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No DJ Jurisdiction for Suit by a Paying Licensee

June 01, 2005

Decision icon Decision

Last Month at the Federal Circuit - July 2005

Judges: Schall (author), Bryson, and Gajarsa

In MedImmune, Inc. v. Centocor, Inc., No. 04-1499 (Fed. Cir. June 1, 2005), the Federal Circuit reaffirmed that a licensee paying royalties under a valid license agreement lacks the reasonable apprehension of an infringement suit necessary for an action under the DJ Act.

Centocor, Inc. (“Centocor”), the exclusive licensee of U.S. Patent No. 5,807,715 (“the ‘715 patent”), which claims methods for producing functional antigen-binding proteins, approached MedImmune, Inc. (“MedImmune”) in May 1999 to take a sublicense for its Synagis® product. Over the next nineteen months, with MedImmume purportedly “facing mounting pressure and fearing an imminent infringepagement suit,” the parties negotiated and finally executed a sublicense agreement for MedImmune to pay royalties to Centocor.

Throughout the negotiations and after the signing of the sublicense, MedImmune maintained its belief that it did not infringe the ‘715 patent and that the patent was invalid and unenforceable. Sixteen months after executing the sublicense, and while continuing to make timely royalty payments, MedImmune filed a DJ action alleging noninfringement, invalidity, and unenforceability. The district court dismissed that action for lack of subject matter jurisdiction, stating that MedImmune did not present an actual controversy under the DJ Act.

In affirming the district court’s decision, the Federal Circuit reiterated its now-standard test for such a DJ action: (1) a reasonable apprehension on the part of the DJ plaintiff that it will face an infringement suit, and (2) present activity by the DJ plaintiff that would constitute infringement, or concrete steps taken with the intent to conduct such activity. Focusing on the reasonable-apprehension prong of that test, the Court found controlling its holding from Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir. 2004): the presence of a license, unless materially breached, negates any reasonable apprehension of suit, and the license operates as an enforceable covenant not to sue by the licensor, resulting in no controversy between the parties.

Because MedImmune was paying its royalties in a timely manner, and Centocor could not sue under the license agreement, MedImmune did not have any reasonable apprehension of suit and no subject matter jurisdiction existed for the DJ action. The Court noted that neither Cardinal Chemical Co. v. Morton International, 508 U.S. 83 (1993), nor Lear, Inc. v. Adkins, 395 U.S. 653 (1969), required a different result as both were clearly distinguishable on their facts. Cardinal dealt with the jurisdiction of the courts of appeal, not with a district court’s jurisdiction under the DJ Act, while Lear noted only that a licensee is not estopped from challenging the validity of a licensed patent, not that a district court would necessarily have jurisdiction over a DJ challenge for validity.

MedImmune also asked that the panel recommend to the full Court that Gen-Probe be overruled, as that decision forced a choice by the licensee between paying tribute to a suspect patent and tying its fate to the uncertainty of patent litigation. The Court dismissed that argument as a complaint against Article III’s requirement of an actual case or controversy for any federal court jurisdiction, and not a limitation of Gen-Probe on the rights of licensees. Therefore, the Federal Circuit affirmed the judgment of the district court and dismissed the case for lack of subject matter jurisdiction.