On July 29, 2011, the Court of Appeals for Federal Circuit
issued its much–anticipated decision in Association
of Molecular Pathology v. Myriad Genetics, Inc.. Most of the
publicity surrounding that decision naturally focused on the
court's holdings on the patentability of isolated DNA molecules
and various claims to testing methods. However, the court's
resolution of the threshold issue of declaratory judgment
jurisdiction also deserves attention. The panel unanimously found
that one of the many plaintiffs -- a non-infringing party who had
rejected a license more than ten years ago – had standing
to challenge the validity of Myriad's patents. Slip. Op. at
8. The panel's reasoning suggests that the result would
have been the same if the plaintiff was a current licensee
– which has implications for all patent-holders.
Plaintiffs, an assortment of medical organizations, researchers,
genetic counselors, and patients, sued the patent owner, Myriad, in
the United States District Court for the Southern District of New
York seeking a declaratory judgment that fifteen claims from seven
patents were invalid because they covered subject matter not
eligible to be patented. Myriad moved to dismiss the case, arguing
that the Plaintiffs (none of whom were infringing the patents)
lacked standing to sue. The district court disagreed, and the
parties moved for summary judgment on the merits of the
patentability challenge. The district court again held for
Plaintiffs and Myriad appealed the decisions on standing and the
merits. Slip. Op. at 8-24.
In analyzing the standing issue, the panel applied the totality of
the circumstances test announced by the Supreme Court in
MedImmune v. Genentech to ascertain whether (a) the
Plaintiffs had alleged a real and immediate injury, that (b) was
fairly traceable to Myriad's enforcement of its patents, and
(c) would be likely to be redressed by a favorable decision.
Slip. Op. at 25. In particular, the panel noted that
MedImmune requires the Plaintiffs to allege (1) "an
affirmative act by the patentee related to the enforcement
of his patent rights;" and (2) "meaningful
preparation to conduct potentially infringing activity."
Slip. Op. at 26.
The first prong of that test (an affirmative act by the patentee)
weeded out all but three of the plaintiffs – Drs.
Kazazian, Ganguly, and Ostrer – who each ran a university
laboratory and had received cease and desist letters from Myriad.
Myriad had demanded royalty payments from the doctors in letters
proposing a collaborative license. Although the letters were sent
over ten years ago, the panel reasoned that neither the testing
technology nor the parties' positions had changed in the
interim. In further view of the patentee's enforcement of its
patents against similarly situated parties, the panel concluded
that these letters were the required affirmative acts. The
panel further concluded that only Dr. Ostrer had met the second
requirement of meaningful preparation, because he had both
the resources and skill to do the allegedly infringing testing, and
testified that he would immediately resume such testing if not for
the threat of a lawsuit. Slip. Op. at 30. The other two
doctors, by contrast, merely asserted they would
"consider" resuming the testing – an
announcement of "'some day' intentions" which
cannot establish standing. However, since one plaintiff had
standing (and had pressed all of the claims), the panel moved on to
decide the merits portion of the appeal. Slip Op. p.
35.
Although the Supreme Court liberalized standing for declaratory
judgment claims in MedImmune to allow a paying licensee to
sue the patentee on a contract theory, it did not address whether
that paying licensee would have standing to sue directly for
invalidity of the licensed patent claim(s). In the Myriad
opinion, the panel interpreted MedImmune to permit a
non-infringing party who rejected a license (becoming a customer
instead of a competitor) to seek a declaratory judgment of
invalidity, and the court's reasoning might well apply equally
to current, paying licensees who become dissatisfied. While
refusing to define the outer boundary of declaratory judgment
standing, the Federal Circuit did emphasize that it would strictly
apply the MedImmune standard, and that standing "will
not arise merely on the basis that a party learns of the existence
of an adversely held patent, or even perceives that such a patent
poses a risk of infringement." Slip Op. at 28. Even
without further review from the en banc Federal Circuit or
the Supreme Court, such scrutiny should offer a ray of hope to
patent holders.
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