Medimmune, Inc. v. Genentech, Inc., 04-1300.

• Citation: 427 F.3d 958
• Decision Date: 18 October 2005
• Docket Number: No. 04-1300.,No. 04-1384.,04-1300.,04-1384.
• Parties: MEDIMMUNE, INC., Plaintiff-Appellant, v. GENENTECH, INC., Defendant-Appellee, and City of Hope, Defendant-Appellee, and Celltech R & D, Ltd., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 958

427 F.3d 958

MEDIMMUNE, INC., Plaintiff-Appellant, v. GENENTECH, INC., Defendant-Appellee, and City of Hope, Defendant-Appellee, and Celltech R & D, Ltd., Defendant-Appellee.

No. 04-1300.

No. 04-1384.

United States Court of Appeals, Federal Circuit.

October 18, 2005.

COPYRIGHT MATERIAL OMITTED

Harvey Kurzweil, Dewey Ballantine LLP, of New York, New York, argued for plaintiff-appellant. With him on the brief were Joseph Angland, Aldo A. Badini, and Henry J. Ricardo. Of counsel on the brief was Elliot M. Olstein, Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, of Roseland, New Jersey.

Daniel M. Wall, Latham & Watkins LLP, of San Francisco, California, argued for defendant-appellee Genentech, Inc. and the City of Hope. With him on the brief were Christopher S. Yates, and James K. Lynch; and Mark A. Flagel, of Los Angeles, California and Dean G. Dunlavey, of Costa Mesa, California. Of counsel on the brief were Roy E. Hofer, Cynthia A. Homan, and Meredith Martin Addy, Brinks Hofer Gilson & Lione, of Chicago, Illinois. Also, of counsel on the brief were John W. Keker, Mark A. Lemley, and Daralyn J. Durie, Keker & Van Nest, L.L.P., of San Francisco, California.

Joseph M. Lipner, Irell & Manella LLP, of Los Angeles, California, for defendant-appellee City of Hope. With him on the brief were Morgan Chu and Jason D. Linder. Of counsel on the brief was Gordon A. Goldsmith, City of Hope, Office of the General Counsel, of Duarte, California.

Charles S. Barquist, Morrison & Foerster LLP, of Los Angeles, California, argued for defendant-appellee Celltech R & D Ltd. With him on the brief were Steven M. Haines, of Los Angeles, California and Jason A. Crotty, of San Francisco, California.

Before NEWMAN, MAYER, and CLEVENGER, Circuit Judges.

Opinion for the court filed by Circuit Judge NEWMAN.

Dissenting in part opinion filed by Circuit Judge CLEVENGER.

PAULINE NEWMAN, Circuit Judge.

MedImmune, Inc., a licensee in good standing under a patent owned by Genentech, Inc. and City of Hope (collectively "Genentech"), seeks by declaratory action to challenge the validity and enforceability of the licensed patent on various grounds flowing from the settlement of a patent interference between Genentech and Celltech R & D, Ltd. The United States District Court for the Central District of California held that because MedImmune continues to comply fully with the license terms, leaving no possibility of infringement suit or license cancellation by Genentech, there is no "case of actual controversy" as required by the Declaratory Judgment Act, 28 U.S.C. § 2201. The district court also dismissed MedImmune's antitrust and unfair competition counts. We affirm the judgment.¹

BACKGROUND

The patented technology relates to the use of cell cultures to manufacture human antibodies. Genentech, Inc. and the City of Hope are the owners of United States Patent No. 4,816,567 (the Cabilly I patent) filed on April 8, 1983, and Patent No. 6,331,415 (the Cabilly II patent), a continuation of Cabilly I, filed on June 10, 1988. Celltech owns United States Patent No. 4,816,397 (the Boss patent), having a British priority date of March 25, 1983. In accordance with 35 U.S.C. § 135 the United States Patent and Trademark Office (PTO) declared an interference between the Boss patent and the Cabilly II application. The PTO interference proceedings consumed seven and a half years. The Board of Patent Appeals and Interferences decided priority in favor of the senior party Boss, holding that Cabilly had not established an actual reduction to practice before the Boss patent's British priority date. Cabilly v. Boss, 55 USPQ2d 1238 (Bd. Pat.App. & Int.1988).

Genentech then filed a civil action in the United States District Court for the Northern District of California, in accordance with 35 U.S.C. § 146. After various proceedings, the district court concluded that disputed facts concerning conception and reduction to practice required trial and, referring to the complexity of the science, stated that "[t]here appears to be a dispute amongst highly educated and apparently well-qualified experts" as to the interpretation and probative value of the evidence. The court urged Genentech and Celltech to resolve the issue of priority with the aid of mediation. Genentech and Celltech retained a mediation service, and a retired judge served as mediator. A settlement agreement was duly reached, whereby Genentech and Celltech agreed that the Cabilly II application was entitled to priority as against the Boss patent, based in part on new evidence of the content of a draft patent application during the period leading to filing of the Genentech application. Genentech and Celltech also entered into a cross-license agreement that included a formula for sharing of royalties. The district court entered judgment on the parties' resolution of the issue of priority, and directed the PTO to vacate its prior decision, revoke the Boss patent, and issue a patent on the Cabilly II application. Genentech, Inc. v. Celltech R & D, Ltd., No. 3:98cv03929 (N.D.Cal. March 16, 2001).

Genentech and Celltech jointly presented the district court's judgment to the PTO, with a petition requesting that the PTO cancel the Boss patent and issue a patent on the Cabilly II application. The Board entered an order that Cabilly was the prior inventor, but did not precisely follow the requested procedure. The Board stated that the Boss patent was cancelled by operation of law when the district court's judgment became final and was not appealed, and that no further action by the PTO was required. The Board also observed that an Information Disclosure Statement filed by Genentech in 1991 had not been acted upon, and returned the Cabilly II application to the patent examiner for review of any "ground not involved in judicial review." Genentech then cited a large number of additional references to the examiner, and provided various documents from the record of the § 146 action. After further examination the Cabilly II patent was issued on December 18, 2001, eleven years after the inception of the interference.

MedImmune had since 1997 been licensed by Genentech under the Cabilly I patent and, by the terms of that agreement, received a license under the Cabilly II patent. In addition, MedImmune had since 1998 been licensed by Celltech under the Boss patent. After issuance of Cabilly II, Genentech advised MedImmune that a MedImmune product, brand name Synagis®, was covered by Cabilly II and subject to royalties in accordance with the license terms. MedImmune objected, and filed this declaratory judgment action in the Central District of California, requesting a declaration that the Cabilly II patent is invalid or unenforceable. MedImmune paid and continues to pay the license royalties to Genentech, relying on precedent such as Cordis Corp. v. Medtronic, Inc., 780 F.2d 991 (Fed.Cir.1985) for the holding that the licensor cannot terminate the license if the royalties are paid to the licensor and the license agreement is not otherwise breached. The district court, applying Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed.Cir.2004), dismissed the suit as non-justiciable under the Declaratory Judgment Act.

DISCUSSION

I

The district court held that MedImmune, as a licensee in good standing and not in reasonable apprehension of suit, cannot bring a declaratory action to challenge the patent under which it is licensed. MedImmune concedes that it is free of apprehension of suit, stating that the reason it is paying the royalties is to avoid the risk and possible consequences of a successful infringement suit by Genentech. However, MedImmune argues that under Lear, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969) it has the absolute right to challenge the validity or enforceability of the patent, whether or not it breaches the license and whether or not it can be sued by the patentee. MedImmune states that the Gen-Probe decision improperly resurrected the licensee estoppel that was abolished in Lear, and should be overturned.²

Genentech responds that this is not a question of licensee estoppel under Lear, but a question of Article III jurisdiction under the Declaratory Judgment Act. Unlike the situation in Lear, MedImmune is paying the license royalties; and unlike the situation in Lear, Genentech has no ground on which to cancel the license or otherwise bring suit affecting the licensed subject matter. In Lear the licensee stopped paying royalties and the patentee sued for royalties; there was clearly a justiciable controversy, and that aspect was not an issue in Lear. In contrast, in Gen-Probe the licensee was complying fully with the license terms and could not be sued by the patentee. Similarly, MedImmune is complying fully with the license terms and cannot be sued by the patentee.

MedImmune argues that although it has no reasonable apprehension of suit, it meets the requirements of the Declaratory Judgment Act because if it stopped paying royalties it could be sued. MedImmune states that the Cabilly II patent is subject to challenge on several grounds, and that it should not be shielded from such challenge. MedImmune also distinguishes its situation from that in Gen-Probe on the ground that the licensee in Gen-Probe negotiated for a license and then filed suit to invalidate the licensed patent, having secured its right to operate and the royalty terms should it lose the suit; MedImmune points out that it already had a license to Cabilly II under its license to Cabilly I and that the royalty rate was already set.

The district court was not persuaded by these distinctions, and we agree that they do not create a justiciable controversy. Unlike the facts in Lear, where the licensee ceased payment and disavowed the license obligation, in Gen-Probe, as for MedImmune, breach was assiduously avoided. Thus this case does not raise the question of whether patent invalidity is...