Stakes Are Huge in Genentech Patent Trial Over Growth Drug

In a widely watched patent infringement case underway in federal court, the University of California is charging biotechnology giant Genentech Inc. with using patented materials prepared at the university to manufacture one of the first genetically engineered drugs, human growth hormone.

The university, completing its first round of witnesses in the San Francisco jury trial last week, claimed that it is due substantial royalties from the sale of the hormone Protropin, which is used to treat short-statured children with growth disorders.

The financial stakes in the case are enormous. The university’s attorneys say they seek to recover $400 million in back royalties and interest since the company began marketing the hormone in 1985. And the judge could triple those damages--boosting the total to more than $1 billion--if he found that the violations were willful.

Patent disputes are commonplace in the competitive world of biotechnology, but most are settled quietly between the parties. Only rarely do they go to trial.

The lead attorney for the university, Gerald P. Dodson, says this case is being watched closely, particularly by universities responsible for much of the pioneering research that formed the foundation of the biotech industry.

“The issue is whether the university is a free garden where the industry can come and pick the fruits of research or whether it must pay money to the university that will keep the research going,” Dodson said.

The Genentech case has been long in coming to trial: Key events--including the removal of a cloned gene for the growth hormone from the UC San Francisco lab near midnight on New Year’s Eve--took place more than two decades ago, and the suit has caromed around the judicial system since it was filed in 1990.

Genentech and its attorneys will not comment on the specifics of the case. “We strongly disagree with the [university’s] patent infringement claim, and we believe we have a strong case,” Genentech spokeswoman Marie Kennedy said.

In court, the company’s attorneys argue that the university’s patent is defective--that it could not produce a useful product, namely genetically engineered human growth hormone. They contend that Genentech’s own patents cover the work necessary to bring the product to market.

The research described in the UC patent “does not make protein--something useful,” said Genentech attorney John E. Kidd in his opening statement. The patent “does not create a bacteria factory.”

The university and its witnesses concede that Genentech did an excellent job of taking a discovery and turning it into a commercially successful drug. Today, Genentech boasts annual sales for Protropin and its other growth hormone products in excess of $200 million.

But Dodson says Genentech relies on the university’s pioneering patent that covers the fundamental discovery, even if others were able to refine it for commercial purposes--in the same way the Wright brothers’ invention of the airplane made modern aviation possible. “The Wright brothers’ plane flew 131 feet in 12 seconds,” he said. “Still, it is a fundamental invention and all the [aircraft] that followed were built on the shoulders of those giants.”

The issues in the case are so technical that the two sides provided the judge with a tutorial on genetic engineering and a university witness delivered a short course on the subject to help the jurors understand evidence drawn from abstruse scientific journals and cryptic laboratory notebooks.

Aside from the merits of the suit, the case provides insights into biotech’s gold rush years, the 1970s, when brash start-ups, backed by venture capitalists, were swooping up bright young researchers from the best of the country’s university laboratories.

It was a time when traditional academic values sometimes clashed with opportunities for jobs and consulting contracts, and a time when universities were realizing that advances made by their researchers could be a meaningful source of new revenue. Genentech, founded in 1976 by UC San Francisco scientist Herbert W. Boyer and venture capitalist Robert Swanson, was soon recruiting university scientists and underwriting research on the UC campus.

Today, South San Francisco-based Genentech is a $10-billion company that markets eight drugs and reports revenue of more than $1 billion a year.

In the ‘70s, the UC San Francisco campus had emerged as a world leader in new techniques of genetic engineering, particularly in finding genes for human hormones and transferring them to bacteria or yeast in which they could be used for commercial manufacture.

Among those at the university was Peter H. Seeburg, a junior scientist from Germany working on isolating and cloning the gene for the human growth hormone. Like many of the scientists involved in that early work, Seeburg has gone on to a successful career. Today he is a director of the prestigious Max Planck Institute of Medical Research in Heidelberg, Germany.

By 1978, according to Seeburg’s testimony in the case, he and others at the University of California had succeeded in isolating a large piece of the human growth hormone gene, and, based on the earlier works of UC scientists, they were able to figure out the makeup of the rest.

The university filed for and received a patent for this discovery.

At about this time, Genentech executives successfully recruited Seeburg to join the growing company, first as a consultant and then as a full-time employee to co-direct the company’s human growth hormone project.

According to Seeburg, the Genentech team was having trouble isolating the gene for the hormone and transferring it to bacteria. He testified that at about 11 p.m. on New Year’s Eve, he and another former university researcher went to their old laboratories in San Francisco and removed vials containing the gene hormone fragment and other materials they had developed as university scientists.

Whether Seeburg was entitled to take the vials is a matter of some contention. He testified that he was not told to do so by Genentech officials but that he did tell friends at the university and Genentech’s attorney after the fact.

U.S. District Judge Charles A. Legge, who is presiding over the case, has ruled that whether Seeburg had a legal right to take the material is not relevant to the patent case. Eighteen months after the removal, records show, Genentech agreed to pay the university $2 million for the transfer of the hormone gene and other material. Under that settlement, however, the university reserved rights to all of its patents.

Seeburg testified that the Genentech team, under competitive pressure to produce human growth hormone, used the university gene fragment in its commercial product because they were unable to produce the gene on their own. He testified that the lab notebooks of another Genentech scientist document this contention.

As pointed out by Genentech attorneys, Seeburg and four other university scientists are all named as inventors on UC’s patent, and each will receive a tenth of any damages if the university prevails.

The details on how the company scientists were able to manufacture the hormone were later reported in the journal Nature but did not credit the university for its contribution, according to Seeburg, who admitted that not telling editors of the publication was “dishonest.”

Genentech’s attorneys are scheduled to begin their defense this week.

The current phase of the trial is expected to wrap up later this month. But the trial could drag on through the summer, as the judge settles several legal issues and another jury is called up to determine damages.

Whatever the outcome, the losing side is likely to appeal.

The patent case is unrelated to Genentech’s agreement last month to pay $50 million and to plead guilty to criminal charges that it had marketed Protropin for treatments not approved by the Food and Drug Administration.

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Times staff writer Paul Jacobs can be reached at [email protected].