Friday, October 22, 2004
C.A. Affirms $500 Million Judgment for City of Hope
From Staff and Wire Service Reports
This district’s Court of Appeal yesterday upheld a $500 million verdict against biotechnology company Genentech Inc. for failing to pay royalties on some drugs manufactured under a 1976 agreement with City of Hope National Medical Center.
Div. Two, in an opinion by Justice Judith Ashmann-Gerst, said retired Los Angeles Superior Court Judge Edward Kakita, who heard the case on assignment, correctly submitted the interpretation of the agreement to the jury, and that the jury’s interpretation was reasonable.
The jury found that Genentech failed to pay a 2 percent royalty on drugs based on patents developed by two City of Hope physicians. City of Hope successfully contended that the agreement required Genentech to pay royalties on the product sales of licensees even if those licensees did not “practice” the patents—follow the manufacturing process contained in the patent—when manufacturing their products.
“We are gratified by the court’s ruling, which follows well-established legal precedent and is fully supported by the evidence,” Robert Stone, attorney for the Duarte hospital, said in a statement.
Genentech spokeswoman Caroline Pecquet said the company was disappointed with the ruling and planned to seek a review of the case by the state Supreme Court.
City of Hope sued Genentech in 1999, claiming the South San Francisco-based biotechnology giant concealed licensed sales of protein products, such as hepatitis vaccines, over a 15-year period that were worth about $16.7 billion.
City of Hope, which made the protein manufacturing discovery, contended it was owed $457 million in royalties and interest. The jury awarded $300 million in compensation and $200 million in punitive damages.
In upholding the punitive damage award, Ashmann-Gerst said there was “substantial evidence of fraud and malice” by Genentech and that the award did not violate due process.
“...Genentech’s scheme of concealing licenses and withholding royalties spanned decades. The conduct may not have been widespread as to the number of victims, but it was pervasive and continuous as to City of Hope,” the justice wrote. “While Genentech did not directly jeopardize anyone’s life, safety, or health, it damaged an entity that is in the business of providing medical care to the poor, often at City of Hope’s own expense. Additionally, at the time Genentech offered to buy down the royalty rate, it knew that City of Hope was in need of money. Last, Genentech essentially cheated City of Hope out of a staggering amount of money.”
The case is City of Hope National Medical Center v. Genentech, Inc., B161549.
Copyright 2004, Metropolitan News Company