Articles

Authored by Ronald A. Bleeker and Michael V. O'Shaughnessy

As we write, it has been exactly one year since the Supreme Court's decision in MedImmune, Inc. v. Genentech, Inc.¹ At the time, observers predicted that this decision would "open the floodgates" to increased filings of declaratory judgment actions in patent cases.²

Have those predictions been fulfilled? Because it has been a year since MedImmune was decided, we now have the benefit of a number of Federal Circuit and district court decisions that have addressed the ramifications of MedImmune. What have we learned from these cases about declaratory judgment jurisdiction in patent cases? Do they tell us anything about whether MedImmune resolved broader questions as to the Lear doctrine? Has MedImmune changed the behavior of those who license and litigate patents? Has it had an impact on the drafting of patent license agreements?

This article therefore has several purposes: (1) to review the two bodies of law (licensee estoppel and declaratory judgment jurisdiction) that intersect in MedImmune;(2) to review MedImmune itself and the subsequent Federal Circuit and district court cases interpreting it; (3) to consider what MedImmune and its progeny did and did not say about the Lear doctrine; and (4) to consider how these decisions may affect litigation, negotiation, and drafting strategies with respect to patents and patent license agreements.

I. Prior Development of the Case Law—Licensee Estoppel and Declaratory Judgment Jurisdiction

A. Licensee Estoppel—The Lear Doctrine
In its 1969 decision, Lear, Inc. v. Adkins,³ the Supreme Court considered the supposedly well-entrenched doctrine of licensee estoppel, i.e. the inability of a patent licensee to challenge the validity of the patent under which it is licensed. The Court recognized the competing arguments — requiring that parties be bound by their contracts, on the one hand, and the public interest in eliminating invalid patents, on the other. Indeed, it characterized the licensee estoppel doctrine as "a product of judicial efforts to accommodate the competing demands of the common law of contracts and the federal law of patents."⁴ Ultimately, however, the Court was more concerned about the "important public interest" in removing invalid patents and felt that this would be best accomplished through the self-interest of licensees observing that licensees may often be "the only individuals with enough economic incentive" to challenge the patent.⁵ It therefore ruled that a patent license provision is unenforceable when the provision prohibits the licensee from challenging the validity of the patent or when it requires the licensee to pay royalties during a challenge to validity.⁶

Lear has been the subject of continuing criticism by both commentators⁷ and the lower courts. In particular, the Federal Circuit has repeatedly narrowed and limited the ruling's scope. For example, subsequent decisions held that Lear only applied to patent license agreements and not to patent assignment agreements⁸ or to consent judgments in patent cases.⁹ In addition, the courts held that Lear did not apply to litigation settlement agreements, citing a competing public policy in favor of res judicata.¹⁰

The Federal Circuit also imposed procedural prerequisites for invoking the doctrine. In particular, the court was troubled by the equities in allowing a licensee to claim a license's protection while simultaneously challenging the licensed patent.¹¹ Although there is considerable precedent in the common law prohibiting a party to a contract from attacking the underlying asset, this argument seems to revive the contract v. public policy debate that was addressed by the Supreme Court in Lear. However, the fact that the licensee in Lear had actually stopped paying royalties before making its challenge to the patent allowed the Federal Circuit to make the distinction that a licensee that has not "repudiated" its license cannot invoke Lear.¹²

In particular, in Studiengesellschaft Kohle m.b.H. v. Shell Oil Co.,¹³ the Federal Circuit said that repudiation requires a licensee to (i) stop paying royalties under the license agreement and (ii) give notice to the licensor that it is challenging the validity of the licensed patent.¹⁴ It is worth noting that the court's fundamental unease with Lear is manifest throughout Shell. The Federal Circuit addressed Lear's concern that restricting licensees from challenging patents would cause the public to "pay tribute to would-be monopolists without need or justification," by characterizing this as "tones that echo from a past era of skepticism over intellectual property principles." Not surprisingly, the Federal Circuit concluded there is "no significant frustration of federal patent policy" in enforcing the terms of the agreement in the case of a non-repudiating licensee.¹⁵

B. Declaratory Judgment Jurisdiction In Patent License Cases
From Shell, it is only a small step to Gen-Probe, a case in which the Federal Circuit invoked a second body of law in its procedural restriction of Lear—declaratory judgment jurisdiction.

Article III of the U.S. Constitution states that a federal court has jurisdiction only with respect to a "case or controversy." The Declaratory Judgment Act, 28 U.S.C. § 2201(a) gives federal courts the power to declare a party's rights to a "case or controversy" and has been upheld by the Supreme Court as consistent with Article III.¹⁶ Applying this test has not been easy, but a unique standard developed in patent litigation which became known as the "reasonable apprehension of imminent suit" test.¹⁷

Under this test, a party could establish declaratory judgment jurisdiction in a patent case if it satisfied two criteria:

i. an explicit threat or other action by the patentee which created a reasonable apprehension on the part of the declaratory judgment plaintiff that it would be sued, and

ii. present activity by the declaratory judgment plaintiff which would constitute infringement, or concrete steps taken with intent to conduct such activity.¹⁸

Gen-Probe Inc. v. Vysis, Inc.¹⁹ involved facts very similar to those presented in MedImmune. The licensee continued to pay royalties under its license, but had brought a declaratory judgment action challenging the licensed patent.²⁰ Thus, it was a non-repudiating licensee. It is easy to understand why the Federal Circuit viewed Shell as the controlling law in this situation. However, the Federal Circuit in Gen-Probe went further then it had in Shell and declared that the failure to repudiate the license not only prohibits the licensee from invoking Lear, but also deprives it of any basis for a declaratory judgment action, because the continued existence of the license agreement "obliterate[s] any reasonable apprehension" that the licensee will be sued for infringement.²¹

It is this use of declaratory judgment jurisdiction to prohibit a nonrepudiating patent licensee from challenging a licensed patent that lies at the heart of the MedImmune decision.

II. MedImmune and Its Progeny

A. The Supreme Court decision in MedImmune (January 2007)

1. Background
In 1997, MedImmune entered into a patent license agreement with Genentech, whereby MedImmune took licenses under Genentech's patent on "chimeric antibodies" and also on a then-pending Genentech patent application for "coexpression of immunoglobulin chains in recombinant host cells."²² The agreement defined a "Licensed Product" as a specified antibody that would infringe either or both of these patent properties, provided that they had not expired or been declared invalid.²³ It also gave MedImmune the right to terminate the agreement with six months written notice.²⁴ Med-Immune successfully commercialized a drug known as "Synagis," which is used to treat respiratory tract disease in young children and infants.²⁵ Since 1999, Synagis has accounted for more than 80 percent of the sales revenue of MedImmune.²⁶

When the Genentech "coexpression" application issued as a patent ("Cabilly II") in December 2001,²⁷ Genentech advised MedImmune that it expected MedImmune to pay royalties under this patent for Synagis.²⁸ However, MedImmune believed that Synagis did not infringe the Cabilly II patent and, further, that the patent was invalid and unenforceable.²⁹ Nonetheless, MedImmune was reluctant to terminate the license agreement because of the potential risk to its Synagis business.³⁰ Therefore, it continued to pay the royalties to Genentech but "under protest and with reservation of all of [MedImmune's] rights."³¹ It also brought a declaratory judgment action against Genentech that sought a declaration that the Cabilly II patent is invalid, unenforceable, and not infringed.³²

The district court dismissed MedImmune's declaratory judgment action for lack of subject matter jurisdiction.³³ On appeal, the Federal Circuit affirmed, following its prior decision in Gen-Probe.³⁴ The Supreme Court then granted certiorari.³⁵

2. The Supreme Court's Decision (January 2007)³⁶
As a threshold matter, the Court considered whether the issue on appeal was a "freestanding" claim of patent invalidity or whether it was a contract claim based on patent invalidity and non-infringement.³⁷ The Court concluded that it was presented with a contract claim.³⁸ In passing, the Court made an important observation about the extent to which its 1969 decision in Lear v. Adkins applied to this case.³⁹ Significantly, the Court drew a distinction between a repudiating licensee (as in Lear) and a non-repudiating licensee (as in MedImmune).⁴⁰

In the Supreme Court's view, the central question presented was whether the facts of this case presented a "case or controversy," as required by Article III of the Constitution, and sufficient for purposes of the Declaratory Judgment Act.⁴¹ In reviewing its prior opinions on this issue, the Court quoted from its opinion in a non-patent case, Maryland Casualty Co. v. Pacific Coal & Oil Co. "Basically, the question in each case is 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 the issuance of a declaratory judgment."⁴²

Under this standard, a "case or controversy" would certainly exist if MedImmune had repudiated the license by stopping its royalty payments. However, because MedImmune continued to pay royalties under the license agreement, albeit "under protest," it was not in "imminent threat of harm" from an infringement lawsuit. But, did its situation still present a "case or controversy" for purposes of establishing declaratory judgment jurisdiction?

The Supreme Court first observed that "where threatened action by government is concerned, we do not require a plaintiff to expose himself to liability before bringing suit to challenge the basis for the threat."⁴³ The Court then noted that there are fewer cases, mostly in the lower courts, which involve the avoidance of injury where the plaintiff is threatened by a private party.⁴⁴ However, the "only Supreme Court decision in point" happened to present facts remarkably similar to those in MedImmune.⁴⁵

Altvater v. Freeman⁴⁶ concerned a patent dispute which had been previously resolved by an injunction and the parties' entry into a license agreement.⁴⁷ Subsequently, the parties became embroiled in a further dispute over the terms of the license agreement; the licensees counterclaimed for a declaratory judgment that the licensed patents were invalid, but continued to pay royalties "under protest."⁴⁸ The Supreme Court held that there was a basis for the declaratory judgment claim, notwithstanding that the royalties continued to be paid "under protest" and under compulsion of an injunction:

[T]he requirements of [a] case or controversy are met where payment of a claim is demanded as of right and where payment is made, but where the involuntary or coercive nature of the exaction preserves the right to recover the sums paid or to challenge the legality of the claim.⁴⁹

In the Gen-Probe case, the Federal Circuit considered Altvater, but distinguished it on the ground that Altvater involved the compulsive effect of an injunction.⁵⁰ In MedImmune, however, the Supreme Court explicitly rejected this distinction, noting that the Altvater opinion had recognized that the licensee could stop payment but would thereby put itself at risk of an infringement action.⁵¹ The Court therefore held that MedImmune "was not required, insofar as Article III is concerned, to break or terminate its 1997 license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed."⁵²

In addition, in its now-famous footnote 11, the Supreme Court went on to say that "[e]ven if Altvater could be distinguished as an injunction case, it would still contradict the Federal Circuit's reasonable apprehension of imminent suit" standard for declaratory judgment.⁵³ Not content to make this point once, footnote 11 went on to state that the Federal Circuit test "conflicts" with two Supreme Court decisions and is "in tension" with a third.⁵⁴ As we will see, these repeated and pointed comments did not escape the attention of either the Federal Circuit or the district courts.

B. The Lower Courts' Initial Reaction to MedImmune (January—March, 2007)
The Federal Circuit reacted to MedImmune's footnote 11 in two significant decisions at the end of March 2007. However, in the period between January and late March, 2007, several district courts noted this pointed critique of the long-standing Federal Circuit "reasonable apprehension of imminent suit" test. These cases can be divided into two groups—cases that viewed footnote 11 as completely overruling the Federal Circuit's test and cases that took the more cautious position that the test had been criticized but not overruled.

In at least three cases in this period, the district court acknowledged that the reasonable apprehension of imminent suit test had been questioned by the Supreme Court, but held that it had not been explicitly overruled. For example, in Prasco L.L.P. v. Medicis Pharm. Corp.,⁵⁵ the court noted that the Supreme Court's MedImmune decision "may call into doubt the use of the 'reasonable apprehension of suit' test, [but] it did not overrule the line of cases that rely upon the 'reasonable apprehension of suit test'" outside of this factual scenario [i.e. the nonrepudiating licensee].⁵⁶ Other cases holding that the reasonable apprehension of imminent suit test was not overruled were Bridgelux, Inc. v. Cree, Inc.⁵⁷ and WS Packaging Group, Inc. v. Global Commerce Group, LLC.⁵⁸

In at least two other district court cases, however, the court felt that the Supreme Court's criticism had effectively overruled the Federal Circuit's test. In Rite-Hite Corp. v. Delta T Corp.,⁵⁹ the court wrote:

[T]he Supreme Court has called into serious question the continued viability of the Federal Circuit's 'reasonable apprehension of suit' test in patent declaratory judgment actions. In light of such fact, this court is reluctant to employ that test in ruling on the defendant's motions to dismiss. Indeed, to do so would be to ignore the Supreme Court's clear signal that such test has a limited future life expectancy.⁶⁰

The Rite-Hite opinion's prediction that the test had only a short life expectancy was correct. Less than three weeks later, the Federal Circuit issued its SanDisk and Teva/Novartis opinions.

C. The Federal Circuit Reacts to MedImmune—SanDisk and Teva/Novartis (March 2007)
Taken together, the SanDisk and Teva/Novartis decisions clearly abolish "imminent apprehension of suit" as the test for declaratory judgment jurisdiction in patent cases and replace it with something akin to the Maryland Casualty standard discussed by the Supreme Court in MedImmune.⁶¹

These two decisions are also noteworthy because they dealt with factual contexts that were very different from the one at issue in MedImmune. As we have seen, MedImmune involved a situation where two parties had previously entered into a license agreement, and a non-repudiating licensee challenged the licensed patent.⁶² In contrast, SanDisk dealt with negotiations prior to the existence of any license agreement between the parties.⁶³ Teva/Novartis involved yet another situation—the relationship between the FDA's Orange Book listings and the unique ANDA environment in which pharmaceutical companies and generic competitors fight patent battles.⁶⁴

Taken together, these two cases created a new standard for declaratory judgment jurisdiction in patent cases, with important tactical and strategic implications for patent litigation and licensing.

1. SanDisk
The Federal Circuit decided SanDisk Corp. v. STMicroelectronics on March 26, 2007.⁶⁵ In this case, ST was the owner of several patents relating to flash memory storage that it wished to license to SanDisk.⁶⁶ In the course of prolonged negotiations between the parties, ST presented detailed claim charts in which it "mapped" the claims of its patents against specific SanDisk products, that were described as "infringing," and requested that SanDisk pay a royalty.⁶⁷ However, ST's counsel also stated that "ST has absolutely no plan whatsoever to sue SanDisk."⁶⁸ In response, SanDisk denied that it needed a license.⁶⁹ The negotiations ultimately broke down and SanDisk filed a declaratory judgment action alleging that the fourteen ST patents which were discussed in the negotiations were invalid and not infringed.⁷⁰ In a decision prior to MedImmune, the district court granted ST's motion to dismiss the case under the "reasonable apprehension of suit" test.⁷¹ On appeal, the post-MedImmune Federal Circuit reversed and held that the facts established a basis for declaratory judgment jurisdiction.⁷²

The central issue addressed by the Federal Circuit was whether, in light of MedImmune, the facts established a "case or controversy" for purposes of declaratory judgment jurisdiction.⁷³ Not surprisingly, the court focused on the Supreme Court's footnote 11 and viewed it as a "rejection" of at least the first prong of the "reasonable apprehension of suit" test.⁷⁴ The Federal Circuit also noted the Supreme Court's preference for the Maryland Casualty standard.⁷⁵ Accordingly, although "some affirmative act" of the patentee is still required,⁷⁶ the Court concluded that Article III jurisdiction is met "where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do."⁷⁷ In brief:

We hold only that where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of the legal rights.⁷⁸

In reaching this conclusion, the Federal Circuit had to consider the explicit statement of ST's patent counsel that there was "absolutely no plan whatsoever to sue  SanDisk."⁷⁹ However, the court found that ST "has engaged in a course of conduct that shows a preparedness and willingness to enforce its patent rights despite [its counsel's] statement."⁸⁰ Indeed, the court viewed this contradictory comment as "the kinds of 'extra-judicial patent enforcement with scare-the-customer-and-run tactics' that the Declaratory Judgment Act was intended to obviate."⁸¹

Concurring in the result, Judge Bryson filed a separate opinion in SanDisk. He first noted that, since ST had been careful not to threaten suit during the negotiations  (and, in fact, had made a statement to the contrary), the case would have been decided differently under the pre-MedImmune test for declaratory judgment jurisdiction.⁸² Nonetheless, he agreed with the majority that "a fair reading of footnote 11" in MedImmune "calls our case law into question" and effectively changed the outcome in this case.⁸³ However, in his view, the majority opinion failed to fully address the broad implications of this "sweeping change" in the law, which are not limited to the precise factual situation presented.

Therefore, it would appear that under the court's standard virtually any invitation to take a paid license relating to the prospective licensee's activities would give rise to an Article III case or controversy if the prospective licensee elects to assert that its conduct does not fall within the scope of the patent. . . . [A]ll the prospective licensee has to do in order to dispel any doubt is to inquire of the patentee whether the patentee believes its activities are within the scope of the patent. If the patentee says 'no', it will have made a damaging admission that will make it very hard ever to litigate the issue, and thus will effectively end its licensing efforts. If it says 'yes' or equivocates, it will have satisfied the court's test and will have set itself up for a declaratory judgment lawsuit.⁸⁴

Although Judge Bryson clearly had reservations as to the wisdom of this result, he agreed that the majority had reached the correct outcome under the MedImmune standard.

An interesting point raised in SanDisk was whether the parties could have entered into a "confidentiality agreement" during their license negotiations to avoid creating a basis for declaratory judgment.⁸⁵ In fact, this was the point on which license negotiations between the parties broke down—SanDisk was willing to offer terms on which it would take a license, but only on a confidential basis, whereas ST insisted on a non-confidential offer.⁸⁶ The court did not define or describe exactly what it meant by a "confidentiality agreement" in this context, but presumably it was referring to a type of "stand-still" agreement in which the parties agree not to bring suit for a defined period, or to use the negotiations as a basis for bringing suit.⁸⁷ In his concurring opinion, Judge Bryson questioned whether such an agreement would ever make sense under the new standard:

[O]nly a party that was not interested in bringing a declaratory judgment action would enter into such an agreement. A party that contemplates bringing a declaratory judgment action or at least keeping that option open would have no incentive to enter into such an agreement.⁸⁸

2. Teva/Novartis
Three days after the SanDisk opinion, the Federal Circuit delivered its opinion in Teva Pharm. USA v. Novartis Pharm.⁸⁹ In this case, Novartis owned five patents relating to its drug, Famvir.⁹⁰ One of the patents was directed to the active ingredient in the drug (famciclovir), while the other four patents were directed to methods of therapeutic use for the drug.⁹¹ All five patents were listed by Novartis in the FDA's Orange Book. Teva developed a generic version of famciclovir and in 2004 filed its Abbreviated New Drug Application ("ANDA"), as required by the Hatch-Waxman Act,⁹² including a statement that all five of the Novartis patents were either not infringed or invalid.⁹³ Novartis sued Teva for patent infringement, but only on the '937 "active ingredient" patent.⁹⁴ Teva then brought a declaratory judgment action on the other four "method of use" patents.⁹⁵ Applying the pre-MedImmune "reasonable apprehension of suit" test of Teva v. Pfizer, the district court dismissed the declaratory judgment claims.⁹⁶ On appeal, after MedImmune, the Federal Circuit reversed.⁹⁷

In Teva/Novartis, even more than in SanDisk, the Federal Circuit was clear that the old "reasonable apprehension of suit" test had been overruled by MedImmune and that the standard set forth in Maryland Casualty now controlled:

In MedImmune, the Court re-affirmed the correct standard for determining a justiciable declaratory judgment action: 'Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'⁹⁸

In Teva/Novartis, the Federal Circuit particularly emphasized the phrase "under all the circumstances," perhaps leading to a "totality of the circumstances" analysis. Among the factors listed by the court as providing a basis for declaratory judgment are the following:

i. Novartis listed all of the patents in the Orange Book—although the majority opinion was careful to say that this was only a factor, and that the mere act of listing was not a sufficient basis in itself.⁹⁹

ii. Teva's ANDA certification referred to all five patents.¹⁰⁰

iii. Several statutory provisions—especially a 2003 amendment to the Hatch Waxman Act on achieving "patent certainty"—seem designed to prevent a patentee from "insulating" its method patents while asserting its product patents.¹⁰¹

iv. Novartis actually brought a suit against Teva on one of the related patents.¹⁰²

v. Novartis' strategy raises the unwelcome prospect of "multiple infringement suits from the same patentee based on the submission of a single ANDA …. "[t]his threat of protracted litigation creates a present and real harm that is a relevant circumstance in finding whether a justiciable controversy exists."¹⁰³

Judge Friedman filed a concurring opinion that took "a somewhat different, and shorter, path" to reach the same conclusion.¹⁰⁴ His opinion is even more candid as to the effect of footnote 11 on the "reasonable apprehension of suit" test: 

In these unusual circumstances, where the Supreme Court went out of its way to state its disagreement with our 'reasonable apprehension of imminent suit' test, which was not an issue in the case before it, it appears incumbent on us to stop using that test and hereafter to apply the general declaratory judgment standards that the Supreme Court applied in MedImmune.¹⁰⁵

Unlike the majority, however, Judge Friedman came closer to saying that the mere listing of related patents in the Orange Book created sufficient basis for an "existing controversy."¹⁰⁶ In his view, Novartis's filing of the ANDA suit and Teva's declaratory counter-suit simply confirmed that a controversy existed.

D. Cases Since SanDisk and Teva (April 2007–January 2008)
SanDisk and Teva/Novartis settled beyond question that MedImmune overruled the "imminent apprehension of suit" test for declaratory judgment jurisdiction in patent cases. Federal Circuit and district court cases that have subsequently addressed the issue clearly recognize this. However, these cases also add to the emerging picture of the "factors" that are relevant when evaluating declaratory judgment jurisdiction in patent cases.

1. Federal Circuit Cases
Of the four Federal Circuit decisions on this issue subsequent to SanDisk and Teva/Novartis — as of January 9, 2008 — three found that the facts presented a basis for declaratory judgment and one found that they did not.¹⁰⁷ Honeywell International Inc. v. Universal Avionics Systems,¹⁰⁸ is similar to Teva/Novartis in that it dealt with the concept of "relatedness." However, in this case, the question was not the relationship between several separate patents listed in the Orange Book, but rather the relationship between independent and dependent claims in a single patent that had been asserted in litigation.¹⁰⁹ After the litigation had commenced, Honeywell withdrew certain independent claims of the patent from suit, but maintained its cause of action based on related dependent claims.¹¹⁰ The litigation defendant then counterclaimed for a declaratory judgment with regard to these withdrawn claims.¹¹¹ Observing that the Supreme Court had recently "eliminated this court's 'reasonable apprehension of imminent suit' test," the Federal Circuit concluded that Honeywell had "left the entire subject matter of the [relevant] claims at issue," and that a basis for declaratory judgment jurisdiction exists.¹¹²

Sony Electronics., Inc. v. Guardian Media Technologies., Ltd.,¹¹³ is very similar to SanDisk, in that it involved conduct during extended pre-license negotiations. In Sony, Guardian explicitly identified the patents and relevant claims it believed Sony (and other defendants) had infringed, as well as accusing specific products.¹¹⁴ In turn, Sony (and the other accused infringers) asserted prior art that allegedly rendered the asserted claims invalid.¹¹⁵ At the same time, however, the parties engaged in efforts to negotiate a "business resolution."¹¹⁶ As a result, Guardian asserted that no basis for declaratory judgment jurisdiction existed because the suit was brought while the parties were still negotiating.¹¹⁷ The Federal Circuit disagreed, holding that "a patentee's apparent continued willingness to engage in licensing negotiations does not prevent a plaintiff from maintaining a declaratory judgment suit."¹¹⁸ Rather, because Guardian contended that Sony should pay a royalty, and Sony contended that it should be free to engage in such activities without a license, there existed "an actual controversy between the parties within the meaning of the Declaratory Judgment Act."¹¹⁹

Adenta GmbH v. OrthoArm, Inc.¹²⁰ is somewhat similar to SanDisk because the patentee argued that its language did not constitute an explicit threat of suit. However, the case also bears some resemblance to MedImmune in that it dealt with a situation involving existing licenses. Adenta had two license agreements from American for two different products.¹²¹ Adenta alleged that the licensed patent was invalid and that it intended to stop paying royalties.¹²² American replied that this would be a breach of the licenses and that American would "pursue its available legal remedies to protect its rights."¹²³ As in SanDisk and Sony, the Federal Circuit rejected the patentee's argument that it had not explicitly threatened suit as inconsistent with its overall conduct, which showed an intent to sue if Adenta stopped paying royalties, which Adenta (unlike MedImmune) subsequently did.¹²⁴

However, Benitec Australia, Ltd. v. Nucleonics, Inc.,¹²⁵ demonstrates that there are still some limits to the scope of declaratory judgment jurisdiction. In this case, the Federal Circuit concluded that a sufficiently concrete and justiciable controversy did not exist to support declaratory judgment jurisdiction.¹²⁶ Benitec had filed suit against Nucleonics for infringement relating to Nucleonics' development of human medical applications of RNAi.¹²⁷ Subsequently, the parties both took the position that, under 35 U.S.C. § 271(e)(1), such activity would not be viewed as infringing until and unless Nucleonics filed a New Drug Application, which was not imminent.¹²⁸ Nucleonics nonetheless asserted that the possibility of a lawsuit by Benitec gave rise to declaratory judgment jurisdiction.¹²⁹ The Federal Circuit rejected this contention, concluding that Nucleonics could not present evidence of a justiciable controversy, and "provided insufficient information for a court to assess whether [its] possible future animal work would be infringing or not."¹³⁰ Accordingly, despite Nucleonics' desire to remove any question or concerns about the potential for future litigation, Nucleonics simply had "not made a showing of 'sufficient immediacy and reality' to support declaratory judgment jurisdiction."¹³¹

2. District Court Cases
Not surprisingly, following SanDisk and Teva/Novartis, the district courts have also adopted the new standard for declaratory judgment jurisdiction.

a. "Under all the circumstances"
The Federal Circuit's post-MedImmune decisions, particularly Teva/Novartis, adopted the Maryland Casualty test, and particularly focused on the phrase "under all the circumstances" to develop a "totality of the circumstances" approach. While this approach reflects the fact-specific nature of the analysis and achieves the flexibility that the Supreme Court apparently desired, it also has the disadvantage of making predictability more difficult, at least until a more substantial number of cases have been decided.

In Judkins v. HT Window Fashions Corp.,¹³² for example, HT gave Judkins notice that a specific Judkins product infringed HT's '634 patent.¹³³ Judkins redesigned its products, so that they no longer infringed.¹³⁴ HT acknowledged that the new products did not infringe the '634 patent, but also stated that if Judkins ever sold its old products, Judkins would be liable for willful infringement.¹³⁵ HT later brought a suit against Judkins for infringement of HT's '120 patent.¹³⁶ Judkins counterclaimed that both the '120 patent and the earlier-asserted 634 patent were invalid.¹³⁷ HT argued that the court lacked declaratory judgment jurisdiction with respect to the '634 patent.138 The district court disagreed, citing Teva/Novartis for the proposition that:

A declaratory judgment plaintiff need only show "under all the circumstances" an actual or imminent injury caused by the defendant that can be redressed by judicial relief and that is of "sufficient immediacy and reality" to warrant the issuance of a declaratory judgment.¹³⁹

Teva/Novartis seems to provide a good guide as to the factors that a court will consider in an ANDA situation involving listed, related patents. However, one can extrapolate from the factors considered in Teva II to identify other factors that may be relevant.

b. Course of conduct
A number of cases follow SanDisk, Sony, and Adenta¹⁴⁰ in emphasizing the patentee's overall conduct and not its self-serving actions or statements designed to cloud the actual controversy. For example, in Sabert Corp. v. Waddington North America, Inc.,¹⁴¹ the court rejected the patentee's argument that its filing of a request for re-examination had nullified the controversy that arisen from its prior actions.¹⁴²

Similarly, in Echostar Satellite LLC v. Finisar Corp.,¹⁴³ the patentee, following a victory in a related suit, issued a press release stating its intention to continue license negotiations with other companies. The patentee contended that the press release showed the absence of a controversy, but the court rejected this argument:

[A] statement by a patent holder promising not to sue the [declaratory judgment] plaintiff does not eliminate the justiciable controversy created by the patent holder's actions. SanDisk, 480 F.3d. at 1382–83 . . . . [I]n light of the successful infringement suit against DirecTV on the same patent at issue here, it was reasonable for  Plaintiffs to interpret the press release as an attempt by Defendant to pressure Plaintiffs into a licensing arrangement as their only alternative to facing an infringement suit.¹⁴⁴

Another factor cited in Teva/Novartis is whether the parties were already engaged in actual litigation with respect to this subject matter.¹⁴⁵ Using this as a starting point, a court might also consider whether there is a history of patent litigation between these parties, whether the patentee has a prior history of bringing suit on this patent against other parties, or whether the patentee has a record of being generally litigious with regard to its patents.¹⁴⁶ Conversely, even where the court acknowledges that the patentee filed suit primarily for the purpose of gaining leverage in negotiations, this intent is not a reason for a district court to decline jurisdiction.¹⁴⁷

In Cimline, Inc. v. Crafco, Inc,¹⁴⁸ Crafco previously accused Cimline of patent infringement and actually sued Cimline in a different district court for infringement of  the same patent, albeit with respect to a different Crafco product.¹⁴⁹ In fact, Cimline alleged that Crafco had charged it with patent infringement "for every prior Cimline attempt to market and sell a melter with an autoloader."¹⁵⁰ In view of this history and the pattern of litigation between the companies, the district court found that there was sufficient basis for declaratory judgment jurisdiction. The court also rejected Cimline's argument that there was no basis for jurisdiction because it had not made a charge of infringement against the new Crafco product that was the subject of the suit.¹⁵¹

Conversely, certain types of conduct by the patentee can vitiate a "controversy." For example, in Merck & Co., Inc. v. Apotex, Inc.,¹⁵² Merck filed a statutory disclaimer with respect to two patents and also asked the FDA to "de-list" them from the Orange Book.¹⁵³ Even though the FDA did not "de-list" the two patents, their disclaimed status meant that Merck could "no longer enforce any claims as to these patents, [and] there is no justiciable case or controversy to support jurisdiction in an action for declaratory judgment here."¹⁵⁴ As the district court pointed out, these facts are different from those in Teva/Novartis, where Novartis neither disclaimed the patents in question nor sought to remove them from the Orange Book.¹⁵⁵

The new MedImmune standard for declaratory judgment cases has also been applied by the district courts in cases involving other types of intellectual property, such as trademarks. For example, in Russian Standard Vodka (USA), Inc. v. Allied Domecq Spirits & Wine USA, Inc.,¹⁵⁶ a false advertising case, Allied Domecq threatened the plaintiffs and even initiated a proceeding with the NAD in view of plaintiffs' statements as to whether Stolichnaya vodka was an "authentic" Russian vodka.¹⁵⁷ Subsequently, Allied Domecq filed an affidavit with the court in which it stated that it would not pursue legal action against the plaintiffs with respect to their past statements on this subject.¹⁵⁸ The district court held that, under MedImmune, even though Allied Domecq's conduct had initially created a controversy, this affidavit changed the situation—"their subsequent waiver of the right to sue because of past statements eliminated any controversy regarding those statements."¹⁵⁹ However, the court then went on to find that there was "sufficient immediacy" to justify jurisdiction based on the threat of legal action by Allied Domecq over possible future statements by the plaintiffs.¹⁶⁰

c. Relatedness
Another factor that may be significant is "relatedness," i.e., how related is the patent that is the subject of the declaratory judgment counterclaim to the patentee's claim of infringement? This applies to the situation where different patents or different claims are involved in the same declaratory judgment action. In Teva/Novartis, all of the patents related to a common invention and were listed together by the patentee in a regulatory document, the FDA Orange Book.¹⁶¹ In the Honeywell case, the claims that were the subject of the declaratory judgment claim were actually part of the same patent in suit, but had been withdrawn by the patentee in the course of the infringement litigation.¹⁶²

Although the majority opinion in Teva/Novartis is more cautious, Judge Friedman's concurrence comes close to taking the position that, at least in the context of Hatch-Waxman, listing patents in the Orange Book may be sufficient by itself to establish declaratory judgment jurisdiction.¹⁶³ This would put pharmaceutical companies in a difficult position; they would be caught between the regulatory requirement that they list their patents in the Orange Book to be able to assert them and the risk that mere listing gives their generic competitors a basis for seeking a declaratory judgment.¹⁶⁴ In SanDisk, the court emphasized that declaratory judgment jurisdiction still required "some affirmative act" by the patentee to assert the patent — the question would be whether the Orange Book listing is such an "affirmative act"?¹⁶⁵

If the mere listing of patents in the Orange Book can provide a basis for declaratory judgment jurisdiction, what other situations might be similarly affected?¹⁶⁶ In particular, would this create a basis for declaratory judgment in cases involving standard-setting organizations ("SSOs")? In certain industries (especially the computer and electronics industries), companies formed groups to facilitate the introduction of new technologies through the adoption of common standards. This has led to litigation regarding the extent to which individual participating companies are required to disclose their relevant patents to other members of the SSO and, if so, the terms on which such patents would be licensed to members and to non-members.¹⁶⁷ Can one extrapolate the Teva/Novartis situation to argue that if an SSO member identifies or lists a patent or patent application as relevant to a standard, that in itself should provide others with a basis for declaratory judgment jurisdiction? Or is some other affirmative act required, such as a request for a license by an SSO member or actual production of a product that falls under that standard? If the SSO requires its members to automatically grant licenses under their relevant patents, does that decrease the potential risk of infringement for the potential licensee? What if the terms of the license are left open for negotiation between the parties?¹⁶⁸

d. "Sufficient Immediacy and Reality"
The Maryland Casualty test also requires that an actual "controversy" have "sufficient reality and immediacy."¹⁶⁹ A number of the post-MedImmune cases have relied on this language to reject declaratory judgment jurisdiction on the ground that the case before it presents issues that are too speculative, hypothetical, or remote.

In Benitec, the Federal Circuit pointed to this language in finding that the alleged controversy, as to potential future research, was too speculative to establish declaratory judgment jurisdiction.¹⁷⁰ A number of district court cases have taken similar positions. For example, Geisha, LLC v. Tuccillo¹⁷¹ was a trademark dispute over the use of the mark "Japonais" in connection with a restaurant.¹⁷² Citing Benitec, the court declined to find declaratory judgment jurisdiction in view of the fact that the alleged infringer merely stated that it intended to use the mark, but did not take any concrete steps towards opening the restaurant ("a distant possibility of potentially infringing activity, rather than a real, immediate, or imminent threat").¹⁷³

Courts have also found that a dispute lacks "sufficient immediacy and reality" because there is no existing basis for a claim. For example, in Rite Aid Corporation v. Purdue Pharma, L.P.,¹⁷⁴ a drug store chain had purchased generic oxycontin from several manufacturers.¹⁷⁵ Purdue sued all of these manufacturers and also sent letters to Rite Aid threatening suit in view of its purchases.¹⁷⁶ Rite Aid filed a declaratory judgment action.¹⁷⁷ In the meantime, however, Purdue had settled its suits against all of the manufacturers, including a release for all customers who had purchased oxycontin from them.¹⁷⁸ Since all possible suppliers in the market were now licensed, the court held that there was no longer an "actual controversy." The case would clearly have been decided in accord with SanDisk in the absence of these settlements.¹⁷⁹

Similarly, in Eisai Co., Ltd. v. Mutual Pharmaceutical Co, Inc.,¹⁸⁰ the district court found that there was not "sufficient immediacy and reality" because the generic company's developmental work to date fell within the "safe harbor" exemption from infringement provided by 35 U.S.C. § 271(e)(2) and therefore could not be a basis for a charge of infringement as a matter of law.¹⁸¹ In addition, any possible future infringement lacked "immediacy" because it was dependent on "two contingent events," namely, FDA approval of the generic company's ANDA and a decision by the generic company to actually market a generic version of the patented drug.¹⁸²

3. Covenants Not To Sue
A surprisingly large number of the post-MedImmune cases have dealt with covenants not to sue, i.e., situations where the patentee has previously given a covenant not to sue to the declaratory judgment plaintiff.¹⁸³ In these cases, the issue is whether the covenant removes the possibility of a controversy and thereby any basis for declaratory judgment jurisdiction. In other words, the patentee typically argues that the covenant covers the case in hand, whereas the other party argues that it does not. As might be expected, the cases tend to turn on the court's analysis of the scope and effect of the covenant.

The general rule in this area is that an unconditional covenant not to sue will divest the court of declaratory judgment jurisdiction.184 However, a conditional covenant not to sue does not eliminate jurisdiction.¹⁸⁵ Does MedImmune change anything?

The issue arose in Teva/Novartis, where the court noted:

We believe the only circumstance in which a case or controversy might not exist would arise in the rare circumstance in which the patent owner and brand drug company have given the generic applicant a covenant not to sue, or otherwise formally acknowledge that the generic applicant's drug does not infringe.¹⁸⁶

Another Federal Circuit case that addressed this issue is Benitec, where the patentee relinquished all rights to sue for past and present activity and thereby eliminated any basis for "controversy."¹⁸⁷ Additionally, there are several district court cases that address this issue.

Some of these cases looked past the covenant to the parties' conduct. For example, in Monolithic Power Systems, Inc. v. O2 Micro International. Ltd,¹⁸⁸ O2 had filed a stipulation with the court that it "covenants not to assert or reassert" its patents against MPS with respect to products identified by specific "product designations."¹⁸⁹ MPS then developed a new product with a different product designation.¹⁹⁰ It brought a declaratory judgment suit against O2 because it believed O2 "took a narrow view" of the prior covenant.¹⁹¹ In particular, MPS noted that (i) in another suit on the same patent against a third party, O2 had said that the stipulated dismissal was limited to "certain products" and (ii) O2 had asserted the same patent against four other companies, some of which are customers of MPS.¹⁹² Not surprisingly, the district court held that O2's "course of conduct" showed a willingness to assert its rights and to pursue litigation and that there was a basis for declaratory judgment jurisdiction notwithstanding the covenant.¹⁹³

Other cases looked to the terms and scope of the covenant itself. For example, in Field Turf USA, Inc. v. Sports Construction Group, LLC,¹⁹⁴ the covenant was a promise not to bring suit "for any past or current activity associated with . . . a synthetic field at Concord University."¹⁹⁵ The patentee said that this covenant ended all possibility for "controversy," but the district court found that this was only a conditional covenant, thereby distinguishing Benitec, in that it did not extend to activities at locations other than Concord University.¹⁹⁶

In Pfizer Inc. v. Ranbaxy Laboratories Ltd,¹⁹⁷ Pfizer asserted its '995 patent against Ranbaxy.¹⁹⁸ When one claim of the patent was declared invalid, Pfizer gave Ranbaxy a covenant not to sue with regard to any of the other claims.¹⁹⁹ On these facts, the district court held that there was no basis for declaratory judgment on this patent because Pfizer had "no valid patent that currently exists that can be enforced against Ranbaxy."²⁰⁰ However, Ranbaxy argued further that Pfizer had also submitted this patent for reissue, and therefore it was still at risk of suit under the reissue patent, which was not covered by the covenant.²⁰¹ The court rejected this argument as "speculative, purely hypothetical, and unripe for judicial determination."²⁰²

A very full discussion of MedImmune, Sony, Benitec, and several district court cases dealing with covenants not to sue is found in Furminator, Inc. v. Ontel Products Corp.²⁰³ In that case, the patentee gave a covenant not to sue with respect to products made, used, or sold before March 23, 2007 or which were offered for sale on the patentee's web site as of that date.²⁰⁴ The accused infringer argued that this did not protect it against suit with regard to products offered for sale or sold after that date, including one product known to the patentee.²⁰⁵ The patentee responded that this product was not at issue in the suit and that all relevant products had been included in the covenant.²⁰⁶ The court noted that, as in Benitec, this was a broad covenant not to sue, which "weighs heavily" against a finding that a "substantial controversy" exists.²⁰⁷ It rejected arguments about other products that might infringe other patents: "Defendants may not expand the scope of this case to obtain an advisory declaratory ruling with respect to a product based on a controversy involving another product."²⁰⁸ As to the new product, there was no showing of either sales or clear threats of infringement²⁰⁹ sufficient to meet the required burden.

III. Some Further Questions Raised by MedImmune

The MedImmune decision and the subsequent cases raise, but do not resolve, several further questions of interest.

A. MedImmune and Lear
There is another way that the Supreme Court could have decided the MedImmune case—it could have overruled Lear. As discussed, Lear has been criticized by commentators and by the Federal Circuit.²¹⁰ Justice Harlan's majority opinion in Lear clearly reflects a long-standing difficulty in reaching an acceptable compromise between "the competing demands of the common law of contracts and the federal law of patents" and the need to find a position that "would remain responsive to the radically different concerns of the two different worlds of contract and patent."²¹¹ In Lear, the Court was swayed by "our recent decisions emphasizing the strong federal policy favoring free competition in ideas which do not merit patent protection," citing cases such as Sears-Compco²¹² and Walker Process.²¹³

Like Lear, MedImmune also presented a choice between the competing demands of contract and public policy and the Supreme Court could have chosen to re-adjust the balance in favor of contract. Since it draws the distinction between a repudiating and a nonrepudiating licensee, Justice Scalia's opinion hints that this possibility may have attracted him. He clearly emphasizes that while Lear still applies in the case of a repudiating licensee, the Court is not reaching the question of whether Lear applies in the case of a nonrepudiating licensee.²¹⁴ This sentence is then followed by the "cf." notation and a citation to the Shell case.²¹⁵ As discussed above, Shell restricts Lear by imposing procedural requirements (perhaps derived from equitable considerations) that require a licensee to formally repudiate its license before it can invoke the doctrine of licensee estoppel.²¹⁶ Is this the balance between contract and patent law that seems appropriate to Justice Scalia, as it did to the Federal Circuit in Shell?²¹⁷

On the other hand, are there members of the current Court who, like Justice Harlan, are more concerned about "undeserving patents"? For example, in several recent opinions, Justice Kennedy has raised this issue. In the eBay case,²¹⁸ Justice Kennedy filed a concurring opinion, joined by three other Justices, in which he expressed concern about the emergence of "patent trolls" as well as about the "suspect validity" of business method patents. A year later, writing for a unanimous Court in the KSR case,²¹⁹ Justice Kennedy observed that "the results of ordinary innovation are not the subject of exclusive rights under the patent laws. Were it otherwise patents might stifle, rather than promote, the progress of useful arts."²²⁰

Although MedImmune changed the law with respect to declaratory judgment jurisdiction in patent cases, it changes nothing with respect to Lear and explicitly leaves open the question of whether a nonrepudiating licensee can even invoke the Lear doctrine.²²¹ Is it conceivable that MedImmune has the right to maintain its challenge to the Cabilly II patent for jurisdictional purposes, but that a future appellate court might hold that MedImmune lacks the ability to challenge the patent on the merits unless it repudiates its license?²²²

B. MedImmune and Notice of Damages
Patent law has long recognized that an accused infringer must be given some notice of its infringement. In particular, 35 U.S.C. § 287(a) requires that a patentee must mark its product or otherwise give notice, failing which "damages may be recovered only for infringement occurring after such notice."²²³ Obviously, and as the statute explicitly states, filing suit is one way to give actual notice.²²⁴

The Federal Circuit has a well-developed body of law concerning what a patentee must do to satisfy the "notice" requirement and to thereby start the damages clock. In particular, the cases focus on the notice's "adequacy." It is not sufficient for a patentee to make vague allegations. Rather, the patentee must specifically identify the patents in question and (to the extent possible) which of the alleged infringer's products it thinks are infringing its patents.²²⁵

The post-MedImmune world presents a new dilemma for the patentee during pre-license negotiations. As Judge Bryson pointed out in SanDisk, it no longer takes much for an issue to be joined, thereby establishing declaratory judgment jurisdiction.²²⁶ In order for a controversy to exist, a patentee need only suggest that another company "needs a license" under its patent with respect to a particular product, and for that other company to demur.²²⁷

Put another way, once a patentee goes to an alleged infringer and identifies a specific patent and a specific product of the other company, the patentee is immediately at risk of a declaratory judgment action. For this reason, patentees will seek to avoid being specific, if at all possible. For example, one can imagine that it will become more common to see letters in which the patentee "draws the attention" of another company to a patent, without explicitly alleging infringement or identifying with specificity the products that it thinks are infringing. But if this is all the patentee is willing to say, has it met the requirement of adequate notice and has it started the clock running for damages purposes?

This dilemma implicitly raises the question of whether notice for purposes of declaratory judgment and notice for purposes of § 287(a) are the same. In SRI Int'l., Inc. v. Advanced Tech. Labs.,²²⁸ the Federal Circuit held that they are not the same since they serve different purposes. In that case, the court held that one can have "actual notice" for purposes of § 287(a) without creating a basis for declaratory judgment jurisdiction.²²⁹ However, because that case was decided using the old "reasonable apprehension of suit" test,²³⁰ it is unclear whether the court would reach the same result today.

C. MedImmune and Willfulness
An interesting additional question is how a letter avoiding a specific accusation of infringement would affect the issue of willful infringement — does a letter that fails to specify the infringing product give the accused infringer sufficient notice for purposes of requiring conduct that will avoid a finding of "willfulness"? What if the accused infringer is a very large company, selling thousands of different products, many of which involve components purchased from suppliers, and the patent is a very broad business method or computer software patent — does the accused infringer have a duty to investigate all of its products and components? Alternatively, what if the letter is vague but the accused infringer is already aware of the patent and knows exactly which of its products are at risk — can the accused infringer take refuge in the vagueness of the letter or is its conduct "reckless"?

This issue is obviously very fact-dependent, and is made especially difficult in view of the fact that, the Federal Circuit's recent Seagate decision²³¹ does not specify in any detail the types of reckless conduct that constitutes willful infringement. Judge Newman's separate opinion rightly identifies this problem, but only describes the standard as "standards of fair commerce, including reasonableness of the actions taken in the particular circumstances."²³² But what is "reasonable"? This again creates a dilemma for the patentee — should it be specific and risk a declaratory judgment action or should it be so vague as to complicate any potential claim for willfulness?

IV. Negotiating Patent License Agreements After MedImmune

MedImmune involved a dispute arising between parties to an existing license agreement²³³ while SanDisk and Sony involved pre-license negotiations.²³⁴ As a result of these cases, it is safe to say that almost all future patent license negotiations will be conducted on eggshells, with each side aware that the other can trigger litigation at any time. On a very fundamental level, this evens the playing field between the patentee (who can bring suit for infringement at any time, provided its counsel can satisfy Fed. R. Civ. P. 12) and the accused infringer (who now has a much greater ability to bring a declaratory judgment action at any time, at least once a "controversy" is joined). This shift significantly reduces an important advantage that had been held by patentees.

Are there still ways for a patentee to avoid, or at least minimize, the risk of a declaratory judgment? At least three possibilities exist.

A. Is There Any Kind of Safe Letter?
In cases where a patentee is not anxious to immediately enter into litigation, it is common to initiate license discussions by sending a letter to the accused infringer offering a license.²³⁵ Such letters range from a very general statement to a fairly detailed and specific license offer, or even to attaching a "standard license agreement" and requesting signature. For reasons discussed above, after SanDisk and Sony there will be an increased tendency to avoid sending letters that link specific patents of the patentee to specific products of the accused infringer. One can expect to see more letters that identify a patent and merely say licenses are available on reasonable terms, but which do not identify any specific product or use the word infringement. An alternative would be a letter which draws your attention to a specific product, but again does not specify the accused infringing products.

Even such bland letters may still create dilemmas for the patentee. As Judge Bryson suggested in SanDisk, the accused infringer may choose to create a "controversy" by writing back to ask whether the patentee thinks a license is needed.²³⁶ In addition, as discussed above, a very general offer that does not attempt to link the patents to specific products may fail to provide "adequate notice" for purposes of § 287(a) or for establishing willfulness, both of which may limit the patentee's ability to collect damages.

Finally, we learn from SanDisk and Sony that one should be consistent in one's approach to negotiation. Even an explicit statement that patentee has "no intention whatsoever to sue," does not overcome a course of conduct in which specific patent claims were mapped onto specific products of the accused infringer. Even the most innocuous or self-serving language in a letter can be nullified by negotiation conduct that makes it clear that the patentee is bringing a serious and specific claim of infringement.

B. Confidentiality or Stand-Still Agreements
As discussed above, the SanDisk opinion suggested in passing that the parties could have avoided the risk of a declaratory judgment action if they had entered into a "confidentiality" agreement.²³⁷ Although the opinion does not clearly define this term, it appears to be what is sometimes called a stand-still agreement, i.e., an agreement between the parties that neither will use the fact or substance of their negotiations against the other (e.g., by bringing a declaratory judgment action). Although Fed. R. Evid. 408 does not apply to this situation since there is no existing litigation or claim, the court suggested that it might recognize a private pre-litigation agreement between the parties.²³⁸ As discussed above, Judge Bryson questioned this suggestion, saying that it would only be of use where the accused infringer had no intention of bringing a declaratory judgment action anyway.²³⁹

Yet, there may be intermediate situations where Judge Bryson's comment would not apply. For example, the stand-still agreement might not be an absolute stand still or no prejudice agreement between the parties, but instead might be an agreement that neither party will take any action for a defined period of time or that neither party will take any action without giving some advance notice to the other. This could happen in situations where neither party is anxious to enter into litigation or where the accused infringer believes that there is a reasonable prospect of obtaining a license through negotiation and the patentee is willing to delay its right to sue for a fixed time.

C. Filing First, But Without Serving
A third option available to the patentee is to file its complaint before sending a letter or entering into negotiations, but not to serve it immediately. In this way, the patentee retains its choice of forum²⁴⁰ and puts additional pressure on the accused infringer. Under Fed. R. Civ. P. 4(m), service must be effected within 120 days after filing of the complaint. This gives the parties about four months in which to negotiate a license or other amicable resolution of their dispute. Further extensions may be possible if the parties and the court are in agreement.

V. Drafting Patent License Agreements After MedImmune

A. MedImmune and Lear As Cases About License Agreements
Both MedImmune and Lear involved disputes arising from patent license agreements.²⁴¹ As discussed, Lear recognized the conflict between the law of contracts and the public policy embodied in federal patent law, but elected to favor public policy. As discussed, the Supreme Court in MedImmune could have overruled Lear, but declined to do so. If anything, MedImmune reaffirms the continuing vitality of Lear, at least with regard to contract clauses requiring repudiating licensees to continue to pay royalties during its challenge. "[In Lear], we rejected the argument that a repudiating licensee must comply with its contract and pay royalties until its claim is vindicated in court."²⁴²

However, this may or may not be the case with respect to a nonrepudiating licensee.²⁴³ All this leads to the following question—what types of clauses can a patentee include in a patent license agreement in order to minimize the effects of MedImmune? Are these clauses enforceable in view of Lear's continued existence?

B. Some Possible License Clauses
Since the MedImmune decision, a number of licensing practitioners have suggested several possible clauses that might avoid Lear; some have even appeared in draft license proposals.²⁴⁴ These clauses span a spectrum, from clauses that are clearly enforceable under the current case law to those that edge closer to what was condemned in Lear. Of course, most of these clauses have not yet been tested in litigation.

One could therefore consider the following drafting possibilities:

1. licensor can terminate the agreement if licensee challenges the licensed patent.²⁴⁵
2. licensee must give advance notice to licensor of a challenge, and must also identify the prior art (if any) on which it intends to rely.
3. licensee must bring its challenge in a particular court or other forum (e.g. D. Delaware, ITC, etc.).
4. licensee must pay licensor's costs, and counsel fees, during a challenge.
5. if licensee loses the challenge, licensee must resume payments at an increased royalty rate.
6. if licensee wins the challenge, licensee must continue to pay royalties at some reduced rate.

Already the subject of some case law in the United States, Clause (a) has been found to be enforceable.²⁴⁶ Interestingly, it would also be enforced under E.U. law.²⁴⁷ Clause (c) seems unobjectionable, since choice of forum clauses in the event of a dispute are well known and regularly upheld, assuming that there is some reasonable connection between the agreement or the parties, and the forum.²⁴⁸

Though Clause (b) seems innocent, its effects must be considered. The advance notice of a challenge, including the prior art (if any) to be relied on, gives the patentee an opportunity to file a reissue or re-examination proceeding based upon the cited art in the USPTO before the licensee can bring its challenge in a district court. If so, the district court action will likely be stayed pending the outcome of the USPTO proceeding. This poses the question of whether the clause is operating to effectively deprive the licensee of an opportunity to challenge the licensed patent, which would be contrary to the spirit of Lear.²⁴⁹ Alternatively, the patentee could argue that any reissue or re-exam proceeding provides a means for the USPTO to review the validity of the patent and thus, is consistent with the spirit of Lear to the extent that it could still remove the burden of a worthless patent from the public.²⁵⁰ The proposed clause is less effective protection for the licensee when the basis of the challenge is not prior art, but rather an issue such as inequitable conduct or non-infringement which is not suitable for USPTO determination.²⁵¹

Clauses (d) and (e) are in the nature of penalties for bringing the challenge. On the one hand, they could be viewed as contrary to Lear in that they may have a deterrent effect on a challenge, which was exactly what the Lear court condemned. With respect to Clause (e), however, there is a possible argument in its favor. For one thing, Lear held that the licensee did not have to pay royalties that accrued after the patent issued "if Lear can prove patent invalidity."²⁵² Presumably, if the licensee fails to prove invalidity (or non-infringement), then the licensee has breached the license agreement without good cause and might arguably be subject to penalties specified in the agreement.

A related question has come up in the wake of the Supreme Court's eBay decision,²⁵³ which held that a prevailing patentee was not automatically entitled to an injunction against the infringer. In considering alternative remedies, some courts have expressed a reluctance to require the infringer to merely pay a reasonable royalty. After all, these courts reason, if that is the only penalty for infringement, then infringers would never agree to a license since the only disadvantage would be the cost of defending the litigation. Accordingly, it has been suggested that a running royalty would be appropriate, but at some increased level to reflect the fact that the infringer elected to litigate and lost.

Clause (f), however, would seem to run afoul of Lear in most cases. If the intent of Lear is to remove the burden of invalid patents from the public, then why should the licensee pay anything? One exception might be in the case where the license agreement in question is a mixed patent/know-how (hybrid) agreement. In that case, even if the patent was found to be invalid or not infringed, then there is still an argument that the licensee is benefiting from the continuing use of the know-how and should be required to pay at some lesser rate for that benefit.

C. Other Clauses
MedImmune and the clauses discussed above may also impact two other common clauses in a typical license agreement.

If one effect of MedImmune is an increase in the number of licensee challenges, then the licensor's receipt of consideration under the agreement will remain at risk throughout the life of the agreement. In other words, it is conceivable that a licensor may not receive the full measure of its anticipated consideration during a long-term license agreement because of the increasing risk that the licensee will find a basis to challenge the patent and will thereupon stop paying running royalties. For this reason, licensors may show greater interest in consideration arrangements that are paid on signing or that are otherwise front-loaded.

Finally, because there is little guidance at this time with regard to how the courts would view some of the clauses proposed above, it is conceivable that the courts may find one or more unenforceable. For that reason, a licensor who is considering adding such clauses to an agreement may want to make sure that the agreement's severability clause contemplates this result.

Conclusion

So — one year after the Supreme Court's decision in MedImmune — how much has changed? Has MedImmune had the "immediate and dramatic impact" predicted by the commentators?

It certainly has had this effect in one area — declaratory judgment jurisdiction in patent cases. Reacting to the Supreme Court's criticism, the Federal Circuit has  definitively abandoned its "reasonable apprehension of imminent suit" test. The new standard appears to make it easier for accused infringers to bring a declaratory judgment action, although the cases to date show that there are still some limits of "immediacy and reality." While this change may "level the playing field" between patent owners and accused infringers, it also has the potential for increasing the number of declaratory judgment actions filed in patent disputes. It is too soon to tell, but it will be interesting to watch judicial statistics over the next few years to see whether this trend is really developing. If, in fact, the new standard leads to a "race to the courthouse" mentality in license negotiations and litigation strategy, will the district courts be able to control it through the use of their transfer powers, as the Federal Circuit has recently suggested?

The area where MedImmune has not had an effect — at least, not yet — is with respect to the Lear doctrine. The Supreme Court's decision affirmed the vitality of Lear as to repudiating licensees, but expressly avoided ruling with respect to a non-repudiating licensee. However, at least in dicta, Justice Scalia seemed to refer favorably to the procedural limitations of the Shell case. Some of these issues have recently been addressed in the district court remand of the MedImmune case. Eventually, they may work their way back to the Federal Circuit and, perhaps, to the Supreme Court. If the Supreme Court chooses to deal directly with Lear in a possible future MedImmune II decision, then we may yet receive further guidance in this area. In the meantime, however, licenses are being drafted with innovative clauses that are likely to be the subject of future litigation.

It is clear that both significant procedural and substantive change is occurring in this area, whether or not "immediate and dramatic." For this reason, it is incumbent on those who negotiate and draft patent license agreements to understand the new risks and opportunities created by MedImmune and to be aware of the potential strategies and approaches that relate to them.

Endnotes
¹ 127 S. Ct. 764 (2007).

² A sampling of just some articles from IP Law 360 in early 2007 shows how this decision was perceived by many patent counsel. Dealing With MedImmune, IP Law 360, Mar. 14, 2007, http://ip.law360.com/Secure/ViewArticle.aspx?id=20434 (link no longer active as of 5/1/2012) ("Many observers believe that this decision will fundamentally alter the negotiating  positions of prospective licensors and licensees"); "MedImmune" Ushers In New Era Of Patent Litigation, IP Law 360, Jan. 12, 2007, http://ip.law360.com/Secure/ViewArticle.aspx?id=16412 (link no longer active as of 5/1/2012) ("[MedImmune] promises a significant amount of additional litigation"); New "Hair Trigger" Can Turn Negotiations Into Litigation, IP Law 360, Apr. 4, 2007, http://ip.law360.com/Secure/ViewArticle.aspx?id (link no longer active as of 5/1/2012)= ("[The decision] has already had an immediate and dramatic impact"); Supreme Court Decision Gives Licensees Leverage, IP Law 360, Mar. 1, 2007, http://ip.law360.com/Secure/ViewArticle.aspx?id=19634 (link no longer active as of 5/1/2012) ("[MedImmune] revolutionized a patent licensee's ability to challenge the scope and, perhaps, validity of licensed patents").

³ 395 U.S. 653 (1969).

⁴ Id. at 668.

⁵ Id. at 670.

⁶ See id. at 671–74.

⁷ See, e.g., L.B. Dodds, After Lear v. Adkins—What?, 51 J. Pat. Off. Soc'y 621 (1969); Rochelle C. Dreyfuss, Dethroning Lear: Licensee Estoppel and the Incentive to Innovate, 72 Va. L. Rev. 677 (1986); Nellie A. Fisher, The Licensee's Choice: Mechanics of Successfully Challenging a Patent Under License, 6 Tex. Intell. Prop. L.J. 1 (1997); Tipton D. Jennings IV & Carrol L. Bryan II, The Ever Expansive Scope of Lear v. Adkins: Does It Have Limits?, 59 J. Pat. Off. Soc'y 679, 704 (1977); J. Thomas McCarthy, "Unmuzzling" the Patent Licensee: Chaos in the Wake of Lear v. Adkins, 45 Geo. Wash. L. Rev. 429, 434 (1977); Raymond T. Nimmer, Breaking Barriers: The Relation Between Contract And Intellectual Property Law, 13 Berkeley Tech. L.J. 827 (1998); Richard H. Stern, Antitrust Implications of Lear v. Adkins, 52 J. Pat. Off. Soc'y 213 (1970).

⁸ Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1223 (Fed. Cir. 1988).

⁹ Foster v. Hallco Mfg. Co., 947 F.2d 469, 483 (Fed. Cir. 1991); see also Diversey Lever, Inc. v. Ecolab, Inc., 191 F.3d 1350, 1352 (Fed. Cir. 1999).

¹⁰ Hemstreet v. Spiegel, Inc., 851 F.2d 348, 350 (Fed. Cir. 1988); Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362, 1368 (Fed. Cir. 2001). The use of res judicata as a public policy counterweight revives the contract v. public policy debate in somewhat different form.

¹¹ Studiengesellschaft Kohle m.b.H. v. Shell Oil Co., 112 F.3d 1561, 1568 (Fed. Cir. 1997).

¹² See id.

¹³ 112 F.3d 1561 (Fed. Cir. 1997).

¹⁴ Id. at 1568.

¹⁵ Id. at 1567–68.

¹⁶ Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239–40 (1937).

¹⁷ See Teva Pharm. USA v. Pfizer, Inc., 395 F.3d 1324, 1333 (Fed. Cir. 2005).

¹⁸ Id. at 1332.

¹⁹ 359 F.3d 1376 (Fed. Cir. 2004).

²⁰ See id. at 1377, 1381.

²¹ Id. at 1381.

²² MedImmune, 127 S. Ct. at 768.

²³ Id.

²⁴ Id.

²⁵ See id. at 767.

²⁶ Id. at 768.

²⁷ Id.

²⁸ Id.

²⁹ Id.

³⁰ See id.

³¹ Id. (citation omitted) (internal quotation marks omitted).

³² See id. at 768–69 & n.2.

³³ Id. at 768.

³⁴ See MedImmune, Inc. v. Genentech, Inc., 427 F.3d 958, 969 (Fed. Cir. 2005), rev'd, 127 S. Ct. 764 (2007).

³⁵ MedImmune, Inc. v. Genentech, Inc., 546 U.S. 1169 (2006).

³⁶ Justice Scalia wrote the Court's opinion, on behalf of himself and seven of the other Justices. Justice Thomas filed a dissenting opinion. MedImmune, 127 S. Ct. at 767.

³⁷ Id. at 768–69.

³⁸ Id. at 770.

³⁹ See id at 776.

⁴⁰ See id.

⁴¹ Id. at 767.

⁴² Id. at 771 (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)).

⁴³ Id. at 772.

⁴⁴ Id. at 773 (citing Keener Oil & Gas Co. v. Consol. Gas Utils. Corp., 190 F.2d 985, 989 (10th Cir. 1951); Am. Mach. & Metals, Inc. v. De Bothezat Impeller Co., 166 F.2d 535 (2d Cir. 1948); Hess v. Country Club Park, 2 P.2d 782, 783 (Cal. 1931) (en banc); Wash.-Detroit Theatre Co. v. Moore, 229 N.W. 618, 618–619 (Mich. 1930); Fed. R. Civ. P. 57 advisory committee's note).

⁴⁵ Id.

⁴⁶ 319 U.S. 359 (1943).

⁴⁷ Id. at 362.

⁴⁸ Id.

⁴⁹ Id. at 365.

⁵⁰ Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376, 1382 (Fed. Cir. 2004).

⁵¹ MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764, 773–74 (2007).

⁵² Id. at 777.

⁵³ Id. at 774 n.11 (emphasis added) (internal quotation marks omitted).

⁵⁴ See id. ("[J]urisdiction obtained even though the collision-victim defendant could not have sued the declaratory-judgment plaintiff-insurer without first obtaining a judgment against the insured.") (citing Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)); id. ("[J]urisdiction obtained even though the very reason the insurer sought declaratory relief was that the insured had given no indication that he would file suit.") (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239 (1937); see also id. ("[A]ppellate affirmance of a judgment of noninfringement, eliminating any apprehension of suit, does not moot a declaratory judgment counterclaim of patent invalidity.") (citing Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 98 (1993)).

⁵⁵ No. 1:06cv313, 2007 U.S. Dist. LEXIS 48302 (S.D. Ohio July 3, 2007).

⁵⁶ Id. at *5.

⁵⁷ No. C 06-6495-PJH, 2007 U.S. Dist. LEXIS 53137, *8–9 (N.D. Cal. July 9, 2007).

⁵⁸ LLC, 505 F. Supp. 2d 561, 564–65 (E.D. Wis. 2007).

⁵⁹ 82 U.S.P.Q.2D (BNA) 1272 (E.D. Wis. 2007).

⁶⁰ Id. at 1279 n.1; see also Highway Equip. Co., Inc. v. Cives Corp., 476 F. Supp. 2d 1079, 1085–86 (N.D. Iowa 2007).

⁶¹ Cf. MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764, 774 n.11 (2007) ("[J]urisdiction obtained even though the collision-victim defendant could not have sued the declaratory-judgment plaintiff-insurer without first obtaining a judgment against the insured.") (citing Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)).

⁶² See id. at 767.

⁶³ See SanDisk Corp v. STMicroelectronics, Inc., 480 F.3d 1372, 1374–76 (Fed. Cir. 2007).

⁶⁴ See Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1334–36 (Fed. Cir. 2007).

⁶⁵ SanDisk, 480 F.3d at 1372.

⁶⁶ See id. at 1374.

⁶⁷ See id. at 1375.

⁶⁸ Id. at 1376.

⁶⁹ See id.

⁷⁰ See id.

⁷¹ See id.

⁷² See id. at 1382.

⁷³ See id. at 1377.

⁷⁴ See id. at 1380.

⁷⁵ See id. at 1378.

⁷⁶ The Federal Circuit noted that merely learning of the existence of a patent is not sufficient basis, without some further "affirmative act" such as a letter or threat, for declaratory judgment jurisdiction. See id. at 1381.

⁷⁷ Id.

⁷⁸ Id.

⁷⁹ See id. at 1376.

⁸⁰ Id. at 1383.

⁸¹ Id. (citing Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 (Fed. Cir. 1988)).

⁸² See id. at 1383–84 (Bryson, J., concurring).

⁸³ Id. at 1384–85.

⁸⁴ Id.

⁸⁵ See id. at 1375 n.1.

⁸⁶ See id. at 1376.

⁸⁷ In footnote 1, the court discusses the common practice of negotiating subject to Rule 408 of the Federal Rules of Civil Evidence, which applies to offers to compromise a claim in litigation. Id. at 1375 n.1. However, as the court points out, Rule 408 would not have applied to the SanDisk situation since there was no litigation or claim in existence during the negotiations. Id. Therefore, it is more likely that a "stand-still" agreement of some sort was envisioned.

⁸⁸ See id. at 1385 n.1; see also infra Part IV.B.

⁸⁹ 482 F.3d 1330 (Fed. Cir. 2007).

⁹⁰ Id. at 1334.

⁹¹ Id.

⁹² See id.; see also Hatch-Waxman Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984) (codified as amended at 21 U.S.C. § 355 and 35 U.S.C. § 271(e)).

⁹³ Novartis, 482 F.3d at 1334.

⁹⁴ Id. at 1334–35.

⁹⁵ Id. at 1335.

⁹⁶ Teva Pharms., USA, Inc. v. Novartis Pharms. Corp., No. 05-2881(JLL), 2005 U.S. Dist. LEXIS 38649, at *9–*10 (D.N.J. Dec. 12, 2005), rev'd, 482 F.3d 1330 (Fed. Cir. 2007).

⁹⁷ Novartis, 482 F.3d at 1346.

⁹⁸ Id. at 1337 (citing Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)).

⁹⁹ Id. at 1341–42.

¹⁰⁰ Id. at 1342.

¹⁰¹ Id. at 1342–44.

¹⁰² Id. at 1344–45.

¹⁰³ Id. at 1345.

¹⁰⁴ Id. at 1346 (Friedman, J., concurring).

¹⁰⁵ Id. at 1347.

¹⁰⁶ Id.

¹⁰⁷ Subsequent to the time period considered in this article, the Federal Circuit also found a basis for declaratory judgment in Micron Tech., Inc. v. Mosaid Techs., Inc. 518 F.3d 897 (Fed. Cir. 2008), discussed infra notes 124, 140, 146, 240.

¹⁰⁸ 488 F.3d 982 (Fed. Cir. 2007).

¹⁰⁹ See id. at 993–94.

¹¹⁰ Id. at 995.

¹¹¹ Id.

¹¹² Id. at 995–96.

¹¹³ 497 F.3d 1271 (Fed. Cir. 2007).

¹¹⁴ See id. at 1274.

¹¹⁵ Id.

¹¹⁶ See id. at 1280.

¹¹⁷ Id. at 1282.

¹¹⁸ Id. at 1286 (citing SanDisk Corp v. STMicroelectronics, Inc., 480 F.3d 1372, 1382 (Fed. Cir. 2007)).

¹¹⁹ Id.

¹²⁰ 501 F.3d 1364 (Fed. Cir. 2007).

¹²¹ Id. at 1366.

¹²² Id.

¹²³ Id.

¹²⁴ See id. The patentee's pattern of conduct was also the basis for finding a basis for declaratory judgment jurisdiction in the Federal Circuit's recent Micron Technologies case, supra note 107. The factors emphasized by the court included the patentee's "aggressive litigation strategy," including systematic suits against all other major companies in this product area, threatening letters, and public statements in press releases and in patentee's annual reports. 

¹²⁵ 495 F.3d 1340 (Fed. Cir. 2007), cert. denied, 2008 U.S. LEXIS 3510 (U.S. Apr. 21, 2008) (No. 07-1068).

¹²⁶ Id. at 1349.

¹²⁷ Id. at 1342.

¹²⁸ Id.

¹²⁹ Id. at 1342–43.

¹³⁰ Id. at 1349.

¹³¹ Id. at 1349.

¹³² 514 F. Supp. 2d 753 (W.D. Pa. 2007), aff'd, 2008 U.S. App. LEXIS 7423 (Fed. Cir. Apr. 8, 2008) (No. 2007-1434).

¹³³ Id. at 757–58.

¹³⁴ Id. at 757.

¹³⁵ Id. at 757–58.

¹³⁶ Id. at 757.

¹³⁷ Id.

¹³⁸ See id. at 758.

¹³⁹ Id. at 764 (citing Teva Pharms., USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330, 1338 (Fed. Cir. 2007)).

¹⁴⁰ See also, Micron Technologies, supra note 107 which would be another case in this line that focused on overall "conduct."

¹⁴¹ 2007 U.S. Dist. LEXIS 68092 (D.N.J. 2007).

¹⁴² In the remand of the Sony case, 2007 U.S. Dist. LEXIS 82636 (S.D. Cal. Nov. 6, 2007), the district court rejected Guardian's argument that the filing of a request for re-examination and request for a stay of the Federal court proceedings by the Plaintiffs was a reason for the court to decline declaratory judgment jurisdiction.

¹⁴³ 515 F. Supp. 2d 447, 449 (D. Del. 2007).

¹⁴⁴ Compare Segone, Inc. v. Fox Broad. Co., 2007 U.S. Dist. LEXIS 75061 (E.D. Va. 2007) where the court found that the copyright owner's conduct did not give rise to a controversy, in part because the declaratory judgment plaintiff had declined to join in a prior copyright infringement suit brought by Fox against its customer, which suggested that Fox's copyright did not have a direct impact on the plaintiff's business. See also Cordance Corp. v. Amazon.com Inc., 521 F. Supp. 2d 340 (D. Del. 2007) ("Evidence of marketing products or services and entering into license agreements supports an actual controversy . . . . In addition, '[i]f . . . a party has actually been charged with infringement of the patent, there is, necessarily, a case or controversy adequate to support jurisdiction").

¹⁴⁵ Teva Pharms., USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330, 1344 (Fed. Cir. 2007).

¹⁴⁶ See Micron Technologies, supra note 107 at *5-6.

¹⁴⁷ See Sony, supra note 142.

¹⁴⁸ No. 07-3997, 2007 U.S. Dist. LEXIS 94869 (D. Minn. Dec. 28, 2007).

¹⁴⁹ Id. at *2.

¹⁵⁰ Id. at *12-13.

¹⁵¹ Id. at *8-13.

¹⁵² No. 06-5789, 2007 U.S. Dist. LEXIS 84426, (D.N.J. Nov. 15, 2007).

¹⁵³ Id. at *6.

¹⁵⁴ Id. at *15.

¹⁵⁵ Id. at *15-16.

¹⁵⁶ 523 F. Supp. 2d 376 (S.D.N.Y. 2007).

¹⁵⁷ Id. at 379.

¹⁵⁸ Id. at 382.

¹⁵⁹ Id.

¹⁶⁰ Id. at 383.

¹⁶¹ See Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1334 (Fed. Cir. 2007).

¹⁶² Honeywell Int'l Inc. v. Universal Avionics Sys., 488 F.3d 982, 995 (Fed. Cir. 2007).

¹⁶³ See Novartis, 482 F.3d at 1347 (Friedman, J., concurring).

¹⁶⁴ See generally id. (holding that listing patents in the Orange Book may be sufficient to establish declaratory jurisdiction). Moreover, this result does not seem consistent with the carefully drafted procedure of the Hatch-Waxman Act, whereby an ANDA applicant's par. (iv) certification is the event that starts the litigation process. Id. at 1343. Under this alternative view, there would be no need for a par.(iv) certification, since the ANDA applicant would be able to seek a declaratory judgment against any patent listed in the Orange Book at any time. Id.

¹⁶⁵ SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1380–81 (Fed. Cir. 2007).

¹⁶⁶ But cf. Prasco L.L.C. v. Medicis Pharm. Corp, 2007 WL 928669 (S.D. Ohio) (deciding that mere "marking" of a product with a patent number as required by statute was not relevant to the jurisdictional analysis although relying on Teva Pharm. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1333-34).

¹⁶⁷ See, e.g., In re Dell Computer Corp., 121 F.T.C. 616 (1996); In re Unocal Corp., F.T.C. Docket No. 9305 (Opinion of the Commission) at 48 (July 7, 2004); In re Rambus, Inc., F.T.C. Docket No. 9302 (Opinion of the Commission) (Aug. 2, 2006). Compare Rambus Inc. v. Infineon Techs. Ag, 318 F.3d 1081 (Fed. Cir. 2003) and Rambus, Inc. v. Fed. Trade Comm'n, 2008 U.S. App. LEXIS 8662 (D.C. Cir. Apr. 22, 2008) (No. No. 07-1086. See also Letter from Thomas O. Barnett, Assistant Att'y Gen., U.S. Dep't of Justice, to Robert A. Skitol at 3-4 (Oct. 30, 2006) (hereinafter VITA Business Review Letter), available at http://www.usdoj.gov/atr/public/busreview/219380.pdf.

¹⁶⁸ See, e.g., VITA Business Review Letter at 3-4, where an SSO found that its policy of requiring licensing on RAND (reasonable and non-discriminatory) terms was not sufficient to protect its members, and that it therefore had to adopt a new FRAND policy (fair, reasonable, and non-discriminatory) in which the "most restrictive" non-royalty terms were also disclosed in advance.

¹⁶⁹ Md. Cas. Co. v. Pac. Coal & Oil. Co., 312 U.S. 270, 273 (1941).

¹⁷⁰ Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1343 (Fed. Cir. 2007).

¹⁷¹ 2007 U.S. Dist. LEXIS 65348 (N.D. Ill. 2007).

¹⁷² Id. at *1-2.

¹⁷³ Id. at *32.

¹⁷⁴ 2007 U.S. Dist. LEXIS 61583 (S.D.N.Y. 2007).

¹⁷⁵ Id. at *4–5.

¹⁷⁶ Id.

¹⁷⁷ Id. at *6.

¹⁷⁸ Id. at *6-7.

¹⁷⁹ For other cases in which a district court has rejected a declaratory judgment claim on the ground that the relief requested was too general and indefinite, see e.g. Segone, Inc. v. Fox Broad. Co., 2007 U.S. Dist. LEXIS 75061, *6 (E.D. Va. 2007) (rejecting a declaratory judgment claim on the ground that the relief requested was too general and indefinite); Veoh Networks, Inc. v. UMG Recordings, Inc., 522 F. Supp. 2d 1265, 1270 (S.D. Cal. 2007) ("Plaintiff seeks a blanket validation of the ongoing legality of their business model").

¹⁸⁰ 2007 U.S. Dist. LEXIS 93585 (D.N.J. 2007).

¹⁸¹ Id.

¹⁸² Id. at *62.

¹⁸³ This does not refer to statements made during negotiations that the patentee does not intend to sue, but rather to a more formal document or undertaking (often one filed with a court as part of settlement or consent judgment). This distinction is noted in SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1382-83 (Fed. Cir. 2007) (describing statements made in course of conduct); Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1347-48 (Fed. Cir. 2007) (discussing statements made in negotiation); Crossbow Tech. Inc. v. YH Tech., 2007 U.S. Dist. LEXIS 65646, *14-15 (N.D. Cal. 2007) (describing generally that distinction between statements made during negotiations that the patentee does not intend to sue and a more formal document or undertaking (often one filed with a court as part of a settlement or consent judgment)).

¹⁸⁴ Super Sack Mfg. Corp. v. Chase Packaging Corp, 57 F.3d 1054 (Fed. Cir. 1995).

¹⁸⁵ Sierra Applied Sciences, Inc. v. Advanced Energy Indus., 363 F.3d 1361, 1375 (Fed. Cir. 2004).

¹⁸⁶ Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1343 (Fed. Cir. 2007).

¹⁸⁷ See also Furminator, Inc. v. Kim Laube & Co, 2008 U.S. Dist. Lexis 1105, *6-7 (E.D. Mo. Jan. 7, 2008); Plasmart, Inc. v. Wincell Int'l. Inc, 2007 U.S. Dist. LEXIS 83707, *2-5 (S.D.N.Y. Nov. 8, 2007); Abbott Labs. v. Baxter Healthcare Corp, 2007 U.S. Dist. LEXIS 76449, *6 (N.D. Ill. Sept. 28, 2007); Crossbow Tech., Inc. v. YH Tech., 2007 U.S. Dist. LEXIS 65646, *10-12 (N.D. Cal. Aug. 21, 2007).

¹⁸⁸ 2007 U.S. Dist. LEXIS 61961 (N.D. Cal. Aug. 13, 2007).

¹⁸⁹ Id.

¹⁹⁰ Id. at *3-4.

¹⁹¹ Id. at *4.

¹⁹² Id. at *4-5.

¹⁹³ Id. at *9-11.

¹⁹⁴ 507 F. Supp. 2d 801 (N.D. Ohio 2007).

¹⁹⁵ Id.

¹⁹⁶ Id. at 808.

¹⁹⁷ 2007 U.S. Dist. LEXIS 88030 (D. Del. Nov. 29, 2007).

¹⁹⁸ Id.

¹⁹⁹ Id. at 10.

²⁰⁰ Id.

²⁰¹ Id. at 11.

²⁰² Id.

²⁰³ 2007 U.S. Dist. LEXIS 77642, *10-27, *38-41 (E.D. Mo. Oct. 18, 2007).

²⁰⁴ Id. at *28.

²⁰⁵ Id.

²⁰⁶ Id. at *29.

²⁰⁷ Id. at *35.

²⁰⁸ Id. at *36.

²⁰⁹ Although there was an allegation of threats made at a trade show, the other party submitted affidavits admitting the conversation but denying that any threat was made. Id. at *37-38; see also id. at 42-44.

²¹⁰ See supra notes 7-10 and accompanying text.

²¹¹ See Lear, Inc. v. Adkins, 395 U.S. 653, 688 (1968).

²¹² See id. at 656.

²¹³ See id. at 669–70.

²¹⁴ MedImmune, Inc. v. Genetech, Inc., 127 S. Ct. 764, 769-70 (2007).

²¹⁵ Id. at 770.

²¹⁶ See Studiengesellschaft Kohle, m.b.H. v. Shell Oil Co., 112 F.3d 1561, 1568 (Fed. Cir. 1997).

²¹⁷ See Metrologic Instruments, Inc. v. Symbol Techs., Inc, 2007 U.S. App. LEXIS 26593, *12 (3rd Cir. Nov. 15, 2007) ("MedImmune does not . . . stand for the proposition that one can breach a contract with impunity merely because that contract involves a patent license").

²¹⁸ See eBay Inc. v. MercExchange, L.L.C., No. 05-130, slip op. at 2 (2006) (Kennedy, J., concurring).

²¹⁹ KSR Int'l Co. v. Teleflex Inc., 127 S. Ct. 1727, 1746 (2007).

²²⁰ Id.; See U.S. Const., Art. I, § 8, cl.8.

²²¹ See MedImmune v. Genetech, Inc., 427 F.3d 958, 963 (Fed. Cir. 2007), rev'd, 127 S. Ct. 764 (2007).

²²² Subsequent to the period addressed in this article, some of these questions were addressed by the district court in ruling on motions for summary judgment in the remand of the MedImmune case. See MedImmune, Inc. v. Genentech, 535 F. Supp.3d 1000 (C.D. Cal. 2008). Thus, unless the case settles, it is likely that these issues will eventually be addressed by the Federal Circuit and, perhaps, by the Supreme Court.

²²³ 35 U.S.C. § 287(a) (2000).

²²⁴ See 35 U.S.C. § 287(a).

²²⁵ See, e.g., SRI Int'l v. Advanced Tech. Lab., 127 F.3d 1462, 1469–70 (Fed. Cir. 1997); Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed. Cir. 1996); Amsted Indus. v. Buckeye Steel Castings Co., 24 F.3d 178, 186–87 (Fed. Cir. 1994).

²²⁶ See Sandisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1384-85 (Fed. Cir. 2007) (Bryson, J., concurring), reh'g denied, 2007 U.S. App. LEXIS 14506 (Fed. Cir. 2007).

²²⁷ Id. at 1385 ("Despite the references in the court's opinion to the particular facts of this case, I see no practical stopping point short of allowing declaratory judgment actions in virtually any case in which the recipient of an invitation to take a patent license elects to dispute the need for a license and then to sue the patentee.").

²²⁸ SRI Int'l., Inc., 127 F.3d at 1470.

²²⁹ Id.

²³⁰ See id. at 1470.

²³¹ See In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007).

²³² Id. at 1385 (Newman, J., concurring).

²³³ MedImmune v. Genetech, Inc., 427 F.3d 958 (Fed. Cir. 2005), rev'd, 127 S. Ct. 764 (2007).

²³⁴ See SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1374-76 (Fed. Cir. 2007), reh'g denied, 2007 U.S. App. LEXIS 14506 (Fed. Cir. 2007); Sony Elecs., Inc. v. Guardian Media Techs. Inc., 497 F.3d 1271, 1275-76 (Fed. Cir. 2007).

²³⁵ See, e.g., Sandisk Corp., 480 F.3d at 1374-76; Sony Elecs., Inc., 497 F.3d at 1275-76.

²³⁶ See Sandisk Corp., 480 F.3d at 1384-85 (Bryson, J., concurring).

²³⁷ SanDisk Corp., 480 F.3d at 1375, n.1.

²³⁸ See id.

²³⁹ See SanDisk Corp., 480 F.3d at 1384-85 (Bryson, concurring).

²⁴⁰ Although proposed amendments to the patent venue statute are pending, choice of forum for trial can be expected to be a major strategic decision in patent litigation. In this connection, one should consider Judge Rader's thoughtful comments in Micron Techs. case, supra note 107. Judge Rader recognizes that one result of MedImmune may be to increase the number of declaratory judgment cases where "the parties are really just contesting the right to choose the forum for their inevitable suit." Id. In order to control this type of race to the courthouse behavior, he suggests that the district courts should "consider the 'convenience factors' found in a transfer analysis under 28 U.S.C. §1404(a)." Id.

²⁴¹ See MedImmune, Inc. v. Genetech, Inc., 127 S. Ct. 764, 765 (2007); Lear v. Adkins, 395 U.S. 653, 654 (1969).

²⁴² MedImmune, 127 S. Ct. at 769.

²⁴³ See supra Section III.A.; see also MedImmune, 127 S. Ct. at 769.

²⁴⁴ See, e.g., John W. Schlicher, Patent Licensing, What to do After MedImmune v. Genentech, 89 J. Pat. Off. Soc'y 364, 382-92 (2007); Catherine Nyarady, 'MedImmune v. Genentech': Unanswered Questions, 237 New York Law Journal 22 (2007); and Stephanie Chu, Operation Restoration: How Can Patent Holders Protect Themselves From MedImmune?, 2007 Duke L. & Tech. Rev. 8, 10-22 (2007).

²⁴⁵ Challenge would need to be a defined term. For example, "initiating or helping to initiate a legal or administrative proceeding in any forum to have the Licensed Patent declared wholly or partially invalid or to reduce the scope of the Licensed Patent; to have the Licensed Patent declared unenforceable; or to obtain a ruling that Licensed Products do not infringe the Licensed Patent."

²⁴⁶ See, e.g., Bayer Ag v. Housey Pharms., 228 F. Supp. 2d 467, 743–74 (D. Del. 2002). See also European Commission Regulation (EC) No. 772/2004 of 27 April 2004, Article 5(1)(a).

²⁴⁷ European Commission Regulation (EC) No. 772/2004 of 27 April 2004.

²⁴⁸ See, e.g., Monsanto Co. v. McFarling, 302 F.3d 1291, 1294–95 (Fed. Cir. 2002).

²⁴⁹ But see supra note 142, discussing where courts have found that the filing of a request for re-examination by the patentee did not stop a declaratory judgment action from proceeding.

²⁵⁰ Id.

²⁵¹ It will be interesting to see how this situation may be affected by the pending Patent Reform Bill. For example, various versions of the bill propose for expanded USPTO determinations of inequitable conduct; for expanded re-examination procedures; for a European-style opposition system, with a limited time period for raising prior art; and for an opposition system where prior art can be raised at any time.

²⁵² Lear v. Adkins, 395 U.S. 653, 674 (1969).

²⁵³ eBay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837, 1840 (2006). See also Paice LLC v. Toyota, 504 F.3d 1293, *56-57 (Fed. Cir. 2007).

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