MedImmune v. Genentech FREDERICK F. CALVETTI

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT PSYCHOLOGY Psychology of CAFC 80s Patent Pre-eminent 90s Notice Function of Claims CAFC Surprises Construction of Claims Determined by Judge – Not Jury

PSYCHOLOGY OF CAFC 35 USC 112 Used to Restrict Equivalents means plus function – paragraph 6 restricted to virtually embodiment disclosed by inventor known equivalent must be disclosed in specification (Valmont) exact function (Penwalt) corresponding structure linked in specification (Braun Medical)

PSYCHOLOGY OF CAFC insubstantial change test (Valmont) identity of function (Chiminotta) written description – paragraph 1 Genetic materials (Regents of University of California) Predictability (Gentry Gallery, YBM) Dedication (Maxwell)

PSYCHOLOGY OF CAFC Doctrine of Equivalents restricted element by element analysis replaces invention as a whole analysis (Warner Jenkins/Hilton Davis) Presumption Amendment Generates Prosecution History Estoppel (Warner Jenkins)

PSYCHOLOGY OF CAFC CAFC – No Surprise Absolute Bar Rule (Festo) CAFC Changed Settled Expectations of the Inventive Community (Festo) U.S. Supreme Court Makes Doctrine of Equivalent Friendlier Than CAFC But Narrowed Scope of Protection/Devaluation of Patent Property Continues with Elevated Supreme Court Interest

United States Supreme Court Medlmmune v. Genentech (January 9, 2007) Promising to pay royalties on patents that have not been held invalid does not amount to a promise not to seek a holding of their invalidity After Medlmmune, a licensee in good standing can initiate a declaratory judgment action to invalidate a licensed patent. avoid liability for willful infringement by paying royalties

MedImmune v. Genentech Product: MedImmunes respiratory drug for children, Synagis, which provides 80% of MedImmunes sales revenue Facts: MedImmune and Genentech enter a license on several patents and a pending patent application, which issued in 2001 as the Cabilly II patent Genentech informs MedImmune that Synagis was covered by the Cabilly II patent, demanded MedImmune pay royalties

MedImmune v. Genentech MedImmune pays royalties under protest and with reservation of all of its rights to avoid risking treble damages and attorney fees on Synagis Issue: whether the actual controversy requirement of the Declaratory Judgment Act requires 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 MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007)

Former Declaratory Judgment Standard: Reasonable Apprehension of Imminent Suit In a case of actual controversy... any court of the United States,... may declare the rights and other legal relations of any interested party. 28 U.S.C. § 2201(a) CAFC developed a two-part inquiry to determine whether there is an actual controversy... 1.an explicit threat or other action by the patentee which creates a reasonable apprehension on the part of the declaratory judgment plaintiff that it will face an infringement suit; and

Former Declaratory Judgment Standard: Reasonable Apprehension of Imminent Suit 2.present activity by the declaratory judgment plaintiff which could constitute infringement, or concrete steps taken with the intent to conduct such activity Teva Pharma. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1333 (Fed. Cir. 2005) A declaratory judgment plaintiff must be able to demonstrate that it has a reasonable apprehension of imminent suit

Demise of the Reasonable Apprehension Test We hold that a licensee was not required, insofar as Article III is concerned, to break or terminate its license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed MedImmune, 127 S.Ct. at 776

Demise of the Reasonable Apprehension Test The reasonable-apprehension-of-suit test also conflicts with... Supreme Court cases where jurisdiction obtained: even though collision-victim defendant could not have sued the declaratory-judgment plaintiff-insurer... even though... the insured had given no indication that he would file suit... even after appellate affirmance of a judgment of noninfringement, eliminating any apprehension of suit where declaratory judgment claim of invalidity Id. at 774 n. 11

CAFC post-MedImmune analysis: SanDisk v. STMicroelectronics (March 27, 2007) Background: During negotiations, ST presented an element-by- element claim analysis of SanDisk products District court found no actual controversy, applying Teva v. Pfizer CAFC Jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement without some affirmative act by the patentee Sandisk Corp. v. STMicroelectronics, Inc., 82 USPQ2d 1225 (CAFC 2007)

CAFC post-MedImmune analysis: SanDisk v. STMicroelectronics (March 27, 2007) 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

CAFC post-MedImmune analysis: Teva v. Novartis (March 30, 2007) Background: Teva filed an abbreviated new drug application (ANDA) for generic Famvir Novartis challenged Tevas ANDA, based on 1 of 5 Famvir patents Teva brought declaratory judgment action, District Court dismissed under Teva v. Pfizer

CAFC post-MedImmune analysis: Teva v. Novartis (March 30, 2007) Other Considerations: Novartis pending action against Teva, based on the same technology: related litigation involving the same technology and the same parties is relevant in determining whether a justiciable declaratory judgment controversy exists on other related patents Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., 82 USPQ2d 1173 (CAFC 2007)

CAFC post-MedImmune analysis: Teva v. Novartis (March 30, 2007) Possibility of future suits, because Novartis challenged Tevas ANDA on only 1 of the 5 patents: If Teva is successful in defending the pending 937 infringement suit, it remains subject to four additional infringement actions

CAFC post-MedImmune analysis: Teva v. Novartis (March 30, 2007) Federal Circuit: In light of... MedImmune, Inc. v. Genentech, Inc., which finds that our declaratory judgment test for non- infringement or invalidity conflicts with its precedent, we reverse Under 35 U.S.C. § 271(e)(2), Novartis would have an immediate justiciable controversy against Teva as soon as Teva submitted the ANDA... the same action should create a justiciable declaratory judgment controversy for the opposing party

CAFC post-MedImmune analysis: Teva v. Novartis (March 30, 2007) The new test A controversy is ripe if the question presented is fit for judicial review, meaning it is entirely or substantially a question of law and postponing a decision would work a substantial hardship on the challenging party

MedImmune – Effect on Licensing Licensor discourage licensees from challenging patent validity License provisions barring MedImmune-style suits by licensee are likely precluded by Lear v. Adkins... but may be not for non-repudiating licensees – Supreme Court did not opine on this issue Royalty rate jump in event of a patent challenge Automatic termination on filing of patent challenge

MedImmune – Effect on Licensing Policy is set against: These prohibitions may be tantamount to licensee estoppel (Lear) Patent challenges are encouraged: Cardinal Chemical v. Morton Effect of this uncertainty: Licensees may use threat of validity suit to push down royalty a cap on liability and then bring a suit Front-loaded license payments

MedImmune – Effect on Settlement U.S. legal system strongly encourages settlement Asahi Glass Co. v. Pentech Pharms, Inc., 289 F. Supp. 2d 986 (N.D. Ill. 2003) Res judicata precludes later challenges when suit is dismissed with prejudice : Licenses negotiated outside of litigation can be challenged in court Licenses negotiated through settlement are suit-proof. Effect: licensors refuse any licensing deal until after litigation, leading to more litigation? Patent Misuse/Antitrust Consideration