Wednesday’s Argument in MedImmune v. Genentech

The following argument preview was written by Scott Rhoades of Akin Gump.

On Wednesday, October 4, the Court will hear arguments in MedImmune, Inc. v. Genentech, Inc. et al. (No. 05-608). The question presented in this case is whether Article III’s grant of jurisdiction implemented in the “actual controversy” requirement of the Declaratory Judgment Act, 28 U.S.C. § 2201(a), requires a patent licensee to refuse to pay royalties and commit material breach of the license agreement before suing to declare the patent invalid, unenforceable, or not infringed. In particular, the Court will decide whether a patent licensee, in good standing, may seek a declaratory action to challenge the validity and enforceability of the licensed patent.

John G. Kester of Williams & Connolly LLP will argue on behalf of the petitioner. He will share his time with Deanne Maynard, Assistant to the Solicitor General, who will argue on behalf of the United States as an amicus in support of the petitioner. Maureen E. Mahoney of Latham & Watkins will argue on behalf of the respondents.

Facts

Respondents Genentech, Inc. and the research hospital City of Hope are the owners to two patents, United States Patents Nos. 4,816,567 (the `567 Patent) and 6,331,415 (the `415 Patent). Since 1997, petitioner MedImmune, Inc. was licensed by Genentech under the `567 Patent and any future patent(s) that might issue from a related patent application directed toward the same technology (this application ultimately issued in December 2001 as the `415 Patent). MedImmune paid and has continued to pay the license royalties to Genentech on both patents, thus maintaining its status as a licensee in good standing. MedImmune did object to the submission of royalties under the `415 Patent and filed a declaratory judgment action in the Central District of California requesting a declaration that the `415 Patent was invalid or unenforceable.

The district court held that MedImmune could not bring a declaratory action to challenge the validity and enforceability of the `415 Patent as it was a licensee in good standing and did not have a reasonable apprehension of suit. The district court reached this conclusion by applying the Federal Circuit’s decision in Gen-Probe, Inc. v. Vysis, Inc. MedImmune appealed the district court’s decision to the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit affirmed, holding that since MedImmune was under no threat or apprehension of suit, it did not have standing to bring a declaratory challenge to the `415 Patent. The Federal Circuit noted that MedImmune concedes that it is free of apprehension of suit as it is paying royalties to avoid the risk and possible consequences of a successful infringement suit by Genentech. In reaching its decision, the Federal Circuit agreed with the district court that Gen-Probe was determinative. MedImmune then petitioned for cert., which the Supreme Court granted on February 21, 2006.

Arguments before the Court

MedImmune argues that rules regarding patent licensees and declaratory judgments, as set forth in Gen-Probe, unduly constrict Article III, are contrary to the policy of the patent laws themselves, and ignore the holdings of the Court related to declaratory judgments. MedImmune maintains that the Declaratory Judgment Act authorizes a federal court to issue a judgment declaring legal rights in a case of actual controversy without the need to breach an underlying contract. MedImmune argues that the Court has previously held that a declaratory judgment simply requires a concrete case admitting of an immediate and definitive determination of the legal rights of the parties in an adverse proceeding. Thus, the sole requirement for jurisdiction under the Declaratory Judgment Act is that there be a real and immediate actual controversy.

MedImmune argues that even though it is a licensee in good standing, there is an actual controversy. Here, the record establishes a specific assertion of liability based upon infringement of a patent by sales of a product; a demand for royalties; denial of infringement and liability; denial of the validity and enforceability of the patent; and payment of royalties under protest. These facts, MedImmune asserts, establish that there is an actual controversy between the parties and that an actual breach of the contract is not necessary to demand a declaratory judgment.

Respondents Genentech and City of Hope counter that there is no real and immediate controversy; rather, the fully negotiated license between the parties resolves any justiciable controversy. They contend that no injury or threat to any legal right existed after MedImmune entered into the license agreement, as MedImmune has no fear of an infringement suit of the licensed patents. Moreover, there is no dispute regarding the terms of the license agreement, only a dispute to what the legal obligations would be if MedImmune chose to breach, and this hypothetical controversy is not sufficiently concrete or immediate to justify declaratory relief. MedImmune’s license-then-sue-for-invalidity strategy also violates, respondents contend, the basic equitable principle that a party cannot accept the benefits under a contract while simultaneously attacking the contract as voidable.

The Solicitor General moved for and was granted leave to participate in the oral argument as an amicus curiae. The government argues that the Federal Circuit has adopted an overly restrictive test that categorically precludes licensees in good standing from challenging patents. The government asserts that the Court has consistently held that an actual controversy determination presents a fact-sensitive issue that requires case-by-case determination.