Gaithersburg firm regains rights to its technology; $505 million award in suit;
World's largest diagnostic company says it will appeal
By Julie Bell
Sun Staff
Originally published January 11, 2002
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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