Settling a legal dispute that tainted one of the great achievements of modern science, the regents of California's university system yesterday approved a settlement under which Genentech Inc. will pay $200 million to resolve charges of patent infringement.
Genentech, the first biotechnology company in the world and now its second largest, will pay $50 million toward a new research building at the University of California at San Francisco, with the balance paid to the university as an unrestricted cash settlement.
The deal averts a scheduled Jan. 3 trial in federal court. It resolves a lawsuit filed in 1990 that claims Genentech developed human growth hormone, one of the earliest and most important products of biotechnology, by stealing research conducted at the university in 1978.
Arthur D. Levinson, chairman and chief executive of Genentech, said in a news conference that the company was admitting no wrongdoing but wanted to reduce the risks of a big jury verdict and put the matter to rest. "The events on which the lawsuit are based go back 20 years," he said. "It's old news."
Still, the size of the settlement--one of the largest ever won in a patent dispute--casts a deeper shadow on the reputation of David Goeddel, once Genentech's top scientist and now a pharmaceutical executive and member of the National Academy of Sciences. He was the first biotechnologist elected to the academy, an honor roll of the nation's finest scientific minds.
Goeddel did not return a telephone call yesterday seeking comment.
In a trial earlier this year, Goeddel and another former Genentech scientist, Peter Seeburg, told starkly opposing stories. Seeburg, a UCSF researcher who had left to join Genentech, said that in 1978 and early 1979 he and other Genentech scientists, including Goeddel, used genetic material stolen from the school to make critical breakthroughs in turning growth hormone into a commercial product.
While admitting that Seeburg and a colleague had indeed gone back to their old UCSF laboratory and swiped some genetic material in a famous "midnight raid" on New Year's Eve 1978, Genentech denied using that material in its research. Goeddel was the main company witness in court, claiming that Seeburg invented his account of deliberate theft and fraud at Genentech. After listening to both men, jurors in that trial deadlocked 8-1 in favor of finding Genentech guilty of patent infringement.
The testimony raised questions about the very beginnings of biotechnology in the United States. By inserting the human gene for growth hormone into bacteria and coaxing them to make it in quantity, Genentech proved that large, complicated human proteins could be mass produced. That and closely related achievements of the late 1970s spurred development of an industry that is transforming medicine and agriculture.
By Seeburg's account, however, that signal achievement was tainted from the outset. Since his testimony, Seeburg has been under investigation at his laboratory in Germany for admitting participation in a scientific fraud. Goeddel, head of a South San Francisco research company called Tularik Inc. that has close ties to Genentech and wants to go public, has had to live down whispers about his own integrity. With the settlement, it's unlikely anybody will ever know for sure which man was lying on the witness stand.
Some university lawyers believed UCSF could have gained far more than $200 million in a new trial, but that might have entailed years of appeals. A motive for the settlement, university leaders made clear yesterday, was to preserve a good working relationship between UCSF and Genentech, which have frequently collaborated in advancing genetic science since the mid-1970s.
"One could argue that these are the two institutions most responsible for the biotechnology industry in the United States," said Zach W. Hall, the university's vice chancellor for research.
Five scientists who played a role in the research that led to a university patent on growth hormone will share in the settlement under university policy, splitting about $85 million. Seeburg will be one of the beneficiaries.
Genentech will book the $200 million settlement cost as a special charge in its fourth quarter. The sum exceeds the company's earnings for 1998, but Genentech has a cash balance exceeding $1 billion and analysts have said it can afford to settle.
As a face-saving bonus for Genentech, the company will contribute $50 million toward and will help name a major research building at a new 43-acre campus the university is establishing in San Francisco's Mission Bay area.