India: Impact Of Medimmune Case

Last Updated: 14 February 2019
Article by Nayanikaa Shukla
Most Read Contributor in India, January 2019

Introduction

The MedImmune case1 arose when MedImmune, a pharmaceutical manufacturing company, challenged the validity of Cabilly patent II granted to Genentech, a biotechnology corporation. MedImmune had signed an agreement with Genentech, which was the patent holder, to license the Cabilly I patent and the then-pending Cabilly II patent application, entitling MedImmune to make, use, and sell the subject matters of the Cabilly I patent and the Cabilly II application in manufacturing the drug Synagis. In lieu of such license granted to MedImmune by Genentech, MedImmune paid royalties to Genentech.

After Genentech was granted the patent over subject matter of Cabilly II in 2001, they demanded MedImmune to pay further royalties for the same from March, 2002. Genentech had the intention of terminating their original contract with MedImmune and suing them for patent infringement if they refused to pay revised royalties to Genentech. Although MedImmune did not believe that the patent granted to Genentech was valid, it did not breach their contract and continued paying royalties as demanded by Genentech, but paid them under protest.

Even while paying the royalties under protest, MedImmune filed an action for declaratory relief in the District Court, which was dismissed for lack of subject-matter. Upon appeal, the Federal Circuit affirmed the decision of District Court.

Historical background

The validity of a patent can be challenged by a third party way of a petition under article 311 of the US Patent Act.2 A patent can be challenged for lack of novelty or for obviousness, among other grounds mentioned in articles 102 and 103 of the same act.3 In eBay v. MercExchange L.L.C.4, the Supreme Court ruled that a patent must meet all the requirements of patentability, non-obviousness, novelty and usefulness under the four factor test for the patent holder to obtain a permanent injunction.

The MedImmune case overruled many precedents decided by the US Supreme court. In its 1969 decision in Lear v. Adkins5, the SC had rejected the doctrine of license estoppel, allowing the licensee to challenge the validity of the patent while stopping the payment of royalties. The court observed that such clauses (including "no contest" clauses) protect bad patents and therefore go against public policy. But this doctrine was later upheld by the Federal Circuit in multiple cases like Flex-Foot Inc. v. CRP Inc6 and Acoustical Design, Inc. v. Control Elec. Co.7 and continuously put restrictions on the decision in Lear case.

In the case of Altvater v. Freeman8, the Supreme Court held that a declaratory judgment suit filed by a licensee for declaring a patent invalid should not be rendered non-justiciable simply because of his failure to stop payments of royalty. The facts of this case were similar to those of MedImmune case. The Supreme Court relied heavily on this case while deciding the MedImmune case.

Decision

The main issue before the court in the present case was whether the actual-controversy requirement (requirement of a real dispute capable of being decided by the court) to pass a declaratory judgment deciding upon the rights, duties and obligations requires the licensee to first breach the license agreement by refusing payment of royalties before suing the patent holder to declare the patent invalid, unenforceable, or not infringed.9

The Court held that declaratory judgment jurisdiction existed regardless of MedImmune's actions of payment of royalties and refusal to breach the license agreement and licensee is not required to breach the agreement to file a declaratory judgment action. This judgment was passed with a majority of 8:1, with Justice Thomas being the lone one to dissent.

Effective strategies of patent holders i.e. Licensor

The patent holder may make effective use of the decision of MedImmune case by including the following strategies as clauses in a licensing agreement, in order to strongly protect their own rights:

  • The licensor may include a clause of termination of the license if the licensee contests that validity of the patent in a court of law.
  • Since the licensee can now challenge the validity of the patent without breaching the license agreement, the risk to the patent increases, so the licensor may demand higher royalties from the beginning to cover the risks and may also demand non-refundable payments.
  • The licensor may also seek reimbursement of amount they spent on litigation, if the court upholds the validity of the patent.
  • The licensee may be required to provide a notification of the suit to the patent holder and evidences against the patent before actually filing it. The licensors could also require settlement of dispute by way of arbitration rather than declaratory proceedings.

Effective strategies of Licensee

The licensee may adopt the following practices so as to not allow himself to be suppressed by the Licensor:

  • The licensee may seek the right to not pay royalties during pendency of any suit challenging the validity of patent.
  • He may further demand to be informed of any ground which may invalidate the patents, and may retain the right to challenge the licensed patent if they find any new evidence.
  • The licensee may demand a right to temporarily discontinue royalty payments if the patent is challenged, by the licensee himself or by any third party, and the payment shall continue only if the patent is held valid.

Footnotes

1 MedImmune Inc. v. Genentech Inc. 549 U.S. 118 (2007).

2 https://www.uspto.gov/web/offices/pac/mpep/consolidated_laws.pdf

3 Ibid.

4 126 S. Ct. 1837 (2006)

5 Lear Inc. v. Adkins, 395 U.S. 653 (1969)

6 238 F.3d 1362

7 932 F.2d 939, 943 (Fed. Cir. 1991)

8 319 U.S. 359 (1943)

9 https://www.finnegan.com/en/insights/in-the-aftermath-of-medimmune-v-genentech-is-it-all-doom-and.html

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions