MedImmune, v. Genentech  

(Decision of US Supreme Court)

Case Facts

MedImmune manufactures Synagis, a drug used to prevent respiratory tract disease in infants and young children. In 1997, Metamune took a license from Genentech over a patent and a patent application relating to production of chimeric antibodies and coexpression of immunoglobulin chains in recombinant host cells. The license agreement provided that Metamune would be liable for patent infringement in the absence of the license unless the patents are invalidated.

The patent application was granted a patent in December, 2001 based on which Genentech demanded payment of royalty under the license agreement from March, 2002. Though Metamune believed that the patent was invalid, it prayed the royalty demanded by Genentech to avoid punitive damages. Later Metamune filed a suit in the district court claiming declaration of patent invalidity. The district court dismissed the claim stating that a licensee in good standing cannot challenge the validity of the licensed patent and the federal circuit affirmed its decision. Metamune filed a petition before the Supreme Court, which granted certiorari to decide the case.

Issues

Whether a patent licensee in good standing must breach or terminate its license prior to challenging the validity of the underlying patent pursuant to the Declaratory Judgment Act?

Holding 

No, the licensee need not breach or terminate its license in order to challenge the validity of the underlying patent under the Declaratory Judgment Act.

Rule

The Declaratory Judgment Act provides that, in a case of actual controversy within its jurisdiction, any court of the United States may declare the rights of any Party seeking such declaration.

Analysis

As Genentech claims that Metamune is liable to pay royalty for making, using and selling the patent under the license agreement and Metamune claims that it is not liable to pay royalty because the patent is invalid, the parties have adverse legal interests and there is a substantial controversy between them, bringing the dispute within the scope of the Declaratory Judgment Act. Despite the fact that Metamune continues to pay royalty to avoid liability for punitive damages and has not instigated an actual controversy, the court would have jurisdiction to decide under the Declaratory Judgment Act because of the existence of a substantial controversy.

Promising to pay royalties on patents that have not been held invalid does not amount to a promise not to seek a holding of their invalidity. Metamune is not required to break or terminate its 1997 license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed. A non-repudiating licensee can challenge validity of a patent without terminating or breaching any provisions of the license agreement and is eligible to get relief under the Declaratory Judgment Act.