Genentech feud heads to court

The Associated Press
Wednesday August 29, 2001

LOS ANGELES — Jury selection began Tuesday in what was expected to be a mammoth court battle between two partners who helped spawn the biotechnology revolution. 

The nonprofit City of Hope National Medical Center in Duarte, Calif., is suing biotech giant Genentech Inc. of South San Francisco for what attorneys say could amount to $500 million in unpaid royalties. 

Opening arguments were expected to begin next week in Los Angeles County Superior Court. The trial could last three months, attorneys said. 

The suit involves Genentech’s 1978 funding of two City of Hope researchers, Arthur Riggs and Keiichi Itakura. Some credit them as the first to synthesize human insulin through techniques that since have been used to create some of the building blocks of biotech, including human growth hormone and a hepatitis B vaccine. 

For nearly two decades, Genentech and City of Hope have had a revenue-sharing contract that granted Genentech the patents on the human insulin development technique. City of Hope gets a 2 percent royalty on sales of certain products stemming from those patents. 

But in its suit, City of Hope says Genentech has been bilking the charity out of millions of dollars. 

Genentech withheld information about lucrative deals that were only revealed through the lawsuit, Glenn Krinsky, City of Hope’s general counsel, said Tuesday. 

“We do believe we have been cheated,” Krinsky said. 

Because the money was never paid, City of Hope has been unable to afford free or subsidized treatment to an undetermined number of poor people, Krinsky alleged. 

The lack of payments also threatens the progress of City of Hope researchers, who spend $1 million to $2 million every week, Krinsky claimed. 

Genentech, whose sales reached $1.7 billion last year, counters that it has paid everything it owes and argues that City of Hope is misreading the deal. 

“We have been very open and candid in our interpretation of the agreement for 20 years,” said Sean Johnston, vice president of intellectual property for Genentech.  

“The contract language is clear.” 

Legal experts say the $500 million figure is large — even for the multibillion-dollar biotech industry — but it isn’t unreasonable. 

They also say to expect more battles over royalties as ivory tower researchers grow savvier about the profit-conscious world of business. 

Before the 1980s, most researchers got money from the government and didn’t have to keep an eye on royalties or licenses, said Rochelle Seide, a partner in the intellectual property department of the New York law firm Baker Botts. 

“But things changed in the ’80s, when government funding dried up,” said Seide, who used to represent Genentech as an outside attorney. “Then people became more patent-conscious. The biotech industry really changed that.”