No Need to "Risk the Farm"

Yesterday the US Supreme Court handed down its decision in Medimmune v Genentech.

The facts of the case were quite simple. In 1997 Medimmune entered a licensing agreement with Genentech to work a patent relating to "chimeric antibodies" and also to work a then-pending patent for "the co-expression of immunoglobulin chains in recombinant host cells". These licences enabled it to sell its drug Synagis, a respiratory drug, although the IPKat (at left, after self-grooming) says that sadly it is untested for hairballs.

When the application for the patent matured into a patent (the Cabilly II patent) Genentech wrote to Medimmune asking them to pay further royalties. Medimmune believed that the Cabilly II patent was invalid, but it saw the letter from Genentech as a threat to enforce the new patent (and terminate the licence agreement in relation to the earlier patent). Medimmune decided to start paying the royalties (apparently Synagis accounted for 80% of its revenues), but it also sought a declaratory judgment from the District Court that the Cabilly II patent was invalid.

The point that went to the Supreme Court relates to Article III of the US Constitution. This provision gives federal courts subject matter jurisdiction only where there is a "case-or-controversy". Following the earlier decision of the US Court of Appeals for the Federal Circuit (Gen-Probe v Vysis, 359 F. 3d 1376 (2004)) Genetech argued that as long as Medimmune paid the royalties there was no case or controversy because Genentech would not (and could not) sue Medimmune for patent infringement. In contrast, Medimmune's position was that it should not have to stop paying the licence fee and start infringing before it should be able to apply to the court for a declaratory judgment; particularly in that if they were wrong about the patent's validity they would be liable to treble damages and attorneys' costs during the interim period.

The Court supported Medimmune by extending the scope of previous decisions on Article III. The Court felt that Medimmune should not have to "bet the farm" by starting to infringe (and exposing itself
to the liability) before the Court could consider whether the patent was valid or not; and that the contingent liability faced by Medimmune was sufficient for there to be a case or controversy .

The IPKat says that in US Constitutional law terms the case extends the scope of the "case or controversy" test significantly, but for patent lawyers its effect is quite simple. You can apply to the court for a patent to be revoked while continuing to pay the licence fee: keeping the farm and all the animals safe. Something even Merpel would be happy about.

Right: The IPKat and friends "down on the farm."
No Need to "Risk the Farm" No Need to "Risk the Farm" Reviewed by Johanna Gibson on Wednesday, January 10, 2007 Rating: 5


  1. The fact that the whole farm was at stake and not just the farm cat (sorry Merpel) must have weighed heavily.

  2. The IKat's friend John Cairns points out an article in January's US Chronicle of Higher Education, which he thinks raises the question: In most European court systems, can a licensee who has not breached his agreement sue the licensor? It may be something that European licensees may apply to sue US licensors. The article's author, Goldie Blumenstyk, writes:

    "For universities and other parties that obtain patents, and then negotiate licenses with companies for the right to use their inventions, the decision could prove costly if it encourages more companies to challenge patents".

    While this might not be so much of an issue in the UK, where anyone can question the validity of a patent, this is an issue that universities over here might want to consider when licensing in the US.


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