Jury finds for Igen in Roche case

Gaithersburg firm regains rights to its technology

$505 million award in suit

World's largest diagnostic company says it will appeal

January 11, 2002|By Julie Bell | Julie Bell,SUN STAFF

A federal jury awarded tiny Igen International Inc. $505 million yesterday from the world's No. 1 diagnostic testing company, capping a David vs. Goliath trial in which Igen claimed it was fighting for its life.

Gaithersburg-based Igen, a $36 million-a-year company that sued industry giant Roche Diagnostics five years ago in a bid to win monetary damages and regain rights to its flagship technology, greeted the verdict in U.S. District Court in Greenbelt as a near-total victory.

Roche executives, however, said that the award was substantially less than the more than $1 billion Igen had sought and said it would appeal the verdict, which awarded $105 million in compensatory damages and $400 million in punitive ones.

The jury, which deliberated for 4 1/2 days before returning the verdict early yesterday afternoon, also found that Roche engaged in unfair competition and gave Igen the ability to terminate its contract with the larger company. Both sides have agreed, however, that their relationship will continue at least until appeals are exhausted. That process is likely to take at least 18 months.

Dennis Roth, an analyst with Chesapeake Securities Research Corp., said the verdict gives Igen - which makes technology used in Roche's diagnostic testing equipment - the ability to sell a "treasure trove" of valuable diagnostic tests to others.

"The cancellation value [of the contract] is worth $1 billion to $1.5 billion," he said. "Roche is an untenable position with respect to new product launch: They can't just sit and wait for an appeal."

Igen attorneys had asked the jury to return $709.7 million in compensatory damages plus punitive ones that would put the total over $1 billion, saying the verdict would send a message to a company that engaged in a systemic attempt to "damage and destroy" Igen.

Jurors, however, said in interviews afterward that they were not swayed by emotional appeals during the 10-week trial that began Oct. 23. Instead, jurors said they concentrated on the language in the contract the two parties agreed to in 1992, along with the 40 questions on their verdict form.

"I'm really pleased with the high fairness of the verdict," Heino von Prondzynski, head of the Roche Group's $6.2 billion a year Diagnostics Division, said in an interview last night.

Von Prondzynski also said he was pleased the jury did not find that Roche had failed to apply its best efforts in developing the technology, something Igen had contended.

Just as important as the monetary award, Igen lawyers said, is the fact that Igen won the right to terminate the agreement with Roche.

The verdict, they said, gives the company the ability to license its core technology to others interested in developing disease-diagnosing products used in hospitals, clinical reference laboratories and blood banks - the areas Igen had licensed to Roche.

"This verdict is a tremendous victory for Igen and its shareholders, and we are pleased that the jury concurred with our view that Roche has engaged in an egregious pattern of misconduct over the years," Samuel J. Wohlstadter, Igen's chairman and chief executive officer, said in a statement. The verdict, he said, "sets the stage for Igen to compete in all diagnostic markets."

Roche insisted yesterday that it is up to U.S. District Court Judge Peter J. Messitte to decide whether to give Igen the right to terminate the contract, though the jury's verdict form stated that, if jurors "find a material breach, Igen is entitled to terminate." Jurors so found.

Messitte's clerk said the judge had accepted the jury's verdict but that the judge declined to comment.

"I believe we have a very good chance to keep the license on appeal," von Prondzynski said. Roche, he said, would continue marketing the Elecsys line of machines containing Igen's technology and would continue to add new tests to their menu, including ones designed to detect very early signs of heart failure.

Roche already has put the technology into machines used by at least 7,000 customers.

Though Igen also has licensed the antibody and genetic-probe technology to other companies, the contract with Roche covers use of Igen's technology in blood banks, hospitals and clinical reference laboratories - the giant contract laboratories that account for about 85 percent of the clinical diagnostic testing market.

The jury also found for Igen on a number of other counts, including that Roche had failed to keep accurate records necessary to calculate royalties owed to Igen; had placed products containing Igen's technology at physician offices and other places that are outside the scope of the contract; and failed to give Igen access to improvements it had made in instruments and tests that used the technology, as outlined in the contract.

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