XML 103 R26.htm IDEA: XBRL DOCUMENT v2.4.1.9
Legal Proceedings
12 Months Ended
Dec. 31, 2014
Legal Proceedings [Abstract]  
Legal Matters and Contingencies [Text Block]
Legal Proceedings

Settlement Agreement

On January 31, 2014, we entered into the Settlement Agreement with Genentech and Roche, that resolved all outstanding legal disputes between the parties, including our Nevada litigation with Genentech relating to an August 2010 facsimile sent by Genentech on behalf of Roche and Novartis asserting its products do not infringe on PDL’s SPCs, and our arbitration proceedings with Genentech related to the audit of royalties on sales.

Under the terms of the Settlement Agreement, effective retroactively to August 15, 2013, Genentech will pay a fixed royalty rate of 2.125% on worldwide sales of Avastin, Herceptin, Xolair, Perjeta and Kadcyla occurring on or before December 31, 2015, as compared to the previous tiered royalty rate in the United States and the fixed rate on all ex-U.S.-based Manufacturing and Sales. Pursuant to the agreement, Genentech and Roche confirmed that Avastin, Herceptin, Lucentis, Xolair and Perjeta are licensed products as defined in the relevant license agreements between the parties, and further agreed that Kadcyla and Gazyva are licensed products. With respect to Lucentis, Genentech owes no royalties on U.S. sales occurring after June 30, 2013, and will pay a royalty of 2.125% on all ex-U.S.-based Sales occurring on or before December 28, 2014. The royalty term for Gazyva remains unchanged from the existing license agreement pertaining thereto.

The agreement precludes Genentech and Roche from challenging the validity of PDL’s patents, including its SPCs in Europe, from contesting their obligation to pay royalties, from contesting patent coverage for Avastin, Herceptin, Lucentis, Xolair, Perjeta, Kadcyla and Gazyva and from assisting or encouraging any third party in challenging PDL’s patents and SPCs. The agreement further outlines the conduct of any audits initiated by PDL of the books and records of Genentech in an effort to ensure a full and fair audit procedure. Finally, the agreement clarifies that the sales amounts from which the royalties are calculated do not include certain taxes and discounts.

The Settlement Agreement provides greater certainty for each of the parties in terms of the royalty rate payable under the agreement and the period over which they will be payable. PDL expects to recognize royalty revenue on the licensed products until the first quarter of 2016. Additionally, the settlement terms provide for a better definition of revenues and audit inspection procedures related to the arbitration dispute filed by PDL.

Other Legal Proceedings

The Company, its directors, and certain of its officers were parties to three related lawsuits filed by stockholders of the Company. The first lawsuit, which purports to be brought on behalf of a class of purchasers of the Company’s securities from November 6, 2013 to September 16, 2014, was brought in Federal District Court in Nevada and alleged that the Company and certain of its officers violated federal securities laws by allegedly making misstatements or omissions concerning, among other things, the Company’s financial condition. This action is entitled Hampe v. PDL Biopharma, Inc., et al., No. 2:14-cv-01526-APG-NJK (D. Nev.).

A second lawsuit, which purported to be brought derivatively on behalf of the Company and was also filed in Federal District Court in Nevada, sought to assert claims on behalf of the Company against the Company’s directors for, among other things, breach of fiduciary duty (for disseminating allegedly false and misleading information). This action was entitled Freely, et ano. v. Lindell, et al., No. 2:14-cv-01738-APG-GWF (D. Nev.). A third lawsuit, with substantially similar allegations to Freely was subsequently filed in Nevada State Court and was entitled Marchetti, et ano. v. Lindell, et al., No. A-14-708757-C (Dist. Ct. Clark Co., Nev.). On December 11, 2014, the Court in Hampe granted an unopposed motion to appoint Robert McElroy to serve as lead plantiff in accordance with Private Securities Litigation Reform Act. Pursuant to the scheduling order dated January 5, 2015, the lead plaintiff was required to file his amended complaint on or before March 5, 2015. The Freely and Marchetti actions were stayed pending the entry of an order dismissing the case or deciding an as yet unfiled motion to dismiss in Hampe.

On February 2, 2015 and February 17, 2015, the Hampe and Freely actions, respectively, were voluntarily dismissed without prejudice. On February 18, 2015, the parties to the Marchetti action filed a stipulation and proposed order of dismissal, which is subject to the approval of the court.

In addition, from time to time, we may be subject to various other legal proceedings and claims that arise in the ordinary course of business and which we do not expect to materially impact our financial statements.