Medimmune, Inc. v. Genentech, Inc.

• Citation: 549 U.S. 118,166 L.Ed.2d 604,75 BNA USLW 4034,127 S.Ct. 764
• Decision Date: 09 January 2007
• Docket Number: No. 05–608.,05–608.
• Parties: MEDIMMUNE, INC., Petitioner, v. GENENTECH, INC., et al.
• Court: United States Supreme Court

549 U.S. 118

127 S.Ct. 764

166 L.Ed.2d 604

75 BNA USLW 4034

MEDIMMUNE, INC., Petitioner,

v.GENENTECH, INC., et al.

No. 05–608.

Supreme Court of the United States

Argued Oct. 4, 2006.

Decided Jan. 9, 2007.

Syllabus^*

After the parties entered into a patent license agreement covering, inter alia, respondents'then-pending patent application, the application matured into the “Cabilly II” patent. Respondent Genentech, Inc., sent petitioner a letter stating that Synagis, a drug petitioner manufactured, was covered by the Cabilly II patent and that petitioner owed royalties under the agreement. Although petitioner believed no royalties were due because the patent was invalid and unenforceable and because Synagis did not infringe the patent's claims, petitioner considered the letter a clear threat to enforce the patent, terminate the license agreement, and bring a patent infringement action if petitioner did not pay. Because such an action could have resulted in petitioner's being ordered to pay treble damages and attorney's fees and enjoined from selling Synagis, which accounts for more than 80 percent of its sales revenue, petitioner paid the royalties under protest and filed this action for declaratory and other relief. The District Court dismissed the declaratory-judgment claims for lack of subject-matter jurisdiction because, under Federal Circuit precedent, a patent licensee in good standing cannot establish an Article III case or controversy with regard to the patent's validity, enforceability, or scope. The Federal Circuit affirmed.

Held:

1. Contrary to respondents' assertion that only a freestanding patent invalidity claim is at issue, the record establishes that petitioner has raised and preserved the contract claim that, because of patent invalidity, unenforceability, and noninfringement, no royalties are owing. Pp. 768 – 770.

2. The Federal Circuit erred in affirming the dismissal of this action for lack of subject-matter jurisdiction. The standards for determining whether a particular declaratory-judgment action satisfies the case-or-controversy requirement— i.e., “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant” relief, Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826—are satisfied here even though petitioner did not refuse to make royalty payments under the license agreement. Where threatened government action is concerned, a plaintiff is not required to expose himself to liability before bringing suit to challenge the basis for the threat. His own action (or inaction) in failing to violate the law eliminates the imminent threat of prosecution, but nonetheless does not eliminate Article III jurisdiction because the threat-eliminating behavior was effectively coerced. Similarly, where the plaintiff's self-avoidance of imminent injury is coerced by the threatened enforcement action of a private party rather than the government, lower federal and state courts have long accepted jurisdiction. In its only decision in point, this Court held that a licensee's failure to cease its royalty payments did not render nonjusticiable a dispute over the patent's validity. Altvater v. Freeman, 319 U.S. 359, 364, 63 S.Ct. 1115, 87 L.Ed. 1450. Though Altvater involved an injunction, it acknowledged that the licensees had the option of stopping payments in defiance of the injunction, but that the consequence of doing so would be to risk “actual [and] treble damages in infringement suits” by the patentees, a consequence also threatened in this case. Id., at 365, 63 S.Ct. 1115. Respondents' assertion that the parties in effect settled this dispute when they entered into their license agreement is mistaken. Their appealto the common-law rule that a party to a contract cannot both challenge its validity and continue to reap its benefits is also unpersuasive. Lastly, because it was raised for the first time here, this Court does not decide respondents' request to affirm the dismissal of the declaratory-judgment claims on discretionary grounds. That question and any merits-based arguments for denial of declaratory relief are left for the lower courts on remand. Pp. 770 – 777.

427 F.3d 958, reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which ROBERTS, C.J., and STEVENS, KENNEDY, SOUTER, GINSBURG, BREYER, and ALITO, JJ., joined. THOMAS, J., filed a dissenting opinion, post, p. 777.

John G. Kester, Washington, DC, for petitioner.

Deanne E. Maynard for the United States as amicus curiae, by special leave of the Court, supporting the petitioner.

Maureen E. Mahoney, Washington, DC, for respondents.

Harvey Kurzweil, Aldo A. Badini, Henry J. Ricardo, Dewey Ballantine LLP, New York City, William C. Bertrand, Jr., Jonathan Klein–Evans, Gaithersburg, Maryland, John G. Kester, Counsel of Record, Paul B. Gaffney, Janet C. Fisher, Aaron P. Maurer, Michael T. Morley, Williams & Connolly LLP, Washington, D.C., Elliot M. Olstein, Carella Byrne Bain Gilfillan Cecchi Stewart & Olstein, Roseland, New Jersey, for petitioner.

Daniel M. Wall, Mark A. Flagel, James K. Lynch, Latham & Watkins LLP, San Francisco, CA, Maureen E. Mahoney, Counsel of Record, J. Scott Ballenger, Nathaniel A. Vitan, Amanda P. Biles, Jeffrey Manns, Latham & Watkins LLP, Washington, DC, Roy E. Hofer, Meredith Martin, Addy Brinks, Hofer Gilson & Lione, Chicago, IL, John W. Keker, Mark A. Lemley, Keker & Van Nest LLP, San Francisco, CA, for respondent Genentech, Inc.

Joseph M. Lipner, Laura W. Brill, Jason Linder, Alana B. Hoffman, Irell & Manella LLP, Los Angeles, CA, Robert W. Stone, Gregory D. Schetina, Duarte, CA, Paul M. Smith, Counsel of Record, William M. Hohengarten, Ian Heath Gershengorn, Scott B. Wilkens, Jenner & Block LLP, Washington, DC, for respondent City of Hope.

Justice SCALIA delivered the opinion of the Court.

We must decide whether Article III's limitation of federal courts' jurisdiction to “Cases” and “Controversies,” reflected in the “actual controversy” requirement of the Declaratory Judgment Act, 28 U.S.C. § 2201(a), requires a patent licenseeto terminate or be in breach of its license agreement before it can seek a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.

I

Because the declaratory-judgment claims in this case were disposed of at the motion-to-dismiss stage, we take the following facts from the allegations in petitioner's amended complaint and the unopposed declarations that petitioner submitted in response to the motion to dismiss. Petitioner MedImmune, Inc., manufactures Synagis, a drug used to prevent respiratory tract disease in infants and young children. In 1997, petitioner entered into a patent license agreement with respondent Genentech, Inc. (which acted on behalf of itself as patent assignee and on behalf of the coassignee, respondent City of Hope). The license covered an existing patent relating to the production of “chimeric antibodies” and a then-pending patent application relating to “the coexpression of immunoglobulin chains in recombinant host cells.” Petitioner agreed to pay royalties on sales of “Licensed Products,” and respondents granted petitioner the right to make, use, and sell them. The agreement defined “Licensed Products” as a specified antibody, “the manufacture, use or sale of which ... would, if not licensed under th[e] Agreement, infringe one or more claims of either or both of [the covered patents,] which have neither expired nor been held invalid by a court or other body of competent jurisdiction from which no appeal has been or may be taken.” App. 399. The license agreement gave petitioner the right to terminate upon six months' written notice.

In December 2001, the “coexpression” application covered by the 1997 license agreement matured into the “Cabilly II” patent. Soon thereafter, respondent Genentech delivered petitioner a letter expressing its belief that Synagis was covered by the Cabilly II patent and its expectation that petitioner would pay royalties beginning March 1, 2002. Petitioner did not think royalties were owing, believing that the Cabilly II patent was invalid and unenforceable,¹ and that its claims were in any event not infringed by Synagis. Nevertheless, petitioner considered the letter to be a clear threat to enforce the Cabilly II patent, terminate the 1997 license agreement, and sue for patent infringement if petitioner did not make royalty payments as demanded. If respondents were to prevail in a patent infringement action, petitioner could be ordered to pay treble damages and attorney's fees, and could be enjoined from selling Synagis, a product that has accounted for more than 80 percent of its revenue from sales since 1999. Unwilling to risk such serious consequences, petitioner paid the demanded royalties “under protest and with reservation of all of [its] rights.” Id., at 426. This declaratory-judgment action followed.

Petitioner sought the declaratory relief discussed in detail in Part II below. Petitioner also requested damages and an injunction with respect to other federal and state claims not relevant here. The District Court granted respondents' motion to dismiss the declaratory-judgment claims for lack of subject-matter jurisdiction, relying on the decision of the United States Court of Appeals for the Federal Circuit in Gen–Probe Inc. v. Vysis, Inc., 359 F.3d 1376 (2004). Gen–Probe had held that a patent licensee in good standing cannot establish an Article III case or controversy with regard to validity, enforceability, or scope of the patent because the license agreement “obliterate[s] any reasonable apprehension” that the licensee will be sued for infringement. Id., at 1381. The Federal Circuit affirmed the District Court, also relying on Gen–Probe.427 F.3d 958 (2005). We granted certiorari. 546 U.S....