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MedImmune, Inc. v. Genentech, Inc. - 549 U.S. 118, 127 S. Ct. 764 (2007)

Rule:

A patent licensee is not required, insofar as U.S. Const. art. III is concerned, to break or terminate its license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed.

Facts:

After a patent application purportedly had matured into patent,  Respondent Genentech, Inc., an assignee of the patent, sent its licensee, Petitioner MedImmune, Inc. a letter stating that MedImmune owed royalties on the drug sales to Genentech. Although the licensee MedImmune thought that it owed no royalties because it believed that the patent was invalid and unenforceable and because the drug did not infringe the patent, MedImmune considered Genentech's letter to be a clear threat to enforce the patent, terminate the license agreement, and sue for patent infringement if MedImmune did not pay. Such a suit could have resulted in MedImmune's being ordered to pay treble damages and attorneys' fees and being enjoined from selling the drug, which allegedly accounted for more than 80 percent of the licensee's sales revenue. Petitioner MedImmune, the licensee, paid the royalties under protest and filed an action for declaratory and other relief. The United States District Court for the Central District of California dismissed the declaratory judgment claims for lack of subject-matter jurisdiction because, under Federal Circuit precedent, a patent licensee in good standing cannot establish a case or controversy under the Federal Constitution's Article III with regard to the patent's validity, enforceability, or scope. The United States Court of Appeals for the Federal Circuit affirmed the District Court's judgment. MedImmune, the licensee, petitioned for certiorari review, asserting that it was not required to actually suffer consequences as a precursor to seeking judicial relief.

Issue:

Could a licensee in good standing establish a case or controversy under the Federal Constitution's Article III with regard to the patent's validity, enforceability, or scope?

Answer:

Yes.

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.

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