Jury Orders Genetech To Pay Hospital $200M in Punitive Damages
A California state court jury yesterday decided that Genentech Inc., the world's second-largest biotechnology company, must pay $200 million in punitive damages to former research partner City of Hope Medical Center for "hiding patent licensing agreements on groundbreaking research," the San Francisco Chronicle reports (Tansey, San Francisco Chronicle, 6/25). Earlier this month, the Los Angeles jury ruled that Genentech must pay City of Hope $300 million in compensatory damages for refusal to pay the hospital royalties owed under a 1976 licensing agreement. The hospital filed suit against San Francisco-based Genentech in 1999, claiming that the company "concealed lucrative patent licensing deals" to avoid royalty payments. Under the 1976 agreement, Genentech agreed to pay City of Hope 2% royalties on treatments manufactured with the hospital's patented technology, which led to the development of two of the first biotechnology drugs, human insulin and human growth hormone. Genentech paid the hospital about $300 million after the company licensed the technology patents to two pharmaceutical companies. The jury found Genentech liable for back royalties on 27 additional licenses to manufacturers and said that the company acted with "fraud or malice" (American Health Line, 6/11).
Genentech officials said that they would appeal yesterday's decision, in which jurors voted 9-3 in favor of the $200 million punitive award. Arthur Levinson, chair and CEO of Genentech, said, "We strongly disagree with the result in this case. Genentech has lived up to the letter and the spirit of the contract and paid the City of Hope everything it was entitled to under the 1976 agreement." City of Hope General Counsel Glenn Krinsky said, "We're elated. We certainly think Genentech's conduct was reprehensible, and this jury found it to be reprehensible and delivered a very harsh punishment" (San Francisco Chronicle, 6/25).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.