Opinion ID: 2634389
Heading Depth: 1
Heading Rank: 2

Heading: Contract Between Genentech and City of Hope

Text: On August 5, 1976, Genentech and City of Hope executed the contract. Below, we summarize the provisions pertinent here. Article 1.03 sets forth the general objectives ,of the parties. As to Genentech, it states: GENENTECH proposes to engage in the manufacture and sale of certain polypeptides. To do so, it requires synthetic DNA which codes for the production of a particular polypeptide when incorporated in a bacterial or other plasmid. The article then mentions that City of Hope has laboratory facilities with personnel qualified to synthesize DNA for selected polypeptides, that Genentech would provide funding for that process and would use the resulting DNA in the manufacture of polypeptides, and that Genentech would secure and hold patents as may emerge from that work. As to City of Hope, Article 1.03 states: For its part, CITY OF HOPE wishes to conduct DNA synthesis and related work with GENETECH funding, to publish the results of such work, and to earn royalty income from GENENTECH sales of polypeptides in whose manufacture synthetic DNA is employed. Article 3 of the contract describes the financial support Genentech was to provide to City of Hope, including funding for salaries, materials, and equipment. Article 3.04 states: The parties contemplate that GENENTECH will solely and exclusively own such patent or other proprietary property as emerges from the work performed by CITY OF HOPE under this agreement.... Article 5 grants Genentech the sole option to seek patents, but it also gives City of Hope the right to seek patents if Genentech either fails to do so or abandons a patent application. Article 6.01 reads: GENENTECH shall pay to CITY OF HOPE a royalty of two percent (2%) of the net sales of all polypeptides sold by it or its affiliates, provided only that manufacture of the polypeptide employ DNA synthesized by CITY OF HOPE under this Agreement and provided to GENENTECH by CITY OF HOPE, or replications of that DNA. (Italics added.) (The italicized language is referred to by the parties as the DNA use requirement.) Article 6.02 states: For the period commencing with the effective date of this Agreement and ending five (5) years thereafter, GENENTECH will pay to CITY OF HOPE the royalty provided for in Article 6.01 hereof regardless of whether GENENTECH has secured one or more patents on Developments. Thereafter, GENENTECH's royalty obligations under Article 6.01 shall be limited to the payment of royalty only in respect to such manufacture, use or sale which would infringe the claims of an issued GENETECH patent on Genentech developments in the country of manufacture, use or sale, but for GENENTECH's ownership of the patent, and provided further that the patent has not been finally adjudicated as invalid or unenforceable by a court of competent jurisdiction. (Italics added.) (The italicized language is referred to by the parties as the patent infringement requirement.) Article 6.08 provides: Should GEENTECH license any third party under any patent acquired by it hereunder, then GENENTECH shall secure from that party and pay to CITY OF HOPE the same royalty CITY OF HOPE would have received had GENENTECH itself carried out the licensed activity. Article 7 pertains to the infringement of patents. Article 7.02 states: Should GENENTECH recover from any infringer, whether by way of settlement or judgment, damages or profits for infringement of any patent secured by it under this Agreement, then after deduction from such recovery of GENENTECH's reasonable expenses in effecting the same, the balance shall be treated as net sales of GENENTECH for royalty purposes. In Article 8, Genentech agrees to compute and pay royalties to City of Hope quarterly, to keep regular books of account in sufficient detail to permit the royalties payable hereunder to be determined, and to permit City of Hope to inspect Genentech's books and related records. Article 10.01 grants Genentech the right to assign and transfer its contractual rights, including patents and patent licenses. Article 10.02 grants City of Hope the right to assign and transfer its rights to payments from Genentech. Finally, Article 11.01 states: Nothing herein contained shall be deemed to create an agency, joint venture or partnership relation between the parties hereto. It is agreed that the relationship between the parties is such that CITY OF HOPE in its performance of this Agreement is an independent contractor.