Jury verdict against Genetech upheld in City of Hope case

On October 21, 2004, the California Court of Appeal in Los Angeles upheld a jury verdict ordering Genentech Inc. to pay $500 million to the City of Hope National Medical Center (Duarte, CA) to settle a dispute over a 1976 drug royalties contract. The litigation involved commercial rights to Genentech-funded City of Hope research conducted in the late 1970s that yielded a patented method for using bacteria to produce human proteins invented by City of Hope researchers Arthur Riggs and Keiichi Itakura. Overall, there were 100 patents, and the research led to the creation, among other things, of synthetic insulin, or Humulin®, the world's first biotechnology drug. This litigation is not directed to the license that City of Hope has granted to Genentech for use of its monoclonal antibody technology. This technology is used in the manufacture of the medications Herceptin® and Rituxan® two promising anti-cancer drugs.

The history of this case is complex. City of Hope filed the original contract dispute suit against Genentech in 1999. The first trial resulted in a hung jury, 7-5 in Genentech’s favor, in October 2001. In the retrial, the jury deliberated for 17 days before announcing the verdict on June 10, 2002, which directed Genentech to pay approximately $300 million in additional royalties, including royalties on products for which Genentech itself did not receive royalties. The trial continued three days and the jury deliberated an additional three days before announcing the punitive damages award granted to City of Hope.

Of the decision on appeal, the three-member appellate court said there was "substantial evidence of fraud and malice" by Genentech. It also refused to grant the company a new trial. City of Hope had asserted Genentech concealed licensed sales of protein products, such as hepatitis vaccines, over a 15-year period that were worth about $16.7 billion and that it thereby was owed $457 million in royalties and interest.