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The Medimmune Decision

By Joshua R. Rich

In MedImmune v. Genentech, decided Jan. 9, 2007, the U.S. Supreme Court swept away over a decade of Federal Circuit precedent to find that a licensee need not breach a patent license in order to file a declaratory judgment action for patent invalidity or unenforceability. The decision shifted substantial power from licensors to licensees: previously, a licensee had to choose the lesser of two evils. On one hand, the licensee could comply with the terms of a license agreement and forego any challenge to a patent, even if it felt the patent was not infringed, invalid, or unenforceable. On the other hand, the licensee could breach the license and challenge infringement, validity, and enforceability; in doing so, however, it exposed itself to potentially trebled damages and attorney's fees under 35 U.S.C. ” 284 & 285 and an injunction against future sales under 35 U.S.C. ' 283 if its challenge failed.

In light of the MedImmune decision, any party with a portfolio of licenses (whether as licensor or licensee) should review the licenses to determine if they are subject to and appropriate for declaratory judgment actions. Licenses for 'blockbuster' products will be most appropriate for patent challenges. Prospectively, counsel must be aware of the possibility of declaratory judgment litigation when negotiating license agreements. Licensors will be able to circumvent the MedImmune holding, either contractually or by consent judgment, but licensees may want to avoid giving away declaratory judgment jurisdiction.

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