Gen-Probe Inc. v. Vysis, Inc.

• Decision Date: 05 March 2004
• Docket Number: No. 02-1617.,No. 02-1618.,02-1617.,02-1618.
• Citation: 359 F.3d 1376
• Parties: GEN-PROBE INCORPORATED, Plaintiff-Cross Appellant, v. VYSIS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

359 F.3d 1376

GEN-PROBE INCORPORATED, Plaintiff-Cross Appellant, v. VYSIS, INC., Defendant-Appellant.

No. 02-1617.

No. 02-1618.

United States Court of Appeals, Federal Circuit.

Decided March 5, 2004.

R. William Bowen, Jr., Gen-Probe Incorporated, of San Diego, California, argued for plaintiff-cross appellant. With him on the brief were Stephen P. Swinton, and J. Christopher Jaczko, Cooley Godward LLP, of San Diego, California.

Jeffrey I. Weinberger, Munger, Tolles & Olson LLP, of Los Angeles, California argued for defendant-appellant. With him on the brief was Ted G. Dane.

Before RADER, Circuit Judge, ARCHER, Senior Circuit Judge, and GAJARSA, Circuit Judge.

RADER, Circuit Judge.

After a jury trial, the United States District Court for the Southern District California entered judgment in favor of the declaratory judgment plaintiff, Gen-Probe. Among other rulings, the district court found that substantial evidence supported the jury's verdicts of noninfringement and invalidity for both obviousness and nonenablement. Gen-Probe, Inc. v. Vysis, Inc., No. 99-CV-2668 H(AJB) (S.D.Cal. Aug. 2, 2002). Vysis has appealed issues relating to subject matter jurisdiction, claim construction, noninfringement, obviousness, and nonenablement. Gen-Probe cross-appeals an issue relating to the priority date of the patent in suit. Because the district court and this court lack jurisdiction to hear the merits of the case, this court vacates the district court's judgment and remands the case to the district court with instructions to dismiss.

I.

Since the issuance of U.S. Patent No. 5,750,338 to Collins et al. (the '338 patent), Vysis or its corporate predecessor (collectively, Vysis) has owned the patent. This patent claims methods and kits for use in nucleic acid diagnostic assays. The claimed assays, among other things, test blood for DNA found in the HIV or hepatitis C viruses. The claims generally recite two steps: target capture and amplification. In the target capture step, a nucleic acid binds to a solid support, such as a particle or bead, allowing separation of the nucleic acid from the sample. In the amplification step, the method amplifies the captured nucleic acid to facilitate detection of particular DNA sequences. Although claiming priority on its face as early as October 1986, the '338 patent issued on May 12, 1998.

At the time the '338 patent issued, Vysis and Gen-Probe were involved in litigation regarding other patents. Shortly after the '338 patent issued, a Vysis employee orally informed a Gen-Probe employee that Gen-Probe might be infringing the '338 patent. Eight months later, Vysis's President and Chief Executive sent a letter to his counterpart at Gen-Probe. That letter stated: "Our interest continues to be to obtain resolution of all of the existing intellectual property issues at one time.... To that end, I would like to bring to your attention some additional, recently issued patent assets under our control which we believe Gen-Probe should find of interest." One of the identified patents was the '338 patent. After Gen-Probe responded, Vysis wrote back, announcing its awareness of Gen-Probe's "plans to develop blood screening technology to which [the '338 patent] may apply." In light of the overall circumstances, Gen-Probe detected a significant likelihood that it would be sued for infringement of the '338 patent. Accordingly, it decided to take a license to practice the '338 patent as a part of the overall settlement of the unrelated litigation.

On June 22, 1999, Vysis granted Gen-Probe a nonexclusive license to the '338 patent, its foreign counterparts, and any continuations, divisionals, reissues,¹ and reexaminations claiming priority to the '338 patent as well as two other related patents (collectively, the Collins Patents). This license, which also extended to Gen-Probe's alliances with third-parties, provided for a one-time, upfront payment of $1.5 million as well as a running royalty of 3% on sales of Gen-Probe's assays. Gen-Probe also enjoyed an option, if exercised within six months of the commencement of the license, to extend the license to its third-party allies in the assay market. As a fundamental part of the agreement, the license defined various terms, including "Licensed Method," "Valid Claim," and "Licensed Product." In particular, the license states:

1.2 The term Licensed Method shall mean any method, the use or practice of which would constitute, but for the license granted herein, an infringement of any issued, Valid Claim within the Collins Patents.

1.3 The term Valid Claim shall mean an issued claim of a Collins Patent which has not been ruled invalid by a court or an administrative agency of competent jurisdiction from which all appeals have been exhausted.

1.4 The term Licensed Product shall mean any of the following:

(a) Any product specifically intended for use in practicing a Licensed Method;

(b) Any product which lacks substantial use other than in practicing a Licensed Method; and

(c) Any product, the making, using, selling, offering for sale or importing of which, would constitute, but for the license granted herein, an infringement of any issued, Valid Claim within the Collins Patents.

On December 22, 1999, Gen-Probe filed this declaratory judgment lawsuit, alleging that its tests did not infringe any claims of the '338 patent and that the '338 patent is invalid. Later Gen-Probe amended its complaint to include claims relating to unfair competition, unenforceability of the '338 patent, and a declaration of its rights and obligations under the license. Gen-Probe, however, continued paying the royalties due under the license agreement, albeit under protest.

In a letter to Vysis dated December 21, 1999, Gen-Probe not only exercised certain options relating to third-party alliances but also clearly set forth in the letter its intent to maintain the status quo by continuing to pay royalties throughout the litigation. Explaining its decision to hedge its bet, Gen-Probe wrote:

This letter concerns the June 22, 1999 agreement between Vysis and Gen-Probe concerning the Collins Patents. Since the date of that agreement, we have analyzed the Collins Patents. Based upon that analysis, we have concluded that the claims of the Collins Patents are invalid. Furthermore, we don't believe that any product made, used or sold by Gen-Probe, either individually or in conjunction with others, infringes any claims [sic] of the patents that might ultimately be determined to be valid.

Based on our prior dealings and conversations, we understand that Vysis disputes those positions. Therefore, concurrently with the delivery to you of this letter, Gen-Probe is filing an action in the United States District Court seeking relief concerning the Collins Patents.

In order to preserve the status quo pending resolution of the litigation, Gen-Probe and Chiron Corp. have exercised the options [sic] ... to extend the license to Gen-Probe and Chiron Corp. for purposes of their blood screening business. For the same reason, Gen-Probe and Bayer Corp. have exercised the option... to extend the license to Gen-Probe and Bayer Corp. for purposes of their infectious disease testing business.

Gen-Probe has participated in the exercise of the foregoing options not because we believe the patents are valid, but solely in order to preserve the status quo pending resolution of the litigation. Based on present circumstances, Gen-Probe and its allied parties expect to fulfill their obligations under the licenses during the pendency of the litigation.

Gen-Probe indeed fulfilled its obligations and continued paying royalties at all times relevant to this appeal.

In February 2002, Vysis filed a motion to dismiss the action for lack of subject matter jurisdiction. In support of this motion, Vysis argued in part that, as a licensee in good standing, Gen-Probe could not have had a reasonable apprehension of suit when it initiated this action. The district court disagreed, denying Vysis's motion and, thus, paving the way for a two-week jury trial in May 2002.

II.

This court reviews a denial of a motion to dismiss for lack of subject matter jurisdiction without deference. Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 554 (Fed.Cir.1990). Nevertheless, this court may not disturb factual findings, including those on a reasonable apprehension of suit, unless they are clearly erroneous. Vanguard Research, Inc. v. Peat, Inc., 304 F.3d 1249, 1254 (Fed.Cir.2002). Any party or this court sua sponte may raise the question of subject matter jurisdiction. See Am. Fire & Cas. Co. v. Finn, 341 U.S. 6, 16-18, 71 S.Ct. 534, 95 L.Ed. 702 (1951).

Vysis argues that this case presents an unprecedented situation: a patent licensee in good standing has filed and fully litigated a declaratory judgment action that challenged the validity and scope of the licensed patent. Gen-Probe counters that this case is not truly groundbreaking because the Declaratory Judgment Act authorizes a suit where the parties dispute the rights and obligations under the license and pay royalties only under protest.

The Declaratory Judgment Act only supports jurisdiction in the event of an "actual controversy." 28 U.S.C. § 2201(a). This requirement effectuates Article III of the Constitution, which only authorizes the federal judiciary to hear justiciable cases and controversies. See EMC Corp. v. Norand Corp., 89 F.3d 807, 810 (Fed.Cir.1996). "In general, the presence of an `actual controversy' within the meaning of the statute depends on `whether the facts alleged, under all the circumstances, show... a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" Id. (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)). Thus, "[t]he long established rule of law is that a declaratory...