Tuesday, January 09, 2007

MedImmune wins at Supreme Court

The Supreme Court ruled that MedImmune may pursue its attack on Genentech's patent even though it paid its license fees to the licensor Genentech. The lower courts had determined that MedImmune did NOT have a right to challenge the patent because it had paid its license fees. Petitioner MedImmune argued against the CAFC's rule that a patent licensee cannot bring a declaratory judgment action questioning the validity of the licensed patent as long as the licensee has not breached the license agreement.

Justice Antonin Scalia, writing for the majority, said that MedImmune had satisfied the legal requirement that there is a controversy, even though MedImmune did not refuse to make royalty payments under the licensing agreement. Justice Clarence Thomas dissented, saying that by continuing to make royalty payments, albeit under protest, MedImmune had no cause of action against Genentech. IPBiz notes that this is one of the rare decisions in which Scalia and Thomas are on opposite sides. IPBiz also recalls a comment by Justice Scalia during oral argument:

JUSTICE SCALIA: So there is really not much at issue in this case. And that's clearly a case of controversy. It is a dispute over the meaning of that provision of the agreement?
MS. MAYNARD: Yes, Your Honor.
JUSTICE SCALIA: Gee, there's less here than meets the eye.

In the decision, Justice Scalia notes: The rule that a plaintiff must destroy a large building, bet the farm, or (as here) risk treble damages ... before seeking a declaration of its actively contested legal rights finds no support.

Additionally, big business and the Bush administration were on opposite sides. 3M, General Electric, Procter & Gamble and E.I. DuPont de Nemours and Co. said in amici papers supporting Genentech that a pro-MedImmune ruling in the case could have chilling effects on patent licensing and technology transfers that generate billions of dollars annually. The Bush administration supported MedImmune in the case, telling the Supreme Court that invalid patents can hurt efficient licensing, hinder competition and undermine incentives for innovation.

It is likely that the perception of the existence of many questionable, low-quality, patents lurks in the background of this case. Indeed, IPBiz notes the following:

In response to the U.S. Supreme Court's 8-1 ruling in
favor of MedImmune (MedImmune, Inc. v. Genentech, 05-608), the following
statement should be attributed to the Coalition for Patent Fairness:

"The U.S. Supreme Court’s overwhelming ruling today [Jan. 9] in favor of
MedImmune demonstrates yet again that the patent system needs to be
modernized. Fair patent protections deliver innovative products for consumers
and strengthen America's international competitiveness. This ruling is
a positive step, but it is clear that a legislative remedy is needed to
strengthen our overall patent system. Fortunately, congressional
leaders on both sides of the aisle have demonstrated vision and leadership
on this issue. We look forward to continuing to work with them in 2007
to accomplish this critical goal."

IPBiz notes, as the Harvard Business Review says, "take it and make it your own," or was it, "plagiarize with pride"?

The LA Times had text including the following:

"It's going to open most licenses to challenges," said Jim Badke, who specializes in patent litigation involving biotechnology and medical devices at Ropes & Gray in New York. "It's going to lead to a flood of patent litigation."

MedImmune argued that it should be able to challenge the Genentech patent without exposing itself to damages or a court block on sales of its product should it lose the case. Synagis generated $624 million in sales, or 84% of the company's total revenue, in the first nine months of 2006.

The MedImmune decision can be found here.

Relevant to KSR v. Teleflex, note that Justice Scalia specifically recites the "motion to dismiss" procedural posture of MediImmune, and the procedural posture of KSR should also be relevant when that case is decided.

Of MedImmune, Justice Scalia notes the unusual fact pattern of the case, wherein the license agreement of 1997 is used by Genentech to include a patent which issued in 2001 ("Cabilly II"). Justice Scalia noted the reliance by the CAFC on the case Gen-Probe v. Vysis, 359 F.3d 1356.

Note that Justice Scalia writes: We express no opinion on whether a nonrepudiating licensee is similarly relieved of its contract obligation during a successful challenge to a patent's validity. The Supreme Court did find that MedImmune alleged a contract dispute.

Getting to the center of the argument, Justice Scalia writes: "the continuation of royalty payments makes what would otherwise be an imminent threat at least remote if not nonexistent." MedImmune's act of paying royalties eliminates the threat of imminent harm. To get around this, Justice Scalia reaches to those threatened by government action, and notes no requirement that a DJ plaintiff "bet the farm." Justice Scalia cites Abbott v. Gardner, 387 US 136, and then, to the issues of MedImmune, the case Altvater v. Freeman, 319 US 359. Footnote 10 of Justice Scalia's opinion is of note, because it accuses the dissent (Justice Thomas) of "quoting wildly out of context." Those who assert the parallelism of Justices Scalia and Thomas should note footnote 10 well.

Although not explicitly overruled, one surmises that the CAFC decision in Gen-Probe is gonzo.

IPBiz suggests that, underlying the Supreme Court decision, may be a concern that there are too many bad patents out there. Granting a licensee in good standing the opportunity to file a DJ action will indeed increase litigation. However, if recent legal scholarship is to be believed, invalidity determinations in the courts are down, so that the "ability" to sue may not "weed out" bad patents. In the distant past, the Supreme Court worried about promoting litigation. For example, in Crown v. Nye, 261 US 24 (1923), the Supreme Court wanted to avoid "stirring up litigation."

Of the Coalition for Patent Fairness, Patently-O contains the following comment by Ronald J. Riley:

What has changed is that today inventors have better options to achieve justice and this is something no patent pirate likes, especially those who have the gall to call themselves a Coalition for Patent Fairness, a group who are better known as the Coalition for Patent Piracy. It is no surprise that Microsoft is a member.
The Coalition has four pillars of support.

1) Washed up tech companies who are well past their prime. While they started as innovative companies they are no longer able to produce significant inventions themselves, and arrogantly take others inventions. These are companies who were "high tech" two or three decades ago but today are just mercantile tech. These companies suffer the same problems as the auto industry, and while their ailment is not as advanced as the auto industry they will within a few decades suffer the same fate as the auto industry. They see patents as defensive tools and innovation as a threat to their market position. Those who see innovation and patents as an opportunity will always leave those who see them as a threat behind.

2) Some of the members of the Coalition were never innovative, companies like Microsoft and Dell. Shrewd business people who are very good at profiting from other's inventions but definitely not the brightest bulbs in the pack. [IPBiz: the Harvard Business Review mantra of plagiarize with pride.]

3) The insurance industry, who are really put out that they have to pay innovators with business method patents. The insurance industry reminds me of protection rackets. They are really good at collecting premiums and even better at avoiding paying. Just look to Katrina victims for an example of the industry's immorality.

4) The banking industry, who is also put out that they have to pay innovators with business method patents. About the only thing the banking industry is good at inventing is ever larger and more outrageous fees. Americans who value job creation should shift their business to credit unions.

PIAUSA.org received intelligence some time ago that the "Coalition of Patent Piracy" had organized and hired two firms to feed media propaganda. We were told that each of the members had contributed a quarter of a million dollars to the cause of painting those they have victimized as evil patent trolls. That's over ten million dollars in propaganda. Media has been had by the Coalition's public relations machine. We have seen the results of that coalition's work over the past year. The Coalition knows no shame and as a result of their extreme and shrill positions on intellectual property they have become outcasts among most of corporate America.


Blogger Lawrence B. Ebert said...

Joe Miller has some interesting comments on MedImmune including:

In MedImmune, the Supreme Court reserved the question whether a patent challenge would have been precluded by a license term wherein the licensee expressly promised not to challenge the patent’s validity or enforceability.


There’s good authority, in the years just after Lear, holding that such a term is void and unenforceable - whether in the license context, or the consent decree context. Massillon-Cleveland-Akron Sign Co. v. Golden State Advertising Co., 444 F.2d 425 (9th Cir. 1971) (license);

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