The MedImmune US Supreme Court decision and European implications

1
The MedImmune US Supreme Court decision and
European implications
law firm

• AIPLA Spring Meeting 2007
• by
• Dr. Uwe Manasse
• Bremen, Germany

www.boehmert.de
2
Facts of the case

• MedImmune manufactures Synagis
• In 1997 entered into a license agreement with
  Genentech covering - an existing patent
  (Cabilly I) and - a pending application
  (Cabilly II)
• In 2001 Cabilly II issued as a patent
• Genentech Synagis is covered by Cabilly II
  ? MedImmune has to pay
  royalties.
• MedImmune considered Cabilly II to be invalid
  and unenforceable, but paid royalties for
  Genentech under protest and with reservation
  of all its rights

3
Facts of the case (cont.)

• MedImmune filed a declaratory judgment action
  seeking to have the licensed patent to be
  declared invalid, unenforceable and not
  infringed.
• Gen-Probe-decision A patent licensee in good
  standing can not
  establish an Article III case or controversy
  with regard
  to validity, enforceability or scope
  of the patent.
• District Court dismissed MedImmunes action
• Federal Circuit affirmed

4
Question to the US Supreme Court

• Does the actual controversy requirement of the
  Declaratory Judgment Act, 28 U.S.C. 2201(a),
  require a patent licensee to terminate or be in
  breach of its license agreement before it can
  seek a declaratory judgment that the underlying
  patent is invalid, unenforceable, or not
  infringed?

5
Reasons for the decision

• Standards of Aetna Life-decision would have been
  satisfied if MedImmune had taken the final
  step of refusing to make royalties payments under
  the 1997 license agreement.
• The plaintiffs own action (or inaction) in
  failing to violate the law eliminates the
  imminent threat of prosecution, but nonetheless,
  does not eliminate Article III jurisdiction.
• Altvater v. Freeman was directly on point.
  ?A patent licensee does
  not have to terminate or be in breach of its
  license agreement before it can seek a
  declaratory judgment action.

6
US implications

• more declaratory judgment actions challenging
  validity of patents
• higher royalties
• more patent license agreements
• more licensee estoppel clauses, but ? Lear,
  Inc. v. Adkins
• alternatively, short license terms subject to
  multiple renewals

7
German negative declaratory action

• Seeking declaration that a patent is
  unenforceable or not infringed.
• Handled in special District courts and higher
• Requirement legal interest Section 256
  German Code of civil procedure
• - No-challenging clauses ? no legal interest?
• - No judicatur

8
German nullity action in the past

• Seeking declaration that a patent is invalid
• Handling of no-challenging clauses in license
  agreements not ruled in the German Patent Act.
• 81 Nullity and Compulsory License Proceedings
  (German Patent Act) (1) Proceedings for a
  declaration of nullity of a patent shall be
  instituted by bringing legal action
• 
  ?
• German Federal Supreme Court Nullity action
  could be principally filed from everyone.

9
German nullity action in the past (cont.)

• But the licensor and licensee are litigant
  parties and consequently the contracting
  relationship between them has to be considered
  (Gewindeschneidvorrichtung, Entwässerungsanlage
  , Flächenentlüftung)
• 242 German Civil Code The obligor must
  perform in a manner consistent with good faith
  taking into account accepted practice.
• ?
• German Federal Supreme Court Explicitly and
  implicitly agreed duties to not attack
  licensed protective rights are admissible and
  effective.

10
German opposition in the past

• In the Zeigerwerk decision the German
  Federal Patent Court held the same view with
  regard to oppositions.
• The former view of the German Courts and of the
  GPTO was in agreement with previous Paragraph
  17 Section 12 No. 4 German Act against Restraints
  on Competition (declared no-challenging
  clauses as principally admissible)

11
Situation since 2004

• 7th amendment of German Competition Law
• ? Art. 5 Section 1 lit. c of the Transfer of
  technology exemption Regulation (EC) is
  applicable The exemption shall not
  apply to
• (c) any direct or indirect obligations on
  the licensee not to challenge the
  validity of intellectual property rights, without
  prejudice to the possibility of providing
  for termination of the technology transfer
  agreement in the event that the licensee
  challenges the validity of one or more of the
  licensed intellectual property rights.
  
  ?
  corresponds to old US law

12
European Opposition

• EPO ignored no-challenging clauses already
  before said Transfer of technology exemption
  Regulation (Nichtangriffsverpflichtung-decision)
  
• nowadays Article 81 of the EC Treaty (ex
  Article 85) No. 1 ?no-challenging clauses are
  principally inadmissible No. 3 no exemption
  for them
• Art. 5, Section 1, lit. c. Transfer of
  technology exemption Regulation corresponds to
  that valuation
• ?no-challenging clauses are basically
  inadmissible

13
Conclusions

• MedImmune decision ? impact on licensee/licensor
  relation
  negotiation situation
  
  clauses and conditions
  number of
  patent suits
• Situation in Germany/Europe is already as it
  might become in the U.S. after the MedImmune
  decision