PDL BioPharma, Inc. has announced
that on July 7, 2011, the Second Judicial District Court of Nevada ruled in
favor of PDL on two motions to dismiss filed by Genentech and F. Hoffmann
LaRoche, Ltd. (Roche) in PDL’s lawsuit related to the 2003 settlement agreement
with Genentech. The court denied Genentech and Roche’s motion to dismiss four
of PDL’s five claims for relief and, further, denied Roche’s separate motion to
dismiss for lack of personal jurisdiction. The court dismissed one of PDL’s
claims that Genentech committed a bad-faith breach of the covenant of good
faith and fair dealing stating that, based on the current state of the
pleadings, no “special relationship” had been established between
Genentech and PDL as required under Nevada
law.

Background on Litigation with Genentech In August 2010, PDL
received a letter from Genentech, on behalf of Roche and Novartis, asserting
that Avastin, Herceptin, Lucentis and Xolair (the Genentech Products) do not
infringe the supplementary protection certificates (SPCs) granted to PDL by
various countries in Europe for each of the Genentech Products and seeking a
response from PDL to these assertions. PDL believes that the SPCs are
enforceable against the Genentech Products, that Genentech’s letter violates
the terms of the 2003 settlement agreement and that Genentech owes PDL royalties
on sales of the Genentech Products on a worldwide basis. In August 2010, in
connection with the letter described above, PDL filed a complaint in state
court in Nevada
seeking to enforce PDL’s rights under its 2003 settlement agreement with
Genentech and seeking an order from the court declaring that Genentech is
obligated to pay royalties to PDL on ex-U.S.-based Manufacturing and Sales of
the Genentech Products. The complaint alleges that the communication received
from Genentech, which states that it was sent at the behest of Roche and
Novartis, damaged PDL and constitutes a breach of Genentech’s obligations under
its 2003 settlement agreement with PDL.

In November 2010, Genentech and Roche filed a motion to
dismiss PDL’s complaint against them in which PDL seeks to enforce its rights
under the 2003 settlement agreement with Genentech. Genentech and Roche’s motions
to dismiss under Nevada Rule of Civil Procedure 12(b)(5) alleged that all of
PDL’s claims for relief relating to the 2003 settlement agreement should be
dismissed because the 2003 settlement agreement applies only to PDL’s U.S. patents.
In addition, Roche filed a separate motion to dismiss PDL’s complaint under
Nevada Rule of Civil Procedure 12(b)(2) on the ground that the Nevada court lacks personal
jurisdiction over Roche.

Effect of the Court’s Ruling

The effect of the Court’s ruling is that PDL is permitted to
continue to pursue its claims that:

Genentech is obligated to pay royalties to PDL on
international sales of the Genentech Products;

Genentech, by challenging, at the behest of Roche and
Novartis, whether PDL’s SPCs cover the Genentech Products breached its
contractual obligations to PDL under the 2003 settlement agreement;

Genentech breached the implied covenant of good faith and
fair dealing with respect to the 2003 settlement agreement; and

Roche intentionally and knowingly interfered with PDL’s
contractual relationship with Genentech in conscious disregard of PDL’s rights.

PDL seeks compensatory damages, including liquidated damages
and other monetary remedies set forth in the 2003 settlement agreement,
punitive damages and attorney’s fees as a result of Genentech and Roche’s conduct.