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deCODE sues former employees

CEO Kari Stefansson testifies against employees who left to work for a new genomics program at The Children's Hospital of Philadelphia

By | October 11, 2006

Tension between academic research and the commercial sector bubbled over yesterday in Federal Court in Philadelphia as the chief executive of deCODE Genetics testified against five former employees who left the Icelandic genetics firm earlier this year. deCODE contends the employees, four of whom are now working in the new Center for Applied Genomics at The Children's Hospital of Philadelphia (CHOP), violated two-year non-compete clauses and confidentiality agreements in their deCODE employment contracts. The director of CHOP's new genomics center, Hakon Hakonarson, had been deCODE's vice president, business development. Lawyers for CHOP argued deCODE's interpretation of the agreements is overly broad and would prevent the scientists from ever working in genetics research after leaving the company. They also stressed that institutions receiving National Institutes of Health grants, including CHOP and deCODE, are obligated to try to turn their discoveries into cures under the Bayh-Dole Act. deCODE CEO Kari Stefansson testified that CHOP's plans to collect genetic data on 100,000 patients in order to develop commercial treatments puts the academic institution in direct competition with his firm, which has genotyped 100,000 Icelanders. Stefansson said he was aware Hakonarson was departing to join CHOP this spring, but it was not until he read a July press release describing the new genomics center that he began to view CHOP as a commercial competitor. "The whole press release connotes a description of an entity that is in competition with us," he testified. One quote from Hakonarson in the release was particularly alarming, Stefansson said: "Our goals for the Center are to generate new diagnostic tests for childhood diseases, to use this diagnostic knowledge to guide physicians to the most appropriate therapies. In addition, we plan to form strategic partnerships with biopharmaceutical companies to develop novel therapeutics." Stefansson, who testified that he and Hakonarson had once been close friends, said there is a "fine line" between academic work and the mission of commercial firms. In his view, CHOP is intent on crossing the line. deCODE has submitted evidence as part of its suit that Hakonarson told executives at other drug development companies that the CHOP center would also be doing research projects involving adults. The company is seeking a court injunction to prevent the researchers from working at CHOP because it says they signed agreements not to compete against deCODE for two years after leaving. The suit also alleges that Hakonarson took confidential computer files and software from deCODE and filed competing grant applications with the National Institutes of Health with both CHOP and deCODE. deCODE also alleges Hakonarson used deCODE computers to recruit deCODE employees for CHOP, then wiped out files and e-mail that might have indicated violations of the employment contracts from his hard drive. In addition, deCODE's suit cites instances in which Hakonarson allegedly asked employees still at deCODE to go into his computer files and delete e-mails relating to CHOP from others, including e-mails sent to and from his wife. CHOP's response to the deCODE suit claims Hakonarson innocently copied some computer files, but never stole key software developed by deCODE. The hospital argues that Stefansson knew for months that Hakonarson intended to resign and attempted to work out a plan in which Hakonarson would move to Philadelphia to run the CHOP center but retain at least a part-time position at deCODE. Eventually, the two sides worked out a settlement agreement, until deCODE reopened the matter with its lawsuit, which was unsealed Sept. 26. William Hangley, a lawyer for CHOP, asked why Stefansson struck Hakonarson's name from a research paper during this period. Stefansson said he felt he had to hold Hakonarson to a higher standard in the company because of his close friendship with him. Stefansson also said he did not want Hakonarson to leave because he was concerned it was a rash decision. In addition to Hakonarson, the suit also names former deCODE employees Struan Grant, Robert Skraban and Jonathon Bradfield as defendants in the case being heard before U.S. District Court Judge Jan E. Dubois. Attorneys said the hearing and legal arguments are likely to continue through November and into December. CHOP has pledged $40 million toward the new center, which is expected initially to focus on diseases prevalent in pediatric populations, including asthma, obesity, ADHD and childhood cancers. Susan Warner mail@the-scientist.com Links within this article: deCODE Genetics http://www.decode.com/ The Children's Hospital of Philadelphia http://www.chop.edu/consumer/index.jsp' Bayh-Dole Act http://www.law.cornell.edu/uscode/html/uscode35/usc_sec_35_00000200----000-.html Kari Stefansson http://www.decode.com/Company/Management.php' R. Lewis, "Iceland's Public Supports Database, But Scientists Object," The Scientist, July 19, 1999 http://www.the-scientist.com/article/display/18638 "Large-scale genomics project will hunt genes behind common childhood diseases," CHOP Press Release, June 7, 2006 http://www.eurekalert.org/pub_releases/2006-06/chop-lgp060606.php
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Comments

Avatar of: Andy Papp, PhD

Andy Papp, PhD

Posts: 1

October 11, 2006

I don't know if the article reports correctly or completely, but if it does, the case is very clear. The employees need to work on something other than diagnostic genotyping for 2 years after they leave their company. No one forced them to work at a company that had that provision as part of the employment contract. They chose to agree. They accepted their pay. The company invested in their development and shared confidential scientific and business information with them. It is only fair that the company gets the specified two years before their own people are competing against them.\n\nFurthermore, if the employees breached their contract willfully and/or if CHOP sought to hire them with knowledge of the contract, those parties should now compensate the company for all losses and legal fees. People need to realize that cannot just sign any piece of paper and then pretend it doesn't matter. Good scientist know that details matter.

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