MedImmune, Inc. v. Genentech, Inc. Case Brief

Why is the case important?

MedImmune (Plaintiff), Genentech’s (Defendant) licensee, feared an infringement suit by Defendant and filed a declaratory judgment action to declare Defendant’s new patent invalid.

Facts of the case

“Genentech held the patent for “”Cabilly I””, a process for using cell cultures to manufacture human antibodies. MedImmune had a licensing agreement with Genentech under which MedImmune paid royalties to Genentech in return for the use of the patent. Later, Genentech also obtained the patent to “”Cabilly II,”” a continuation of the Cabilly I process. Under the licensing agreement, MedImmune became a licensee for Cabilly II as well. Genentech informed MedImmune that it would have to pay royalties on one of its most lucrative products, Synagis, which uses the Cabilly II process. MedImmune sued Genentech, claiming that the patent was invalid and unenforceable. However, MedImmune kept paying the royalties.A federal District Court dismissed the suit because it did not present a controversy. Article III of the Constitution limits the jurisdiction of federal courts to “”cases or controversies.”” This is implemented in the Declaratory Judgment Act, which requires that a suit involve an “”actual controversy.”” Genentech argued that since MedImmune was still paying royalties on the patent, there was no controversy. MedImmune countered that though it was indeed still paying royalties on the patent it claimed was invalid, it was paying “”under protest.”” It would be unreasonable, MedImmune argued, for the company to be required to break its contractual obligations by stopping royalty payments before suing. This might jeopardize MedImmune’s legal rights to one of its best-selling products.The U.S. Court of Appeals for the Federal Circuit ruled for Genentech and upheld the District Court, holding that the suit presented no actual controversy.”

Question

Does the Declaratory Judgment Act’s Article III limitation of federal court’s jurisdiction require a patent licensee to terminate or be in breach of its license agreement prior to seeking a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed?

Answer

“(Scalia, J.)Â&nbsp

  • No.Â&nbsp
  • The Declaratory Judgment Act’s Article III limitation of federal court’s jurisdiction does not require a patent licensee to terminate or be in breach of its license agreement prior to seeking a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.Â&nbsp
  • It is appropriate to bring a declaratory judgment action when the dispute is definite, concrete, and touches the legal relations of parties with adverse legal interests.Â&nbsp
  • In this case, if Plaintiff had refused to pay the royalties, the elements would all be met.Â&nbsp
  • However, there is no threat of immediate harm because Plaintiff paid the royalties and Defendant declined bringing a suit of infringement.Â&nbsp
  • The issue becomes whether the party must first expose itself to liability.Â&nbsp
  • A party that is facing a threat by government is permitted to bring a declaratory judgment action before imminent prosecution occurs, therefore this Court must consider whether the same principles apply to a party facing threat from another private party.Â&nbsp
  • In Altvater v. Freeman, 319 U.S. 359 (1943), allowed a declaratory judgment action where royalties were paid under protest because the payor preserved its right to recover the royalties or challenge the claim.Â&nbsp
  • Defendant argues that its license agreement with Plaintiff protects Plaintiff from an infringement suit if Plaintiff pays royalties and does not challenge the patents.Â&nbsp
  • However, that is not what the license agreement states.Â&nbsp
  • Royal payments do not guarantee there will not be a challenge to the validity of the patent.Â&nbsp
  • In addition, the argument that Plaintiff cannot sue for invalidity and enjoy the benefits of the license at the same time fails because Plaintiff is not disputing the license agreement’s validity.Â&nbsp
  • Defendant’s arguments that jurisdiction is not found fail.Â&nbsp
  • Defendant also asked the Court to dismiss the lawsuit on discretionary grounds, but this is the first time this issue has been raised and the lower court can consider that on remand.Â&nbsp
  • Reversed and remanded.”

    Conclusion

    The U.S. Supreme Court reversed the decision of the appellate court, holding that the licensee was not required, insofar as U.S. Const. art. III was concerned, to break or terminate its license agreement before seeking a declaratory judgment in federal court that the underlying patent was invalid, unenforceable, or not infringed. The Court noted that the licensee’s self-avoidance of imminent injury by paying the royalties was coerced by the threatened enforcement action of the licensors, and the coercive nature of the exaction of royalties preserved the licensee’s right to recover the royalties paid or to challenge the legality of the licensors’ demand for royalties.

    • Case Brief: 2007
    • Petitioner: MedImmune, Inc.
    • Respondent: Genentech, Inc., et al.
    • Decided by: Roberts Court

    Citation: 549 US 118 (2007)
    Granted Feb 21, 2006
    Argued: Oct 4, 2006
    Decided: Jan 9, 2007