A Nonrepudiating Patent Licensee’s Right To Seek Declaratory Judgment of Invalidity or Noninfringement of the Licensed Patent: MedImmune v. Genentech

Summary

According to earlier precedent of the U.S. Court of Appeals for the Federal Circuit, a suit filed by a patent licensee in good standing, seeking to declare the underlying patent invalid, unenforceable, or not infringed, is non-justiciable under the Declaratory Judgment Act because there is no actual controversy between the licensee and licensor. The Federal Circuit had asserted that a license agreement eliminates any “reasonable apprehension” that the nonrepudiating licensee will be sued for infringement and thus federal courts must dismiss such declaratory judgment actions for lack of subject matter jurisdiction under Article III of the U.S. Constitution.

In MedImmune v. Genentech (549 U.S. __, No. 05-608, decided January 9, 2007), the U.S. Supreme Court rejected the jurisdictional rule adopted by the Federal Circuit, holding to the contrary that a patent licensee need not materially breach its license agreement (for example, by ceasing royalty payments to the patent holder) before it may bring suit to obtain a judgment that the underlying patent is invalid, unenforceable, or not infringed, in situations where the licensor-patentee has implicitly or explicitly threatened to sue for patent infringement if the licensee did not pay the demanded royalties. Payment of royalties under such “coercive” circumstances does not eliminate the jurisdiction of the federal courts to entertain declaratory judgment actions from patent licensees in good standing, the Court explained. Notably, this decision is limited to the procedural issue of whether federal courts have subject matter jurisdiction over these types of claims; the Supreme Court declined to express an opinion on the merits of the arguments made by the licensor-patentee in the case for denying declaratory relief to the licensee.

This report provides a summary and analysis of the Supreme Court’s opinion in MedImmune and discusses its potential ramifications on patent law.