City of Hope National Medical Center v. Genentech, Inc.

Case Updates

The California Supreme Court agreed with NCLC and set aside $200 million in punitive damages awarded as part of a claim for breach of fiduciary duty. The court set aside the award because an agreement to develop, patent, and commercially exploit a secret scientific discovery in exchange for the payment of royalties does not make the assignee a fiduciary of the assigner. The California Supreme Court reversed the punitive damages award resting on the breach of a supposed fiduciary duty arising from a contract to commercialize intellectual property.

The California Supreme Court then agreed to consider whether the assignment of rights to intellectual property makes the assignee a fiduciary of the assignor with consequent liability for punitive damages. In its second brief, NCLC argued that turning businesses into fiduciaries for each other does not comport with modern understandings of contract law and imposing such a rule would impede technological development.

The California Court of Appeals unanimously affirmed the 2002 decision ordering Genentech to pay more than $500 million in damages.

NCLC argued to the California Court of Appeals that a clear distinction should be maintained between contract and tort damages and that courts should not impose fiduciary duties on parties that purchase or license intellectual property. Imposing such duties would inevitably inject punitive damages liability into commercial contract disputes over royalties owed for the use of intellectual property.