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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT : : Master File No. 3:00 CV 705 (CFD) : : DECEMBER 21, 2004 :

In re PE Corporation Securities Litigation

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

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TABLE OF CONTENTS Page PRELIMINARY STATEMENT ........................................................................................................... 1 STATEMENT OF FACTS ................................................................................................................. 8 ARGUMENT ............................................................................................................................... 21 I. PLAINTIFFS HAVE FAILED TO IDENTIFY A FALSE OR MISLEADING STATEMENT IN THE PROSPECTUS. ............................................................ 22 A. B. C. D. II. The Discussions Regarding Potential Interactions Between Celera and the HGP Were Disclosed in the Prospectus .................................................. 22 The December 29 Meeting Was Neither Material Nor Adverse .............. 23 The December 29 Meeting Did Not Lead to Retaliatory or Punitive Government Action ................................................................................ 27 The December 29 Meeting Had No Effect on Celera's Business Plan..... 30

THE CHALLENGED STATEMENTS ARE PROTECTED BY THE REFORM ACT SAFE HARBOR AND THE BESPEAKS CAUTION DOCTRINE........... 31 A. B. C. The Allegedly Misleading Statements Are Forward-Looking ................. 32 Celera's Forward-Looking Statements Are Protected by Both Prongs of the Safe Harbor .................................................................................. 34 Celera's Forward-Looking Statements Are Protected By the Bespeaks Caution Doctrine .................................................................................... 37

III.

PLAINTIFFS HAVE FAILED TO DEMONSTRATE THAT DEFENDANTS ARE SECTION 12 SELLERS ........................................................................... 37 A. B. Celera and the Individual Defendants Did Not Pass Title to Plaintiffs..... 38 Celera and the Individual Defendants Did Not Solicit the Purchase of Celera Shares ......................................................................................... 39

CONCLUSION ............................................................................................................................. 40

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TABLE OF AUTHORITIES Error! No table of authorities entries found.Error! No table of authorities entries found.Error! No table of authorities entries found.

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PRELIMINARY STATEMENT To best understand Plaintiffs' claim, it is helpful to take a step back and put this suit in context. Like many shareholder suits, the Plaintiffs' complaint was prompted by a decline in a public company's stock price ­ in this case, that of the Celera Genomics Group ("Celera"). Celera is a business formed by PE Corporation in 1998 to develop and commercialize genomic information. At the time Celera was formed, the media and the stock market were acutely interested in technology companies in general, and in biotechnology companies in particular. This interest caused a substantial increase in Celera's stock price in late 1999 and early 2000 ­ the very peak of the "dot com bubble" ­ from $15.31 per share on September 1, 1999 to $244 per share on February 29, 2000. On March 14, 2000, President Clinton and Prime Minister Tony Blair issued a joint statement on genomics research (the "Joint Statement") that was widely misinterpreted as changing intellectual property law to the detriment of biotechnology companies. The entire biotechnology market immediately declined. The NASDAQ Biotech Index declined from its peak of 1,596 on March 6, 2000 to 1,177 the day after the Joint Statement. Celera's stock price likewise declined from its peak of $244 per share to $146 per share the day after the Joint Statement. In an effort to stem this decline, President Clinton issued a subsequent statement clarifying that he had no intention of changing intellectual property law. Notwithstanding President Clinton's clarification, Plaintiffs ginned up this securities action in an attempt to profit from the downturn in the biotechnology market, relying on nothing more than a solitary news article. On March 6, 2000, approximately one week before the Joint Statement, the Los Angeles Times published an article about a December 29, 1999 meeting between Celera and the Human Genome Project ("HGP"), a research organization funded in significant part by U.S. government agencies, that was, like Celera, sequencing the

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human genome. The article stated that the two sides discussed a range of possible interactions, but did not reach an agreement.1 Plaintiffs attempt to craft a securities law claim by (i) mischaracterizing every aspect of the December 29 meeting and (ii) inventing a connection between the meeting and the Joint Statement. More specifically, Plaintiffs' far-fetched theory of this case is that Celera should have disclosed in connection with a stock offering that the United States and the United Kingdom were going to issue the Joint Statement or otherwise punish Celera because Celera did not reach an agreement to work with the HGP on December 29. The remainder of this memorandum details why Plaintiffs' claim is as implausible in fact as it is in theory. Plaintiffs commenced this action against Tony White, Dennis Winger, Vikram Jog (collectively, the "Individual Defendants") and PE Corporation in April 2000 alleging that the registration statement and prospectus (together, the "Prospectus") prepared in connection with a February 29, 2000 secondary public offering (the "Secondary Offering") of Celera common stock were false and misleading in violation of the Securities Act of 1933 because they did not disclose the December 29 meeting.2 On October 5, 2001, Defendants filed a motion to dismiss Plaintiffs' First Amended Complaint (the "Complaint"). On April 1, 2003, the Court denied that motion without discussion and without prejudice to filing a summary judgment motion. Defendants now move for summary judgment because discovery has confirmed what
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It is particularly strange that Plaintiffs cite the discussions between Celera and the HGP as the basis for a non-disclosure claim, since those discussions were widely followed in the media prior to the Secondary Offering. See Statement of Facts, Section D(2), infra; see also Defendants' Post-Hearing Memorandum of Law in Further Opposition to Plaintiffs' Motion for Class Certification, May 13, 2004, at 3-7. PE Corporation is now known as Applera Corporation. At the time of the Secondary Offering, PE Corporation had two tracking stocks: PE Corp. ­ Celera Genomics Group and PE Corp. ­ PE Biosystems Group. This case relates solely to the Secondary Offering of PE Corp. ­ Celera

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Defendants knew from the outset ­ what Plaintiffs have is stock price decline; what they do not have is a legitimate cause of action.3 Based solely on the Los Angeles Times article, Plaintiffs allege that "Celera and the Human Genome Project had ongoing discussions concerning [a] proposed collaboration that culminated" in the December 29 meeting, and that the "bargaining quickly broke down" at the meeting because "Celera wanted at least five years of exclusive rights to license the data produced by the merging of the two sides' efforts to commercial users." (Compl. at ¶ 25.) The undisputed evidence demonstrates that Plaintiffs' speculations concerning the December 29 meeting are, quite simply, wrong in every possible respect.

The December 29 M eeting ­ "A R elatively M inor Side Show"4
At the outset, Plaintiffs are wrong when they allege that the discussions between Celera and the Human Genome Project "were never referenced in any fashion in the Company's public filings or press releases and certainly were not disclosed in the Prospectus for the Secondary Offering." (Compl. at ¶ 24.) The Prospectus expressly discloses that Celera "has sought to coordinate its efforts with those funded by the U.S. government." Summary judgment should be granted for Defendants on this basis alone because this disclosure plainly encompasses any particular conversation or meeting, including the December 29 meeting.

Genomics Group common stock. Accordingly, for the sake of clarity, this memorandum refers to the issuer as "Celera" although the issuer was technically PE Corporation.
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Defendants' motion is timely filed in accordance with the schedule set forth in the parties' Rule 26(f) report, which was so ordered by the Court on June 12, 2003. Section V(F) of the report provides that a party may move for summary judgment at any time after the close of fact discovery, but no later than 45 days after the close of expert discovery. Fact discovery closed on October 20, 2004 and expert discovery has not yet commenced. For the Court's convenience, Appendix A to this memorandum lists the individuals who participated in the effort to sequence the human genome and the discussions between Celera and the HGP.

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Beyond the dispositive fact that the alleged omission was actually disclosed, the central premise of Plaintiffs' entire case ­ that the December 29 meeting was material and adverse to Celera ­ is patently incorrect. First, contrary to Plaintiffs' allegation, Celera did not attend the December 29 meeting to negotiate the terms of a "proposed collaboration." The uncontradicted evidence establishes that the HGP attended the meeting to explore whether the two sides might agree on a formal collaboration, i.e., a complete merger of their respective sequencing programs. Celera, on the other hand, attended the December 29 meeting merely to explore whether the two sides could reduce the adversarial media rhetoric that had characterized their relationship, and whether the parties might agree to simultaneously publish their scientific papers analyzing the human genome. As Dr. Arnold Levine, a member of Celera's Scientific Advisory Board, testified, "the two sides didn't even agree on the substance of the meeting, the content of the meeting or the agenda for the meeting." Second, Plaintiffs erroneously allege that the December 29 meeting was the "culmination" of discussions between Celera and the HGP. The evidence establishes just the opposite. According to a December 28, 1999 email from the HGP to Dr. Craig Venter, President of Celera, the meeting was nothing more than an "exploratory and general" conversation. Dr. Venter confirmed that the December 29 meeting was "the first face to face and first formal discussion" between Celera and the HGP. Third, as Plaintiffs recently admitted, the December 29 meeting was simply one in a series of discussions between Celera and the HGP concerning a range of potential interactions.5

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In support of their motion to compel the testimony of Dr. Francis Collins, Plaintiffs represented to the Court that "post-December 29, 1999 negotiations [between Celera and the HGP] culminated with Drs. Venter and Collins appearing together on the cover of Time [in June 2000]." Plaintiffs' Reply Memorandum in Further Support of Plaintiffs' Motion to Compel the Testimony of Dr. Francis Collins, Nov. 19, 2004, at 2.

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Celera and the HGP continued their sporadic discussions after the December 29 meeting and, contrary to Plaintiffs' "break down" allegation, ultimately agreed to: (i) simultaneously announce the completion of a draft genome sequence; (ii) reduce the adversarial media rhetoric; and (iii) publish their scientific papers simultaneously. Finally, Plaintiffs' characterization of the December 29 meeting as a particularly important event in the course of discussions between Celera and the HGP is flatly contradicted by members of both organizations, who testified that it was insignificant: · · · Dr. Venter testified that the discussions with the HGP were "a relatively minor side show;" Dr. Levine testified that "there's nothing about that meeting that's special;" Dr. Harold Varmus, former director of the National Institutes of Health ("NIH"), testified that discussions with Celera "were not the dominant events in my life;" Dr. Robert Waterston, a member of the HGP, testified that the meeting "hadn't produced anything useful."

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Summary judgment should be granted for Defendants because the federal securities laws do not require disclosure of insignificant, non-productive meetings. To do so would risk burying shareholders in an "avalanche of trivial information," contrary to Supreme Court guidance. In addition to mischaracterizing the December 29 meeting, Plaintiffs assert that their distorted version of the December 29 meeting should have been disclosed in the Prospectus because either (a) the United States and the United Kingdom would punish Celera as a result of the meeting (the "retaliation theory") or (b) Celera's business plan was doomed to fail because of the December 29 meeting (the "business plan theory"). Both theories are nothing more than unsubstantiated speculation.

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The R etaliation Theory
The Complaint asserts that as a result of the meeting and alleged break down in negotiations, "Celera was at an increased and substantial risk that the United States and United Kingdom would take aggressive and punitive actions against Celera in order to ensure immediate and free access to the map of the human genome and its variants." (Compl. at ¶ 26.)6 Plaintiffs further fantasize that the government would punish Celera (and by implication an entire industry) by curtailing intellectual property rights on genomic discoveries. Underlying Plaintiffs' speculations are the unstated assumptions that the HGP had the power to influence the United States Patent and Trademark Office ("PTO"), and that it would exercise that power in retaliation for Celera's refusal to agree to a collaboration at the December 29 meeting. Plaintiffs had no factual support for either of those unstated assumptions at the time of the Complaint, and they have none at the close of fact discovery. The HGP has never had any legal relationship with the PTO and could not order or direct the PTO to deny Celera's intellectual property rights. Moreover, the undisputed testimony of Dr. Harold Varmus and Dr. Robert Waterston, respected members of the HGP, establishes that no one at the HGP ever asked the U.S. government to punish Celera or change intellectual property law to Celera's detriment. Furthermore, Plaintiffs' interpretation of the Joint Statement as some sort of directive to the PTO to take adverse actions against Celera is utterly false and directly contradicted by (i) the language of the Joint Statement itself, (ii) public statements by U.S. government officials; and (iii) the testimony of the Human Genome Project. Drs. Waterston and Varmus testified that, contrary to Plaintiffs' allegation, the Joint Statement was wholly unrelated
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Notwithstanding their own allegation, Plaintiffs refused to respond to a contention interrogatory requesting that Plaintiffs identify all instances in which the U.S. or U.K. governments actually punished Celera on the grounds that, inter alia, the terms "punish" and "punishment" are "vague, ambiguous and overly broad."

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to the December 29 meeting and long preceded discussions between Celera and the HGP. In short, the sworn testimony of key members of the HGP confirms that Plaintiffs' retaliation theory is nothing but unfounded speculation.

The Business Plan Theory
Recognizing the absurdity of their retaliation theory, Plaintiffs changed direction during discovery and pursued the alternative business plan theory. Plaintiffs now assert that the description of Celera's business plan in the Prospectus was false and misleading because Celera failed to disclose that it did not reach an agreement to collaborate with the HGP and that its business plan was somehow dependent upon a collaboration. Plaintiffs' business plan theory is even more implausible than their retaliation theory. Celera's business plan contemplated the public release of the basic human genome and the sale of subscriptions to an annotated, searchable version of the genome, much like Westlaw or Lexis sells annotated and searchable versions of publicly available case law. Every witness in this case, including witnesses from the HGP, testified that a collaboration with the HGP was never part of Celera's business plan. Plaintiffs' business plan theory, like their retaliation theory, has no evidentiary support. There are no disputed material facts and Defendants are entitled to judgment as a matter of law for several reasons. First, Plaintiffs have failed to identify a false or misleading statement or material omission in the Prospectus ­ a necessary predicate for any claim under Sections 11 and 12 of the Securities Act of 1933. Second, the challenged statements in the Prospectus, from which references to the December 29 meeting were allegedly omitted, are protected by the safe harbor provisions of the Private Securities Litigation Reform Act ("PSLRA" or "Reform Act") and the bespeaks caution doctrine. Finally, Plaintiffs have failed to establish that Defendants sold stock to any class member ­ a critical element of Plaintiffs' -7-

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Section 12 claim. For the foregoing reasons, and for the reasons explained more fully below, Defendants respectfully request that the Court grant their motion for summary judgment and dismiss the Complaint in its entirety.7 STATEMENT OF FACTS8 A. The Human Genome Project The HGP is an international research organization formed in 1990 to sequence the human genome. (Ex. 7 at 10; Ex. 48) It is funded by governments and non-profit organizations in the United States, the United Kingdom, Japan, France, and approximately 10 other countries. (Ex. 7 at 12-13; Ex. 48)9 The majority of the HGP's sequencing work was done through its five largest sequencing centers, referred to by members of the HGP as the "G-5." (Ex. 6 at 62; Ex. 7 at 13-14.) At its inception, the HGP planned to complete the sequencing and assembly of the human genome over a 15-year period at a cost of approximately $3 billion. 10 (Ex. 3 at 39.) B. The Celera Genomics Group PE Corporation formed Celera in 1998 to sequence the human genome and create the definitive commercial source of genomics information for the pharmaceutical, biotechnology

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Plaintiffs also assert a control person claim against the Individual Defendants under Section 15 of the Securities Act. 15 U.S.C. § 77o (2004). Since Plaintiffs' Section 11 and Section 12 claims are deficient as a matter of law, Plaintiffs' Section 15 claim must be dismissed as well. See Laser Mortgage Mgmt., Inc. v. Asset Securitization Corp., No. 00 CIV. 8100, 2001 WL 1029407, at *12 (S.D.N.Y. Sept. 6, 2001). The facts on which Defendants' motion is based, and the evidence showing that there is no genuine dispute as to those facts, are set forth in Defendants' Local Rule 56(a)1 Statement of Material Facts as to Which There is No Genuine Issue to be Tried and the exhibits thereto ("Ex."). The Human Genome Project is not a federal agency. It is a group of research scientists that received grants from, among others, various federal agencies and private charities. After the formation of Celera, the HGP accelerated its sequencing efforts on at least two separate occasions. (Ex. 1 at 36.)

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and life science research industries. (Ex. 1 at 32.) Celera planned to complete the sequence and assembly of the human genome faster, more accurately, and at a fraction of the cost of the HGP's effort ­ three years at a cost of $300 million for Celera, as compared to the projected 15 years and $3 billion for the HGP.11 (Ex. 3 at 39.) At the time of the Secondary Offering, the foundation of Celera's business plan was to sequence the human genome and sell valuable genomic, proteomic and related biological and medical information in the form of an integrated information and discovery system, much like the business model of Westlaw or Lexis. 12 (Ex. 1 at 32; Ex. 2 at 23-24.) Subscribers to Celera's database purchased the ability to view, browse and analyze genomic data in an integrated way that assisted scientists and commercial enterprises in accelerating their understanding of the human genetic code. (Ex. 1 at 38-39; Ex. 5 at 25-26.)13

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Celera's ability to sequence the genome faster and cheaper was primarily due to the groups' different sequencing methods. The HGP utilized a sequencing strategy known as the "BAC by BAC" approach, which involved breaking up the human genome into discrete sections of DNA that are mapped to chromosomes and then sequenced one section at a time. (Ex. 1 at 36.) This method first required HGP scientists to "map" the chromosomes. Celera utilized a sequencing strategy developed by Dr. Venter known as the "whole genome shotgun" methodology. (Id. at 40.) In laymen's terms, the whole genome shotgun strategy involved breaking up the entire genome into thousands of smaller, manageable pieces, sequencing the individual pieces, and then reassembling the genome using powerful computers and algorithms. (Id.) Westlaw and Lexis collect judicial opinions and other widely available legal information, which are neither patentable nor otherwise protectable, and organize and annotate the material into searchable databases. Similarly, Celera planned to use the raw sequence of the human genome, which is not patentable, and organize it into a searchable, annotated format. As explained in the Prospectus, the sequencing of the human genome laid the foundation for two additional components of Celera's business plan. The first component, called "functional genomics," addresses the issue of which genes are responsible for particular cellular functions. (Ex. 1 at 34.) The second component, personalized health/medicine, includes, inter alia, the use of genomic information to individualize the diagnosis of disease and the development of appropriate treatments. (Id.)

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C.

Data Release Policy Recognizing the historic importance of the endeavor, Celera and the HGP each

committed to publicly release the raw human genome sequence. The differences between the data release policies of Celera and the HGP, however, are important in understanding why the allegations in the Complaint make no sense. The HGP's data release policy was driven by an agreement known as the "Bermuda Accord," which calls for all members of the HGP to deposit within 24 hours all newly-generated DNA sequences into an online genetic database known as GenBank, administered by the NIH. (Ex. 4 at 61; Ex. 48.) GenBank data was free of any restrictions, and any member of the public, including Celera, was able to download GenBank data on a daily basis and use it in any way. 14 The significance of the Bermuda Accord was that it gave Celera complete access to any data developed by the HGP. (Ex. 2 at 121-22; Ex. 4 at 154-55; Ex. 6 at 147; Ex. 40.) As a for-profit business, Celera was not party to the Bermuda Accord, and did not obligate itself to make its sequence data available to the HGP. (Ex. 4 at 154-55.) Celera planned to release its data when it completed the sequencing and assembly of the human genome, rather than on a daily basis.15 (Ex. 1 at 38.) The Prospectus described Celera's data release policy as follows: "[a]fter completion of sequencing and assembly, the Celera Genomics group expects to release a detailed ordered consensus human genome assembly. The data that the Celera Genomics group releases publicly will be available . . . via its web site." (Id.)
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HGP's commitment to the Bermuda Accord was widely publicized in the media long before the Secondary Offering. (See, e.g., Ex. 10.) See also Defendants' Memorandum of Law in Opposition to Plaintiffs' Motion for Class Certification, Dec. 29, 2003, at 16-19. Dr. Venter testified that the public release of the human genome was a fundamental condition of his agreement to join PE Corp. and form Celera in 1998. (Ex. 3 at 13, 47.)

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D.

Media Coverage of the Effort to Sequence the Human Genome The efforts of Celera and the HGP to sequence the human genome were among

the most widely publicized events in scientific history, and are chronicled in thousands of news articles and at least two books. (See, e.g., Exs. 10-20, 52, 53.)16 The media portrayed Celera and the HGP as being in a "race" to sequence the human genome, with the possibility of Nobel prizes being awarded to the "winner." (Ex. 6 at 40.) While there was competition between Celera and the HGP for scientific attribution, Celera did not believe the HGP was a commercial competitor or that the outcome of the "race" was important to its business plan. (Ex. 1 at 49; Ex. 2 at 123; Ex. 4 at 29.) 1. Adversarial Rhetoric

Due to the competition for scientific attribution, scientists affiliated with the HGP often made negative comments in the media concerning Celera and Dr. Venter. For example, Dr. Collins stated that he believed Dr. Venter's whole genome shotgun method would produce a "Mad Magazine" version of the human genome. (Ex. 11.) Celera perceived these negative press statements as unwarranted and not in the best interest of science. (Ex. 3 at 37-38.)17 2. Media Coverage of Discussions Concerning Possible Celera/HGP Interactions

Although the media coverage of the effort to sequence the human genome was inaccurate and over-simplified in many respects, news outlets correctly reported that Celera and the HGP discussed potential interactions, and that those discussions had not resulted in an agreement due to the HGP's data release policy. The discussions were reported in several
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A search in Lexis' "all news" database for articles containing the terms "Celera" and "Human Genome Project" in 1999 and 2000 produces 2,321 results.

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national news sources well before the Secondary Offering. (Exs. 12-20.)18 The New York Times, for example, reported in November 1999 that "[t]alk of collaboration has flared among rivals pursuing one of biology's highest goals" but that their "desire to collaborate [was] tempered by rival agendas, especially on the question of access to the DNA data, and personal disagreements." (Ex. 12.) Other publications contained similar descriptions of the relationship between Celera and the HGP: · · E. "Yet, negotiations on joining the efforts have stalled, largely over when and how results would be released." (Ex. 13.) "[T]he public consortium is negotiating with its private rival to pool efforts." (Ex. 14.) Discussions Concerning Possible Interactions Between Celera and the HGP 1. Fall 1999 Contacts

Beginning in the fall of 1999, there were a series of informal contacts between Celera and the HGP regarding a range of possible interactions between the two organizations. (Ex. 4 at 36-37; Ex. 5 at 38; Ex. 6 at 76.) The Complaint wholly mischaracterizes these events. a. Conversations with Dr. Eric Lander

In the fall of 1999, Dr. Eric Lander, director of the Whitehead Institute for Biomedical Research, one of the HGP's "G-5" sequencing centers, began contacting Celera representatives to determine whether there was a way to reduce the negative media rhetoric and

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Dr. Venter testified that he spent a great deal of his time rebutting comments made by members of the HGP "who felt they were in competition with the Celera initiative and continually attacked it, my team, myself, my organization [in] the press." (Ex. 3 at 37-38.) See also Defendants' Memorandum of Law in Opposition to Plaintiffs' Motion for Class Certification, Dec. 29, 2003, at 19-20; Defendants' Post-Hearing Memorandum of Law in Further Opposition to Plaintiffs' Motion for Class Certification, May 13, 2004, at 3-7.

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whether there was any basis for interactions between Celera and the HGP. (Ex. 2 at 29-30; Ex. 3 at 36-37; Ex. 4 at 35-36; Ex. 5 at 22-23.) The interaction that Dr. Lander initially wanted to explore was a full-scale collaboration by which Celera and the HGP would agree to share sequence and backup data, to merge their respective versions of the human genome sequence, and to publish a single, joint scientific paper analyzing the merged genome. (Ex. 22.) Since Celera already had complete access to the HGP's sequence data, it had minimal, if any, commercial interest in pursuing a fullscale collaboration agreement. (Ex. 2 at 121-23; Ex. 3 at 39-40; Ex. 4 at 154-55; Ex. 23; Ex. 40.) Instead, Celera made clear to Dr. Lander that it was only interested in pursuing a simple cooperation agreement whereby Celera and the HGP would agree to publish their scientific papers analyzing the human genome simultaneously, and refrain from making negative statements about each other to the media. (Ex. 23.) b. Conversations with Dr. Harold Varmus

Dr. Harold Varmus was the former director of the NIH, and a key member of the HGP team. In the fall of 1999, Dr. Varmus decided to leave the NIH and accept a position as President of Memorial Sloan-Kettering Cancer Center. (Ex. 4 at 47-49.) Dr. Arnold Levine was a Celera Scientific Advisory Board member, a friend of Dr. Varmus, and the President of Rockefeller University (which is located across the street from Sloan-Kettering). (Id.) On December 10, 1999, Drs. Varmus and Levine met at Dr. Levine's office to discuss possible interactions between their respective institutions, Sloan-Kettering and Rockefeller University. (Ex. 4 at 48; Ex. 6 at 75, 77-78.) At that meeting, Dr. Levine and Dr. Varmus discussed their belief that the rhetoric between Celera and the HGP in the press was embarrassing and bad for science. (Ex. 4 at 48; Ex. 6 at 76.) Dr. Varmus asked if a face-to-face meeting might be helpful. (Ex. 6 at 126-27.) Dr. Levine agreed that a meeting might help reduce the rhetoric. (Id.) - 13 -

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2.

The First Face-to-Face Meeting

The first formal meeting between Celera and the HGP was scheduled for December 29, 1999 at the Hyatt Hotel near Dulles Airport outside of Washington, D.C. (Ex. 39.) The Complaint grossly mischaracterizes every aspect of the meeting. The undisputed facts demonstrate that: (1) Celera never wanted a full scale collaboration with the HGP; (2) Celera only wanted to reduce the adversarial media rhetoric between the two sides; and (3) the December 29 meeting was simply one in a series of discussions between Celera and the HGP. a. The "Shared Principles" Document

Before the December 29 meeting, the HGP drafted a document it called "Shared Principles" that (a) described scientific principles that, according to the document, were shared by Celera and the HGP and (b) proposed terms for a full-scale collaboration. (Ex. 27.) In reality, these "shared" principles were "shared" only by members of the HGP, and not by Celera. (Ex. 3 at 92-93, 98, 100; Ex. 4 at 63-64, 137; Ex. 7 at 47, 71.) On December 28, 1999, the HGP emailed the "Shared Principles" to Celera for the first time, together with a proposed agenda for the next day's meeting. (Ex. 27.) Dr. Venter and others were surprised and angered by the document because it suggested that Celera had already agreed to certain principles or terms regarding a collaboration. (Ex. 3 at 100; Ex. 4 at 137.) Dr. Levine "didn't understand who shared these principles. They hadn't been openly discussed with [Celera]." (Ex. 4 at 63.) Dr. Venter recalled, "[t]hey weren't principles that were shared ­ [Dr. Collins] was sharing them with us. They weren't joint principles." (Ex. 3 at 98.) Dr. Venter flatly rejected the HGP's "Shared Principles" document and proposed agenda. (Ex. 7 at 72; Ex. 26; Ex. 34.) He told the HGP what he had already told Dr. Lander ­ (1) that it was "a little late in the game" to achieve a full blown collaboration, particularly given the persistent adversarial comments made to the press by the HGP and (2) that Celera preferred a - 14 -

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simple cooperation agreement whereby the two sides would agree to a "cease fire" in the press and would publish their scientific papers simultaneously. (Ex. 4 at 64-65; Ex. 26; Ex. 34.) b. The December 29 Meeting

As could be expected given the above-described email exchange, the December 29, 1999 meeting was brief and unproductive. Plaintiffs deposed six of the eight participants in the meeting, and their recollections were consistent. After initial introductions, Dr. Collins introduced the terms of a full-scale collaboration that would be acceptable to the HGP. (Ex. 5 at 80.) Those terms included: (i) an agreement by Celera to give the HGP access to its data and algorithms; (ii) an agreement by Celera to "merge" its data with the HGP's data; (iii) an agreement by Celera to publish a joint scientific paper analyzing the merged product; and (iv) an agreement by Celera to deposit the merged data set in GenBank after a short period of exclusivity lasting six months to a year. (Ex. 27.) The HGP's proposal did not indicate what consideration Celera would receive for any of these agreements. Celera representatives responded immediately and negatively to the HGP's proposal. As they had previously indicated, Celera had no commercial interest in a formal collaboration. (Ex. 3 at 108-09, 111-12.) Celera reminded the HGP that due to HGP's adherence to the Bermuda Accord, Celera already had access to the HGP's data. (Ex. 4 at 15455.) Drs. Waterston and Varmus of the HGP testified that Tony White believed that the HGP's proposal was unreasonable because it did not protect the interests of Celera's shareholders: · "Several times during the meeting Tony White said ­ brought up whether anything ­ whether ­ whether what we were talking about was going to be a benefit to the shareholders. And ­ and that was ­ and several times said that that was his principal responsibility." (Ex. 7 at 81.) "[Tony White] was constantly referring back to whether it was good for the shareholders or not." (Id. at 92.)

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·

"[When Tony White spoke at the meeting,] there was a more overt recognition that, that the company was, you know, beholden to its stockholders, that the company had a large investment and that the intellectual property was extremely valuable . . . ." (Ex. 6 at 104-05.) "[W]hen Tony arrived he made clear that he, you know, he was, he was representing the business interests of the company . . . ." (Id. at 108.)

·

Mr. White responded to the HGP's proposal by stating that Celera's shareholders would need to receive a substantial benefit from any collaboration agreement with the HGP. (Ex. 2 at 55-56.) Mr. White suggested that such a benefit might be, for example, a period of exclusive access to a merged version of the genome for five to ten years. (Id. at 57.) This suggestion regarding an exclusivity period was made solely in response to the HGP's collaboration proposal. (Ex. 3 at 118-19; Ex. 5 at 32-33, 83-85.) It was not a component of Celera's business plan, and it was not a suggestion that Mr. White believed would be acceptable to the HGP. (Ex. 2 at 58, 122; Ex. 3 at 118-19, 123, 149.) The purpose of Mr. White's suggestion was to make clear to the HGP that their collaboration proposal was unreasonable. (Ex. 2 at 122.) As Mr. White expected, representatives of the HGP found his suggestion of a five to ten year exclusivity period unacceptable given the HGP's commitment to the Bermuda Accord. (Id.; Ex. 6 at 116-17.) The meeting ended without an agreement as to cooperation or collaboration. 3. Subsequent Discussions

Following December 29, Celera and the HGP continued to have sporadic discussions regarding potential interactions. (Ex. 4 at 143-44, 160-61.) For example, Tony White and Francis Collins spoke in a lengthy teleconference on January 22, 2000. (Ex. 35.) During that call, Mr. White reiterated that the HGP's proposed collaboration did not benefit

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Celera in any way. (Id.; Ex. 2 at 74.) In January and February 2000, Dr. Collins repeatedly called Dr. Venter to explore the HGP's proposed collaboration. (Ex. 7 at 109; Ex. 36.) Discussions continued in March and April. (Ex. 3 at 156, 178.) Dr. Ari Patrinos, director of the DOE's segment of the HGP, arranged for several meetings between Dr. Collins and Dr. Venter. (Id.) As a result of Dr. Patrinos' efforts, Celera and the HGP agreed that they would jointly announce the completion of a draft assembly of the human genome, and that the two sides would simultaneously submit their papers for scientific publication. (Id. at 178-79; Ex. 5 at 52.)19 Thus, contrary to Plaintiffs' allegations of a "break down" and "aggressive and punitive actions," the discussions between Celera and the HGP were actually successful in achieving an agreement to simultaneously publish their scientific papers. F. Celera's Secondary Offering Celera commenced its Secondary Offering two months after the December 29 meeting. On February 29, 2000, Celera filed an SEC Form S-3 for 4.37 million shares of stock in a secondary public offering at $225 per share. (Ex. 1.) The Prospectus described in great detail Celera's business, the history of the effort to sequence the human genome, and 49 specific risks that might harm Celera's business. (Id. at 8-20, 32-39.)20 Critically, the Prospectus

19

In accordance with this agreement, a ceremony was held at the White House on June 26, 2000 to announce the completion of a draft sequence and assembly of the human genome. (Exs. 41, 42.) Celera and the HGP published scientific papers analyzing the human genome in Science and Nature, respectively, on February 16, 2001. (Exs. 45, 46.) The full text of the 49 risk factors is set forth in Exhibit 1 at pp. 8-20. The Complaint raises a key question: How could Celera have disclosed the alleged "omission" in this case? If Celera disclosed every business meeting in which important issues were discussed, the Prospectus would have been thousands of pages long and inundated shareholders with unimportant information. If Celera disclosed what Plaintiffs allege, that the December 29 meeting resulted in a break down of negotiations between Celera and the HGP, and that the U.S. government was likely to punish Celera as a result, this disclosure would have proven to be inaccurate because Celera continued discussions and reached an agreement with the HGP, and the U.S. government never attempted to punish Celera.

20

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specifically disclosed the above-described discussions that Plaintiffs contend were omitted, stating that Celera "has sought to coordinate its efforts with those funded by the U.S. government." (Id. at 49.) (emphasis added). The Prospectus also disclosed that from its inception, Celera never planned to monopolize or patent the genome, but rather planned to publicly release the genome itself. Indeed, the Prospectus disclosed that "[t]he Celera Genomics group, the federally funded Human Genome Project and others engaged in similar research have committed to make available to the public basic human sequence data." (Id. at 12.) And Celera honored its commitment to publicly release the raw human genome sequence. (Ex. 54.) On February 16, 2001, Celera scientists published an accurate assembly and initial interpretation of the human genome in the journal Science. (Ex. 45.) These facts directly refute Plaintiffs' allegations that: (i) Celera "believed, above anything else, that maintaining exclusive rights to the human genome map was the most important aspect of its business strategy;" (Compl. at ¶ 48.) (ii) Celera needed to "obtain protection from the immediate release of the human genome code;" (Id. at ¶ 26.) and (iii) "public dissemination of the human genome map was a material risk to Celera's business strategy." (Id. at ¶ 46.) In addition, contrary to Plaintiffs' claim that the Prospectus understated the risks to Celera's business plan, data release policy, and intellectual property needs, as shown in the table below, the Prospectus actually contains a multitude of detailed, narrowly tailored disclosures regarding these risks:
THE PROSPECTUS DISCLOSES: CELERA GENOMICS' COMPETITIVE POSITION MAY DEPEND ON PATENT AND COPYRIGHT PROTECTION, WHICH MAY NOT BE SUFFICIENTLY AVAILABLE ­ The Celera Genomics group's ability to compete and to achieve profitability may be affected by its ability to protect its proprietary technology and other intellectual property . . . . [Intellectual property protection] is likely to become more important to its business as it expands into the area of functional genomics, in that Celera

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Genomics would be able to prevent competitors from making, using or selling any of its technology for which it obtains a patent. Patent law affecting Celera Genomics' business . . . is uncertain, and as a result, the Group is uncertain as to its ability to prevent competitors from developing similar subject matter . . . . Moreover, the Celera Genomics group may be dependent on protecting, through copyright law or otherwise, its databases to prevent other organizations from taking information from such databases and copying and reselling it. Copyright law currently provides uncertain protection regarding the copying and resale of factual data. As such, Celera Genomics is uncertain whether it could prevent such copying or resale. Changes in copyright and patent law could either expand or reduce the extent to which the Celera Genomics group and its customers are able to protect their intellectual property. (Ex. 1 at 11-12.) The granting of patents on genomic discoveries is uncertain worldwide and is currently under review and revision in many countries. Moreover, publication of information concerning partial gene sequences prior to the time that the Celera Genomics group applies for patent protection based on the full-length gene sequences or different partial gene sequences in the same gene may affect the Celera Genomics group's ability to obtain patent protection . . . . Currently, the U.S. Patent and Trademark Office requires an adequate disclosure of a specific and substantial utility, such as gene function, in order to support the patentability of a gene sequence. (Id. at 48.) The Celera Genomics group cannot ensure that any changes to, or interpretations of, the patent laws will not adversely affect its patent position. The Celera Genomics group anticipates that there will be significant litigation in the industry regarding genomic patent and other intellectual property rights . . . . If Celera Genomics does not prevail in a patent litigation dispute, it may be required to pay damages or royalties or to take measures to avoid any future infringement, or Celera may not be able to stop a competitor from making, using, or selling similar products or technology. (Id.) The Celera Genomics group believes that current efforts by some companies to obtain data made publicly available for the purpose of private resale may continue, and that the need to protect the value of its information while honoring its intention to share this data with the research community will affect its data disclosure strategy. (Id. at 38.)

As is abundantly clear from these examples and contrary to the allegations in the Complaint, the Prospectus contained many cautionary statements concerning the ability of Celera to obtain the intellectual property protection necessary to follow through on its future business plans. No fair-minded reader of the Prospectus could conclude otherwise. G. The March 14 Joint Statement By President Clinton and Prime Minister Blair Two weeks after the Secondary Offering, President Bill Clinton and Prime Minister Tony Blair issued the Joint Statement. The Joint Statement supported intellectual property protection for genomic discoveries:

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To realize the full promise of this research, raw fundamental data on the human genome, including the human DNA sequence and its variations, should be made freely available to scientists everywhere. Unencumbered access to this information will promote discoveries that will reduce the burden of disease, improve health around the world, and enhance the quality of life for all humankind. Intellectual property protection for genebased inventions will also play an important role in stimulating the development of important new health care products. We applaud the decision by scientists working on the Human Genome Project to release raw fundamental information about the human DNA sequence and its variants rapidly into the public domain, and we commend other scientists around the world to adopt this policy. (Ex. 28.) (emphasis added).21 Despite the Joint Statement's clear statement to the contrary, the media misinterpreted the Joint Statement as a "ban" on gene patents, causing stock prices in the entire biotechnology sector, including Celera and its major competitors, to decline significantly. (Ex. 55.) Two days after the Joint Statement (and before Plaintiffs filed the Complaint), the PTO issued a press release confirming that the Joint Statement had no effect on intellectual property law. (Ex. 29.) Two weeks after the Joint Statement (and also before Plaintiffs filed the Complaint), President Clinton retracted any negative inference in the Joint Statement and assured the public that the Joint Statement had no impact on United States patent policy. (Ex. 43.) Members of the HGP testified that the drafting of the Joint Statement preceded the discussions between Celera and the HGP in the fall of 1999. When asked if the purpose of the Joint Statement was to punish or retaliate against Celera as a result of Celera's unwillingness to agree to a collaboration at the December 29 meeting, Dr. Varmus testified that "the conversations [concerning the Joint Statement] that I had been involved in earlier in 1999 long

21

Plaintiffs misleadingly cite only the last paragraph of the Joint Statement, wholly ignoring the preceding paragraph, which directly contradicts the allegations in the Complaint. See Compl. at ¶ 30.

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preceded any discussions I'm aware of about collaboration." (Ex. 6 at 133.) Similarly, Dr. Waterston testified that there was no causal relationship between the Joint Statement and the December 29 meeting. (Ex. 7 at 182.) ARGUMENT Defendants are entitled to summary judgment under the standards established by Federal Rule of Civil Procedure 56 and the United States Supreme Court. Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). "The substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Once a properly supported motion for summary judgment has been made, the non-moving party has the burden of presenting "specific facts showing that there is a genuine issue for trial." Id. at 250 (citation omitted). On issues where the party opposing summary judgment has the burden of proof (in this case the existence of a misrepresentation or misleading omission), the moving party may simply point out the absence of evidence on the issue, and the motion should be granted if the opposing party does not adduce evidence sufficient to permit a reasonable jury to decide the issue in its favor. See Celotex v. Catrett, 477 U.S. 317, 325 (1986); PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002). The party opposing summary judgment "may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). The applicable standard is similar to the standard for a motion for directed verdict after trial, i.e., whether a reasonable jury could fail to return a verdict for the moving party. Anderson, 477 U.S. - 21 -

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at 250-51. "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy, and inexpensive determination of every action.'" Celotex, 477 U.S. at 327 (quoting Fed. R. Civ. P. 1). I. PLAINTIFFS HAVE FAILED TO IDENTIFY A FALSE OR MISLEADING STATEMENT IN THE PROSPECTUS Plaintiffs' fundamental burden under Sections 11 and 12 is to identify a material misrepresentation or a misleading omission in Celera's Prospectus. See Lasker v. N.Y. State Elec. & Gas Corp., 85 F.3d 55, 57-58 (2d Cir. 1996); I. Meyer Pincus & Assocs. v. Oppenheimer & Co., 936 F.2d 759, 761 (2d Cir. 1991). Plaintiffs must establish facts to indicate how or why any alleged representations were false or misleading. See In re Alliance Pharm. Corp. Sec. Litig., 279 F. Supp. 2d 171, 190 (S.D.N.Y. 2003) (dismissing Section 11 claim where plaintiffs failed to offer any evidence that the statement contained in the prospectus was false or misleading); In re Union Carbide Class Action Sec. Litig., 648 F. Supp. 1322, 1326 (S.D.N.Y. 1986) (plaintiffs cannot "assert vaguely that a false and misleading impression was created"). Here, Plaintiffs do not allege any misstatements. They bring only an omissions case, but they fail to identify any facts to show how any alleged omission is material or misleading. A. The Discussions Regarding Potential Interactions Between Celera And The HGP Were Disclosed In The Prospectus The first major defect in the Complaint ­ and a recurring one ­ is that it repeatedly ignores disclosures in the Prospectus that are inconsistent with Plaintiffs' claims. Most significantly, Plaintiffs assert that the discussions between Celera and the HGP "certainly were not disclosed in the Prospectus for the Secondary Offering." (Compl. ¶ 24.) Yet, as noted above, the Prospectus expressly discloses that Celera has sought to coordinate its efforts with those of the HGP. (Ex. 1 at 49.) For this reason alone, no reasonable jury could find in - 22 -

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Plaintiffs' favor because the alleged omission was plainly disclosed in the Prospectus. Put another way, there was no material omission. B. The December 29 Meeting Was Neither Material Nor Adverse The Complaint must also be dismissed because the December 29 meeting, even if omitted from the Prospectus, was neither material nor adverse to Celera. Section 11 and Section 12 impose liability only if the Prospectus: (1) contained an untrue statement of material fact or (2) omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 15 U.S.C. § 77k (2004); 15 U.S.C. § 77l(a)(2) (2004). To be actionable, an omission must be material. The standard for determining materiality of an omitted fact is whether there is "a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the `total mix' of information made available." TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976); Alliance Pharm. Corp., 279 F. Supp. at 188. The securities laws do not require management to bury shareholders with trivial details. TSC Indus., Inc., 426 U.S. at 448-49; Freedman v. Value Health, Inc., 135 F. Supp. 2d 317, 333 (D. Conn. 2001), aff'd 34 Fed. Appx. 408 (2d Cir. 2002). When determining whether a prospectus failed to disclose a material fact, the prospectus must be read as a whole. Id. at 331. The "central issue . . . is not whether the particular statements, taken separately, were literally true, but whether defendants' representations, taken together and in context would have misled a reasonable investor about the nature of the [securities]." Olkey v. Hyperion 1999 Term Trust, Inc., 98 F.3d 2, 5 (2d Cir. 1996) (quoting McMahan & Co. v. Wherehouse Entm't, Inc., 900 F.2d 576, 579 (2d Cir. 1990)). The evidence in this case establishes that Plaintiffs' alleged omission was wholly immaterial and unimportant, and that the Complaint relies on a characterization of the December 29 meeting that is wholly inconsistent with the facts. - 23 -

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1.

Before the December 29 Meeting, Both Celera and the HGP Believed That A Collaboration Agreement Was Highly Unlikely

Before the December 29 meeting, both Celera and the HGP thought that an agreement of any type was "highly unlikely" given the adversarial and disparaging comments that had been made in the media for much of the preceding two years. For example, Dr. Waterston testified that prior to the December 29 meeting, both he and Dr. Sulston (director of the Sanger Centre, the U.K. component of the HGP) were "very skeptical" of an interaction with Celera. (Ex. 7 at 41, 45; Ex. 32.) Dr. Varmus, then the director of NIH, shared this skepticism. (Ex. 6 at 58-59.) Similarly, Dr. Waterston informed the HGP by email that he preferred not to collaborate with Celera, but would prefer "staying the course and dealing with Celera as we are rather than joining them and having to deal with them as collaborators." (Ex. 7 at 46; Ex. 31.) The HGP representatives were skeptical that an agreement could be reached because they knew before December 29 that their collaboration proposal would be unacceptable to Celera. Prior to the meeting, Dr. Waterston wrote to his HGP colleagues expressing his concern that "Celera will find the demands we make for data and distribution of the data too much." (Ex. 33.) Dr. Waterston testified that his statement meant that: "It's pretty straightforward, that we were asking that ­ that any sequence data that was a result of the collaboration would be more broadly accessible and more broadly distributed than what was acceptable to Celera." (Ex. 7 at 176.) Representatives of Celera were equally skeptical of the value of any agreement with the HGP. Dr. Levine "didn't think it was possible to have a deal." (Ex. 4 at 67.) Dr. Venter "felt it was very highly unlikely" that Celera could agree on a collaboration with the HGP (Ex. 3 at 40.) because "there had been too much water under the bridge with continued . . . attacks from [the HGP] that would make collegial interactions necessary for true scientific

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collaboration probably unlikely to be able to take place." (Id. at 56.) Dr. Venter was "not sure there was a single person at Celera . . . [who] thought the chance of a full, integrated, cooperative, collaborative, joint, scientific publication . . . was at all possible at this stage of the game." (Id. at 113-14.) 2. Consistent With Their Expectations, Celera and the HGP Agreed That The December 29 Meeting Was A Non-Event

All six participants at the December 29 meeting who were deposed in this action agreed that the December 29 meeting was a non-event. According to Dr. Waterston, the meeting "hadn't produced anything useful." (Ex. 7 at 119.) Dr. Varmus described the discussions more generally as "not the dominant events in my life at that time." (Ex. 6 at 90.) On the Celera side, Dr. Levine testified that "nothing was accomplished by the meeting" and therefore "there was nothing to disclose." (Ex. 4 at 74.) Dr. Levine added "there was no conclusion to the meeting and no substance that came from the meeting." (Id. at 144.) Dr. Gilman confirmed that "there hadn't been any significant points of progress" at the meeting (Ex. 5 at 97) and that "there really had been no substantive proposal made that was acceptable from the point of view of Celera." (Id. at 102.) Mr. White testified that discussions with the HGP were "not a big deal" to Celera. (Ex. 2 at 74.) Dr. Venter summarized the discussions with the HGP as "a relatively minor side show." (Ex. 3 at 87.) 3. The Complaint Mischaracterizes Every Aspect of the December 29 Meeting

As shown in the table below, Plaintiffs' allegations regarding what happened at the December 29 meeting are directly and completely contradicted by undisputed evidence:

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Plaintiffs' Allegations Plaintiffs allege that Celera and the HGP were "engaged in discussions to combine their efforts" to sequence the human genome. Compl. at ¶¶ 24, 39(a). · · · · ·

Undisputed Evidence Celera engaged in discussions with the HGP to find a way to reduce the adversarial media rhetoric (Ex. 2 at 29-30; Ex. 3 at 36-37; Ex. 4 at 35-36, 48; Ex. 6 at 76.); Celera was not interested in "combining" its efforts with the HGP because Celera already had the HGP's data as a result of the Bermuda Accord (Ex. 2 at 121-22; Ex. 4 at 154-55; Ex. 6 at 147); and Celera considered an agreement to reduce rhetoric and simultaneously publish scientific papers. (Ex. 3 at 36-37; Ex. 5 at 22; Exs. 23, 26.). The December 29 meeting was an "exploratory and general" conversation (Ex. 25.); and The December 29 meeting was the "first face to face" meeting between Celera and the HGP. (Exs. 26, 39.). Celera and the HGP continued their sporadic and informal discussions long after the December 29 meeting (Ex. 4 at 143-44, 160-61.); Francis Collins and Tony White discussed potential interactions on January 22, 2000 (Ex. 2 at 74; Ex. 35.); Dr. Venter discussed potential interactions with Francis Collins and Ari Patrinos at multiple meetings in March and April 2000 (Ex. 3 at 178.); and Celera and the HGP ultimately agreed to (i) jointly announce the completion of the human genome sequence at a White House ceremony and (ii) publish their scientific papers analyzing the human genome simultaneously. (Id.; Ex. 5 at 52.). Celera never demanded that it have exclusive rights to the human genome sequence because there is no such thing as one single "human genome sequence." As of December 1999, there was (1) Celera's version of the genome, (2) the HGP's version of the genome, and (3) some theoretical discussions regarding the possibility of a "merged" version of the genome (Ex. 4 at 154-55.); At the December 29 meeting, Celera responded to the HGP's proposal by indicating that if Celera agreed to merge its sequence with the HGP's sequence, then Celera required exclusive rights to the merged product for a period of years to protect its shareholders' investment (Ex. 2 at 55-56.); If no agreement was reached, the HGP could do whatever it wanted with its version of the sequence, and Celera could do whatever it wanted with its version (Ex. 4 at 154-55.); and Celera always planned to release its sequence to academics, but wanted to prevent commercial competitors from reselling Celera's data. (Ex. 3 at 14950.) The discussions between Celera and the HGP were repeatedly discussed in major national news publications. (Exs. 12-20.) The Prospectus disclosed that Celera and the HGP had sought to coordinate their efforts. (Ex. 1 at 49.)

Plaintiffs allege that the discussions between Celera and the HGP "culminated" in the December 29 meeting. Compl. at ¶ 25. Plaintiffs allege that the discussions between Celera and the HGP "broke off" and "collapsed" at the December 29 meeting. Compl. at ¶¶ 24, 39(e).

· · · ·

Plaintiffs allege that the discussions between Celera and the HGP broke off because Celera "demanded that it have exclusive rights to the human genome map for an extended period of time." Compl. at ¶¶ 24, 39(b),(c).

·

·

· ·

Plaintiffs allege that the discussions between Celera and the HGP "were not widely known by the public." Compl. at ¶ 24.

· ·

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Plaintiffs' Allegations Plaintiffs allege that the HGP arrived at the December 29 meeting "thinking they had the outline of an agreement in hand." Compl. at ¶ 25. ·

Undisputed Evidence As discussed in Section I(B)(1), supra, prior to the meeting, all HGP representatives thought a collaboration agreement with Celera was highly unlikely.

C.

The December 29 Meeting Did Not Lead to Retaliatory or Punitive Government Action Under Plaintiffs' "retaliation theory," the HGP would cause the U.S. Patent and

Trademark Office or some other unspecified government entity to "retaliate" against Celera by denying Celera intellectual property protection because Celera and the HGP did not reach an agreement at the December 29 meeting. Three facts completely refute Plaintiffs' theory. First, the undisputed testimony of HGP witnesses confirms that the government did not retaliate against Celera. Dr. Varmus testified that at no time did he, or any other HGP member to his knowledge, ever petition any entity affiliated with the U.S. or U.K. governments to retaliate or punish Celera as a result of the December 29 meeting. (Ex. 6 at 137-38.) Dr. Varmus also testified that neither he, nor any other HGP member to his knowledge, ever asked the PTO to change intellectual property law in any way as a result of the December 29 meeting. (Id.) Similarly, Dr. Waterston testified that neither he, nor any other HGP member to his knowledge, ever sought to punish or retaliate against Celera, or sought any change in intellectual property law. (Ex. 7 at 183-84.) Second, the Complaint assumes that the HGP had the legal power or authority to cause the PTO to deny Celera's intellectual property rights ­ an untenable claim given that Celera's intellectual property rights are protected under the U.S. Constitution, federal statutory

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law, and PTO regulatory guidelines. 22 The HGP ­ a group of research scientists ­ does not have any power to amend the U.S. Constitution, repeal federal statutes, or change federal regulations. In fact, at the same time Plaintiffs allege that the PTO would deny protection for Celera's genomic discoveries, the PTO was actually in the process of adopting examination guidelines that expressly endorsed the patentability of genomic discoveries. See Utility Examination Guidelines, 66 Fed. Reg. 1092, 1093 (Jan. 5, 2001). Plaintiffs apparently contend that the HGP might have tried to influence United States patent policies because the United States provided some of the funding for the HGP, and that because the PTO is a United States government agency, the PTO could deny Celera protection for its intellectual property. Using this fallacious logic, the HGP could also have caused the U.S. Post Office to cease delivery of Celera's mail, or caused the Internal Revenue Service to deny Celera any benefits offered under the tax code. Neither of these "possibilities" for "governmental retaliation" is disclosed in the Prospectus ­ but like the potential for retaliation by the PTO, neither of these "possibilities" is legally tenable and there is no evidence whatsoever that they were even contemplated, let alone pursued. Finally, the single "fact" that Plaintiffs offer to show that the United States government retaliated against Celera is the Joint Statement itself. With respect to the Joint Statement, Dr. Varmus testified that there was no connection to the December 29 meeting, and that the concept of the Joint Statement was developed long before discussions began between

22

Article I, section 8, clause 8 of the Constitution states "[t]he Congress shall have Power . . . To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." U.S. Const. art. I, § 8, cl. 8. Congress has utilized this power by adopting patent laws, which provide, inter alia, "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or