Diagnostics & Imaging Week

WASHINGTON — The U.S. Supreme Court has sided overwhelmingly in favor of the appeal by MedImmune (Gaithersburg, Maryland) to pursue patent litigation against Genentech (South San Francisco), even though the former is continuing to license the latter’s patent.

The recent 8-1 decision allows MedImmune to dispute Genentech’s intellectual property without breaching the companies’ contract, and that could have broad implications that ripple across the entire industry, some observers believe.

That’s because if any licensee can fight its licensor’s intellectual property without breaching their contract, a potential wave of challenges to existing license structures could be on the horizon, and that could translate to higher licensing costs.

But even if that’s the case, not everyone foresees gloom and doom ahead.

“I think it will change the current licensing system,” said Steven Ludwig, an attorney in the Washington office of the law firm Venable, “but I’m not a doomsayer.”

In fact, he told Diagnostics & Imaging Week’s sister publication BioWorld Today that the verdict could in fact “strengthen” the patent system for a couple of reasons.

First, those with broad but potentially invalid patents might “think twice” about trying to enforce them; secondly, it encourages patent holders to seek dependent claims. That is, they might request a number of more specific, validated claims rather than claiming overly broad, vague patents.

The Supreme Court, which Ludwig said is clearly “interested” in patent law given its recent caseload that includes this suit and several others around ambiguous claims, is hearing these matters as part of a broader effort to better define intellectual property boundaries.

The patent in question in this case, the Cabilly II patent, is controlled by Genentech. MedImmune licenses the patent to produce Synagis (palivizumab), its top-selling drug that’s marketed for preventing respiratory syncytial virus in high-risk infants, but has challenged the validity of an extension granted to Genentech on the original Cabilly patent.

A lower court, the Court of Appeals for the Federal Circuit, previously ruled against allowing suits by licensees in interpreting a requirement in the Declaratory Judgment Act that there must be a case of actual controversy. A federal district court originally made this determination.

But Justice Antonin Scalia, in delivering the Supreme Court’s opinion, wrote that MedImmune was not required “to break or terminate” its original license agreement before seeking a declaratory judgment in federal court “that the underlying patent is invalid, unenforceable, or not infringed.”

He added that the Court of Appeals “erred in affirming the dismissal of this action” for lack of subject-matter jurisdiction.

In addition, he said Genentech’s assertion that the parties “in effect settled this dispute” upon entering their license agreement “is mistaken.” Further, he said, “Promising to pay royalties on patents that have not been held invalid does not amount to a promise not to seek a holding of their invalidity.”

Only Justice Clarence Thomas dissented.

Officials at MedImmune praised the justices’ decision to grant its appeal for further clarifying the use of declaratory judgments by licensees of questionable patents. Going forward, the company plans to pursue its complaint regarding non-infringement, invalidity and unenforceability of the Cabilly II patent.