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Los Angeles-A California Supreme Court case that seeks to determine whether punitive damages apply in certain business contracts involving inventors has attracted a seemingly unlikely participant: the entertainment industry. The case pits South San Francisco, Calif.-based Genentech Inc. against the City of Hope National Medical Center, which won a record $500 million judgment in a breach-of-contract case filed against Genentech, a biotechnology firm. City of Hope National Medical Center v. Genentech Inc., No. S129463 (Calif.). About $200 million of the judgment was punitive damages. At issue is whether the relationship between City of Hope and Genentech was fiduciary in nature and not simply a breach of contract, which would have eliminated the possibility of punitive damages. More than 20 inventor associations, professors and high-tech companies, such as Intel Corp. and Microsoft Corp., have filed amicus briefs in the case in the past several weeks. But the case is not limited to contracts in the tech world. In briefs filed last month, the Motion Picture Association of America (MPAA), which represents the major motion picture studios, argued in support of Genentech. Three guilds that represent writers, directors and actors took City of Hope’s side. In their brief, the guilds-the Screen Actors Guild, the Directors Guild of America and the Writers Guild of America, west-say that eliminating punitive damages in such cases would make it harder for actors, directors and screenwriters to draft advantageous compensation deals with the studios. “The entertainment industry is analogous to the high-tech industry in that in both situations creators are entrusting what they have created to businesspeople to market their creation and make money off of it,” said Jon Eisenberg, of counsel to Horvitz & Levy of Encino, Calif., which represents City of Hope in the state Supreme Court case. The case goes back to 1976, when City of Hope signed a contract with then-fledgling Genentech to commercialize human growth hormone and insulin based on the genetic research of two of its doctors. When Genentech failed to make royalty payments on the deal, City of Hope sued for breach of contract. After the $500 million award was affirmed in 2004 on appeal, Genentech appealed. In its brief, the MPAA, which represents studios such as Sony Pictures Entertainment and Twentieth Century Fox Film Corp., said that a ruling affirming the $200 million in punitive damages would subject studios to more lawsuits and disrupt daily business activities. Neither Louis Petrich, a partner at Leopold, Petrich & Smith who represents the MPAA, nor Kori Bernards, vice president of corporate communications at the MPAA, returned calls seeking comment. But Martin Katz, an entertainment and media lawyer at Sheppard, Mullin, Richter & Hampton in Los Angeles who filed an amicus brief on behalf of Intel, said that a definitive ruling favoring Genentech would potentially stem a rising tide of fiduciary duty claims brought against the studios. For 40 years, “this was used as leverage by many talent lawyers, threatening studios with punitive damages in what were, essentially, garden variety breach of contract cases,” he wrote in an e-mail to The National Law Journal. David Gubman, a partner at Alschuler Grossman Stein & Kahan of Santa Monica, Calif., representing the three guilds, declined to comment about the case. Revisiting Roger Rabbit In filing briefs before the Supreme Court, both sides are seizing an opportunity to reargue a 2003 appellate decision that found that the studios owed no fiduciary duty in entertainment contracts. In that case, the Walt Disney Co. successfully argued against fiduciary duty in its contract with Gary K. Wolf, author of Who Censored Roger Rabbit? Wolf v. Superior, No. B157178 (Cal. Ct. App. 4th). The studio turned his novel into the 1988 movie Who Framed Roger Rabbit. The state high court did not hear that case. In their brief, the three guilds said that upholding City of Hope’s $500 million verdict would level a “tilted playing field.” The MPAA says that Wolf is a precedent that should not be challenged. “To one it’s a threat, and one it’s an opportunity,” said Gregory Smith, a partner at Los Angeles’ Irell & Manella, which represents City of Hope.

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