:18:38.520 --> 0:18:43.040 released a proposal to extend medical device oversight two lab 0:18:43.240 --> 0:18:47.880 developed tests, which would impose new regulatory burdens and compliance 0:18:47.960 --> 0:18:53.399 costs for those diagnostic manufacturers of tests developed by and 0:18:53.480 --> 0:18:57.520 used in single labs. We think there's a sixty percent 0:18:57.600 --> 0:19:01.919 chance that the Biden administration will finalize this rule sometime 0:19:02.320 --> 0:19:06.160 in summer of twenty twenty four. So what's the background here. 0:19:06.880 --> 0:19:12.040 LDTs are a class of IVDs or in vitro diagnostics 0:19:12.640 --> 0:19:15.800 designed and made for use in a single clinical laboratory. 0:19:16.640 --> 0:19:23.360 FDA traditionally viewed LDTs as low risk, developed for diagnosing 0:19:23.400 --> 0:19:27.199 a rare disease or for use in local community populations. 0:19:27.840 --> 0:19:32.760 The FDA's exercised enforcement discretion over LDTs by choosing not 0:19:32.880 --> 0:19:37.159 to require may be subject to pre market review or 0:19:37.400 --> 0:19:42.280 clearance before use, which is typical for most medical devices. 0:19:42.920 --> 0:19:48.200 But over time LDTs have become more complex and marketed nationwide. 0:19:48.440 --> 0:19:51.280 Even if the test itself is run in a single lab. 0:19:52.359 --> 0:19:55.359 As I said, LDTs can enter the market without FDA review. 0:19:55.800 --> 0:19:59.520 They're also not tracked, and because of this lack of transparency, 0:20:00.200 --> 0:20:03.800 the FDA estimates estimates as many as one hundred and 0:20:03.800 --> 0:20:09.000 sixty thousand existing tests and fifteen thousand new tests per 0:20:09.119 --> 0:20:14.560 year are developed. So what would the FDA proposal do. 0:20:14.840 --> 0:20:19.080 We would clarify that LDTs are medical devices and subject 0:20:19.119 --> 0:20:24.640 to regulation under the Federal Food, Drug and Cosmetic Cosmetic Act, 0:20:25.200 --> 0:20:27.840 and would be the regulation would be phased in over 0:20:27.880 --> 0:20:32.880 a number of years. In terms of the impact, it's 0:20:33.480 --> 0:20:37.040 highly speculative at this point, which FDA acknowledges, and that's 0:20:37.119 --> 0:20:40.199 largely to my earlier point about how many tests are 0:20:40.240 --> 0:20:42.600 out there and how many tests the anticipate will come 0:20:42.600 --> 0:20:46.840 onto the market. It could be roughly six billion, at 0:20:46.920 --> 0:20:50.600 least that's what the FDA has signaled, but it could 0:20:50.680 --> 0:20:54.639 be much higher. So why do we think there's a 0:20:54.720 --> 0:20:58.520 high likeli that the Biden administration will finalize the rule one? 0:20:58.680 --> 0:21:04.400 The FDA tried in twenty fourteen through guidance to outline 0:21:04.400 --> 0:21:08.639 and oversight framework for LDTs, but it was withdrawn amid 0:21:08.680 --> 0:21:13.800 stakeholder and congressional pushback. Since that time, LDTs continue to 0:21:13.840 --> 0:21:18.080 grow without oversight on effectiveness, and then since the guidance 0:21:18.160 --> 0:21:21.760 was removed, Congress did try to take the lead on 0:21:21.800 --> 0:21:26.360 a legislative solution, but after several legislative sessions, there's been 0:21:26.560 --> 0:21:30.080 very little movement given the diverging views of stakeholders like 0:21:30.240 --> 0:21:34.199 academic medical centers and labs that are less keen on 0:21:34.359 --> 0:21:38.200 FD oversight of these tests, and patient groups and diagnostic 0:21:38.320 --> 0:21:42.280 manufacturers that support more oversight. So there's a sense of 0:21:42.359 --> 0:21:45.640 urgency given the uncertainty with the twenty twenty four elections 0:21:45.680 --> 0:21:48.800 and the likelihood for a change in administration, which is 0:21:48.840 --> 0:21:52.800 why you see the administration moving on this now. Now 0:21:52.880 --> 0:21:59.399 just briefly on the orphan Drug proposal, which was introduced recently. 0:22:01.240 --> 0:22:04.880 What would do is exempt orphan drugs from being eligible 0:22:04.920 --> 0:22:10.880 for negotiation under the Inflation Reduction Act, even with support 0:22:10.960 --> 0:22:15.560 from there for rare disease research and some members of Congress, 0:22:15.640 --> 0:22:18.600 we think the likelihood of action in this Congress is 0:22:18.880 --> 0:22:23.040 pretty small. So just some quick background orphan drugs. They're 0:22:23.119 --> 0:22:26.240 used to treat rare diseases or conditions that affect fewer 0:22:26.280 --> 0:22:31.359 than two hundred thousand people in the US. An orphan 0:22:31.440 --> 0:22:35.159 DRU designation usually occurs early in the development process and 0:22:35.200 --> 0:22:39.440 allows companies to qualify for various incentives like R and 0:22:39.520 --> 0:22:44.600 D text credits and then marketing exclusivity if the drug 0:22:44.680 --> 0:22:48.480 is f to approved. Now, the IRA does exempt from 0:22:48.600 --> 0:22:53.200 negotiation orphan drugs designated for only one rare disease or condition, 0:22:54.160 --> 0:22:57.200 where that approved indication is for the disease or condition. 0:22:58.880 --> 0:23:03.360 Drugs that have multiple designations or designations for multiple rare 0:23:03.359 --> 0:23:08.280 diseases or conditions aren't exempt, even if the additional indications 0:23:08.280 --> 0:23:11.919 have not been approved by the FDA, And we've heard 0:23:12.040 --> 0:23:16.920 from some companies that they're now delaying or foregoing additional 0:23:17.000 --> 0:23:22.200 research for new indications and orphan drugs. For example, over 0:23:22.240 --> 0:23:26.680 the summer, Relay Therapeutics indicated its shifting research it's research 0:23:26.680 --> 0:23:30.760 strategy to larger indications first and then following up with 0:23:31.119 --> 0:23:36.159 research on smaller indications or more orphan drugs. And this 0:23:36.280 --> 0:23:39.920 is because drugs that are seven or eleven years marketed 0:23:40.119 --> 0:23:42.879 or approved by the FDA and have over two hundred 0:23:42.920 --> 0:23:47.840 million in expenditures within the medicare population are negotiation eligible, 0:23:48.480 --> 0:23:52.120 So companies like Relay would prefer the clock to start 0:23:52.240 --> 0:23:57.840 with the larger indication to recruit investment costs. Over the 0:23:57.920 --> 0:24:01.480 last twelve months, we've heard some arguments from other companies 0:24:02.040 --> 0:24:05.560 like al Mylin and Genentech that the IRA was impacting 0:24:05.640 --> 0:24:10.480 research timelines and priorities. Again, we think the chances of 0:24:10.520 --> 0:24:13.320 passage or slim. We don't think Democrats are ready to 0:24:13.359 --> 0:24:16.960 open up the IRA, just as price negotiations on the 0:24:16.960 --> 0:24:22.199 first ten drugs are underway, and Republicans, as much as 0:24:22.280 --> 0:24:25.360 they support some aspects of the law like limiting out 0:24:25.359 --> 0:24:28.720 of pocket drug costs, many would prefer to see aboute 0:24:28.760 --> 0:24:32.240 on repealing the drug provisions rather than amending them. So 0:24:32.760 --> 0:24:35.119 I think this is one we'll hear more about in 0:24:35.119 --> 0:24:39.160 the future, but I don't see a likelihood for passage 0:24:39.200 --> 0:24:42.520 anytime soon. So with that, I will turn it back 0:24:42.560 --> 0:24:42.680 to you. 0:24:42.720 --> 0:24:46.679 Elliott. Great, thanks a lot, Dwayne. All right, let's stick 0:24:46.720 --> 0:24:50.520 with things in Washington, DC and bring in Nathan, but 0:24:50.560 --> 0:24:53.040 we'll move on to the financial sector of course. Nathan, 0:24:53.040 --> 0:24:55.520 why don't you come in and tell us about the 0:24:55.520 --> 0:25:01.359 things you're watching, including the prospects of the government shutdown 0:25:01.520 --> 0:25:04.680