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The U.S. Supreme Court handed down its highly anticipated decision in MedImmune (MEDI) v. Genentech (DNA) today, holding by an 8-1 majority that a patent licensee is not required to terminate its license agreement before seeking a declaratory judgment that the subject patent is invalid, unenforceable, or not infringed. Consistent with the Court's recent suspicion of patent quality generally, this decision will make it much easier for parties to challenge the validity of patents in court.

The petitioner, MedImmune, manufactures Synagis, a drug used to prevent respiratory tract disease in infants. MedImmune entered into a license agreement with respondent, Genentech, that covered an existing patent ("Cabilly I"), relating to the production of chimeric antibodies, as well as a pending patent application ("Cabilly II"), relating to coexpresion of immunoglobulins in host cells.
When Cabilly II issued as a patent, in 2001, Genentech sent a letter to MedImmune stating that Synagis was covered by it and therefore MedImmune owed royalties. MedImmune, however, believed the Cabilly II patent was invalid and unenforceable, and therefore thought it should not owe any royalties. Nevertheless, MedImmune considered Genentech's letter to be a clear threat to enforce the Cabilly II patent, and rather than risk treble damages, attorney fees, and an injunction prohibiting the sale of Synagis (which has accounted for 80% of MedImmune's sales), MedImmune paid the royalties to Genentech "under protest and with reservation of all its rights."

MedImmune proceeded to sue Genentech for a declaratory judgment that the Cabilly II patent was invalid, unenforceable, and not infringed by MedImmune's sales of Synagis. However, the district court dismissed MedImmune's complaint based on the Federal Circuit's decision in Gen-Probe v. Vysis (Fed. Cir. 2004), which held that a patent licensee in good standing cannot establish an Article II case or controversy with regard to validity, enforceability, or scope of the patent because the license agreement "obliterates any reasonable apprehension" of suit. The Federal Circuit affirmed the district court, also relying on Gen-Probe.

Now that the Supreme Court has reversed the Federal Circuit, the case will be remanded and MedImmune will have its day in court. Moreover, the Federal Circuit will be forced to reexamine its "reasonable apprehension of suit" test for declaratory judgment jurisdiction in patent cases, at least insofar as it applies the test to licensees. It remains to be seen whether the Federal Circuit will go further than that, and perhaps discard the reasonable apprehension test entirely.

MEDI vs. DNA 1-yr chart

medi chart

Source: MedImmune vs. Genentech: Supreme Court Ruling Facilitates Patent Challenges