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High-tech lawyers and their clients were relieved in February 2005 when the California Supreme Court took up a controversial case in which Genentech Inc. had been hit with a $500 million jury verdict � $200 million of it in punitive damages. The appellate ruling had stunned Silicon Valley and the rest of the business world by upholding punitive damages for a breach of contract. Fearing a chill on innovation, business leaders prayed for quick action. Two years and eight months later, everyone is still waiting. Both parties had fully briefed the case by December 2005, and 21 amicus curiae briefs had been filed and responded to by April 2006. Still, the court hasn’t set an oral argument date for City of Hope National Medical Center v. Genentech Inc., S129463. Some court watchers are baffled by how long the case has languished. “A year and a half is running about average, from grant of review to the issuance of an opinion,” said one attorney familiar with the court who requested anonymity. So what gives? Other than death penalty cases, which take years to process, only two out of 135 pending Supreme Court cases � both criminal � have been awaiting oral argument longer than City of Hope. Paul Utrecht, a partner in San Francisco’s Zacks Utrecht & Leadbetter who filed an amicus brief supporting Genentech for the Washington Legal Foundation, said the court’s justices could be proceeding cautiously because of the money involved. “Making a $50,000 mistake,” he said, “is a lot different than a $500 million mistake.” Utrecht also said the legal issue � whether a breach of contract rises to despicable conduct that merits punitive damages � is so important that the court might be examining the case from all angles. “When you start saying you can get tort damages for a breach of contract and say those numbers can be in the stratosphere, you now have a real shift in the law,” he said. “Maybe that’s their struggle.” The case has gripped the high-tech industry since mid-2002, when Los Angeles jurors hit South San Francisco-based Genentech with $300 million in compensatory damages and $200 million in punitive damages for allegedly cheating City of Hope out of billions of dollars in royalties. The dispute goes back to Genentech’s infancy in 1976, when the company negotiated a patent agreement to develop and market human insulin and human growth hormone based on a genetic engineering breakthrough by two doctors at the City of Hope medical research center. More than two decades later, City of Hope sued for breach of contract and breach of fiduciary duty, claiming Genentech intentionally failed to pay royalties from sales made by third-party companies that had gotten patent licenses from Genentech based on City of Hope’s invention. Los Angeles’ Second District Court of Appeal upheld the huge damages award in 2004, ruling that Genentech had “cheated” City of Hope and, therefore, was subject to punitive damages. The case has attracted attention from the state’s entertainment community, too. Movie studios and writers’, directors’ and actors’ guilds have taken opposing positions in amicus briefs, with artists saying the threat of punitive damages in such cases could give them leverage when drafting compensation deals with studios. Finding out why the case is taking so long isn’t easy because nine of the state’s leading appellate law firms have represented either City of Hope or Genentech. Most attorneys with those firms � and some who filed for amici � wouldn’t comment. “It just may be it’s a big record and a significant case and a timing issue,” said Theodore Boutrous Jr., a partner in Los Angeles’ Gibson, Dunn & Crutcher who filed an amicus brief backing Genentech on behalf of the Product Liability Advisory Council Inc. It’s also possible the justices haven’t decided what to do with the case, and are still trading memos in the hopes that a tentative majority will emerge. Martin Katz, a partner in Sheppard, Mullin, Richter & Hampton’s L.A. office who filed an amicus brief for Intel Corp., in support of Genentech, said the court should take its time. “One of the things the court is going to want to do,” he said, “is make sure it carefully crafts its decision so that it will have the desired impact and not throw the California litigation system into a tailspin.” A few lawyers pointed out that the Supreme Court in August added to its burden by approving supplemental briefing in the case, about a recent U.S. Supreme Court ruling involving interpretations of contract royalty provisions. “It’s a lot of material to read,” Katz said. The court also sent a letter to the parties in June that revealed an internal debate about whether justices needed to recuse themselves if they held financial interests in the amici. The letter said the unnamed justices decided they didn’t need to step aside. Justice Kathryn Mickle Werdegar recused herself early in the process because her son, Matthew, is a partner at San Francisco’s Keker & Van Nest, one of four firms representing Genentech. It’s not yet clear whether the court has appointed a pro tem justice. Getting that person up to speed could take time, too, some attorneys said. Robin Meadow, an appellate specialist and partner in L.A.’s Greines, Martin, Stein & Richland, which isn’t involved in the case, said the supplemental briefing � which wasn’t complete until Aug. 28 �shows the court has recently been dealing with new information. “This case has some issues they are going to want to think through very thoroughly, and there are a lot of stakeholders,” he said. “So why shouldn’t they take their time?” Attorneys for City of Hope and Genentech had little to say. “We have no particular knowledge of what’s happening in the court,” said Joseph Lipner, a partner in Los Angeles’ Irell & Manella, which is one of five firms on City of Hope’s legal team. Meanwhile, Jerome Falk Jr., a partner in San Francisco’s Howard, Rice, Nemerovski, Canady, Falk & Rabkin, which is on Genentech’s legal team, responded with humor. “It’s like making wine. ‘We make no wine before our time,’” he said.

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