LAW OFFICES OF JOHN A' OBRIEN, P'C' NEW YORK, NY WWW'OBRIENIPLAW'COM

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MEDIMMUNE AND ITS AFTERMATH

• American Intellectual Property Law Association
• IP Practice in Japan Committee
• April 2008, Tokyo, Japan
• JOHN A. OBRIEN
• LAW OFFICES OF JOHN A. OBRIEN, P.C.
• NEW YORK, NEW YORK

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MEDIMMUNE AND ITS AFTERMATHOverview

• MedImmune, Inc. v. Genentech, Inc., 127 S. Ct.
  764 (2007) (We express no opinion on whether a
  non-repudiating licensee is similarly relieved of
  its contract obligationon the applicability of
  licensee estoppel).
• MedImmune, Inc. v. Genentech, Inc., ___ F.
  Supp.___, 2008 WL 370620 (C.D. Cal) (The
  distinction that MedImmune is a non-repudiating
  licensee is insufficient to depart from Lears
  analysis).
• Metrologic Instruments, Inc. v. Symbol
  Technologies, Inc., ___F3d ___ (3rd Cir. 2007),
  2007 WL 3391339 (C.A. 3 (NJ))(MedImmune does
  notstand for the proposition that one can breach
  a contract merely because that contract involves
  a patent license).
• MedImmune Impact/Suggestions, Ms. Soonhee Jang
  Eli Lilly and Company.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• BACKGROUND
• The 1997 License Agreement
• Genentech (licensor) hereby grants to Licensee
  (MedImmune)a co-exclusive licenseunder Licensed
  Patents...to make, use, and sell Licensed
  Products. Id. 768.
• Licensed Patents are defined as including
• (a) U.S. Patent No. 4,816,567 (Chimera
  Patents), and
• (b) any patent issuing based on U.S.S.N.
  07/205, 419 (Compression Patents). Id. 768.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• BACKGROUND (Contd)
• Licensed Product(s) are defined as the anti-RSV
  monoclonal antibodylisted in Schedule A hereto,
  the manufacture, use or sale of which substances
  would, if not licensed under this agreement,
  infringe one or more claims of either or both of
  Chimera Patents or Compression Patents, which
  have neither expired nor been held invalid by a
  court or other body of competent jurisdiction
  from which no appeal has been or may be taken.
  (Emphasis added) Id. 768.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• MedImmunes Declaratory Judgment Action
• In 2001 the first Compression Patent issued as US
  Patent No. 6, 331, 415 (the 415 patent). Id.
  768.
• Genentech sent a letter to MedImmune, asserting
  that MedImmunes Synagis product was covered by
  the 415 patent and stating Genentechs
  expectation that MedImmune would commence paying
  royalties. Id. 768.
• MedImmune believed that the 415 patent was
  invalid and unenforceable and that its claims
  were in any event not infringed by Synagis. Id.
  768.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• MedImmunes Declaratory Judgment Action (contd)
• MedImmune considered the Genentech letter to be a
  threat to terminate the license agreement and sue
  for patent infringement if MedImmune failed to
  make royalty payments. Id. 768.
• Unwilling to risk these consequences, MedImmune
  paid the demanded royalties under protest and
  with reservations of all its rights. Id. 768.
• MedImmune then brought a Declaratory Judgment
  Action disputingits obligations to make payments
  under the 1997 License Agreement because
  MedImmunes sale of its Synagis product does
  not infringe any valid claim of the compression
  patent Id. 768.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• MedImmunes Declaratory Judgment Action (Contd)
• Genentech moved to dismiss the MedImmunes action
  for lack of subject-matter jurisdiction.
• The District Court granted MedImmunes motion
  relying on the CAFCs decision in Gen-Probe v.
  Vyris, Inc., 359 F.3d 1376 (2004) (A patent
  licensee in good standing cannot establish an
  Article III case or controversy with regard to
  validity enforceability or scope of the patent
  because the license agreement obliterates any
  reasonable apprehension that the licensee will be
  sued for infringement).
• The Federal Circuit affirmed the District Court,
  also relying Gen-Probe 427 F3d. 958 (2005).

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• SUPREME COURT DECISION
• The Supreme Court rejected the Federal Circuits
  reasonable apprehension of suit test, as stated
  in Gen-Probe. Id. 777.
• The Court held that the Declaratory Judgment Act
  did not require MedImmune to break or terminate
  its 1997 license agreement before seeking a
  declaratory judgment in federal court that the
  underlying patent is invalid, unenforceable, or
  not infringed. Id. 777.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• SUPREME COURT DECISION (Contd)
• The Court held that basically, the question in
  each case is whether the facts alleged, under all
  the circumstances, show that there is a
  substantial controversy, between parties having
  adverse interests, of sufficient immediacy and
  reality to warrant the issuance of a declaratory
  judgment. Id. 771.
• The Supreme Court rejected Genentechs argument
  that the common-law rule that a party to a
  contract cannot at one and the same time
  challenge its validity and continue to reap its
  benefits, and that the Courts decision in Lear
  v. Adkins did not suspend that rule for patent
  licensing agreements, since the plaintiff in that
  case had already repudiated the contract. Id.
  776.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• SUPREME COURT DECISION (Contd)
• The Supreme Courts reasoning is that even if
  Lears repudiation of the doctrine of licensee
  estopel was so limited (a point in which, as we
  have said earlier, we do not opine), it is hard
  to see how the common-law rule has any
  application here. Petitioner is not repudiating
  or impugning the contract while continuing to
  reap its benefits. Rather, it is asserting that
  the contract, properly interpreted, does not
  prevent it from challenging the patent, and does
  not require the payment of royalties because the
  patents do not cover its products and are
  invalid. Id. 776.

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MEDIMMUNE v. GENENTECH127 S. Ct. 764 (2007)

• SUPREME COURT DECISION (Contd)
• In an earlier point in its decision, the Supreme
  Court stated, We express no opinion on whether a
  non-repudiating licensee is similarly relieved of
  its contract obligation during a successful
  challenge to a patents validity - that is, on
  the applicability of licensee estoppel under
  these circumstances. Cf. Studiengeselschaft
  Kohle, M.B.H. v. Shell Oil Co., 112 F.3d 1561,
  1568 (CA Fed. 1997) (A licenseecannot invoke
  the protection of the Lear doctrine until it (i)
  actually ceases payment of royalties, and (ii)
  provides notice to the licensor that the reason
  for ceasing payment of royalties is because it
  has deemed the relevant claims to be invalid).
  Id. 770-71.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• BACKGROUND
• The Supreme Court remanded the case to the
  District Court to proceed with the case.
• In August 2007, the District Court conducted a
  Markman hearing and issued a claim construction
  Order.
• Consequently, MedImmune stipulated that its
  production of Synagis infringed claim 33 of the
  415 patent (but for the license agreement).

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• BACKGROUND (Contd)
• Genentech filed an unconditional, irrevocable
  covenant not to sue or seek royalties with
  respect to the Synagis Product on any claim of
  the 415 patent other than claim 33.
• In January 2008, the District Court granted
  MedImmunes motion to strike the demand for a
  jury trial on the invalidity issue. ___F.
  Supp.___, 2008 WL 44 5839 (C.D. Cal.).
• In February 2008, the District Court granted
  Genentechs motion to confine the litigation to
  claim 33 of the 415 patent. ___F. Supp.___,
  2008 WL 44 5839 (C.D. Cal.)

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• GENENTECHS MOTION FOR SUMMARYJUDGEMENT
• OF VALIDITY
• Genentechs Motion
• Genentech asserted that licensee estoppel bars
  MedImmunes patent invalidity claim because
  MedImmune has not repudiated the contract. Id.
  p. 12. Genentech argued that the Supreme Court
  decision in Lear v. Adkins, should be
  distinguished on the grounds that MedImmune is a
  non-repudiating licensee. Id. 12.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• Genentechs Motion (Contd)
• Genentech noted that the Federal Circuit in
  Studiengesellschaft Kohle v. Shell Oil Co., 112
  F.3d 1561 (Fed. Cir. 1997) (Kohle), expressly
  imposes a repudiation requirement on the
  invocation of Lear. Id. 12. Because that
  requirement has not been met, Genentech reasoned
  that MedImmune is estopped from challenging the
  validity of the 415 patent. Id. 12.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• MedImmunes Opposition
• MedImmune argued that Lear does apply because its
  fundamental holding was broad enough to cover
  non-repudiating licensees. Id. 12.
• MedImmune also argued that Kohle is not
  applicable because of the narrow question in
  front of the Federal Circuit in that case. Id.
  12.
• Citing the Supreme Courts earlier opinion in
  MedImmune, MedImmune contended that licensee
  estoppel could not bar its challenge to the 415
  patent because the license itself expresses no
  such bar. Id. 12.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• District Courts Analysis of Lear
• The District Court noted that the Supreme Court
  decision in Lear is primarily based on the force
  of its public policy rationale It Lear
  viewed the difficulty courts had with licensee
  estoppel as a product of judicial efforts to
  accommodate the competing demands of the common
  law of contracts and the federal law of patents
  on the one hand, a purchaser cannot repudiate a
  contract simply because he becomes dissatisfied
  with the bargain on the other hand, ideas must
  be dedicated to the common good if not protected
  by a valid patent. Id. 12.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• District Courts Analysis of Lear (Contd)
• The District Court noted that Lear found that
  the latter interest federal law of patents
  outweighed the former contract law, and
  declined to apply the licensee estoppel doctrine
  and remanded to permit Lear to challenge the
  validity of the patent. Id. 12.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• District Courts Analysis of the Federal
  Circuits Treatment of Lear
• The District Court noted that early in its
  history the Federal Circuit cited with approval
  the Supreme Courts policies behind Lear, citing
  C.R. Bard, Inc. v. Schwarz, 716 F.2d 874, 880
  (Fed. Cir. 1983) (explaining that Lear changed
  the prior lawon the basis of public policy),
  and Cordis Cor. V. Medtronic, Inc., 780 F.2d 991,
  995 (Fed. Cir. 1985) (a licensee to a patent
  license agreement may not be estopped from
  asserting that the patent subject to the license
  is invalid). Id. 14.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• District Courts Analysis of the Federal
  Circuits Treatment of Lear (Contd)
• The District Court noted, however, that more
  recently the Federal Circuit has distinguished
  Lear. Id. 14. Perhaps these Federal Circuit
  cases reflect the sentiment, expressed in the
  1997 Kohle decision, that Lear reflects tones
  that echo from a past era of skepticism over
  intellectual property. Id. 14-15.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• District Courts Analysis of the Federal
  Circuits Treatment of Lear (Contd)
• According to the District Court, in Kohle the
  Federal Circuit formulated a rule that a licensee
  cannot invoke the Lear doctrine until it (1)
  ceases payment of royalties and (2) provides
  notice to the licensor that the reason for
  ceasing payment of royalties is because it has
  deemed the relevant claims to be invalid. Id.
  14-15.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• DISTRICT COURT DECISION
• The District Court found that the Federal
  Circuits Decision in Kohle does not prohibit
  MedImmunes invocation of Lear in this case.
• According to the District Court, the language of
  Kohle appears to bar MedImmunes invocation of
  Lear because it has not ceased payment of
  royalties as required by first prong of the
  Kohle rule. Kohle, 112 F.2d at 1568. Id. 16.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• The District Court found that the Federal
  Circuits Decision in Kohle does not prohibit
  MedImmunes invocation of Lear in this case
  (Contd)
• But the District Court went on to findthat
  language taken out of context extends the holding
  far beyond the rest of the case. Id. 16.
• The District Court found the Federal Circuits
  two prong rule in Kohle is entirely consistent
  with the factual history in that case.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• The District Court found that the Federal
  Circuits Decision in Kohle does not prohibit
  MedImmunes invocation of Lear in this case
  (Contd)
• The District Court stated that the rules of Lear
  is that a party can challenge the validity of a
  patent (a) by ceasing payment of royalties and
  notifying the licensor of its beliefs, or (b) by
  affirmatively seeking declaratory judgment that
  the patent is invalid, as MedImmune has done
  here. Id. 17.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• 2. The District Court found that Lear controls
  and MedImmune is not barred from asserting patent
  invalidity
• According to the District Court Because the
  Kohle rule is inapplicable to the instant case
  Lear controls this dispute. The distinction that
  MedImmune is a non-repudiating licensee is
  insufficient to depart from Lears analysis.
  Id. 17.

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MEDIMMUNE v. GENENTECH, INC.United Stated
District Court, C.D. CaliforniaNo.
CV03-25672008 WL 370620 (C.D. Cal.)

• The District Court found that Lear controls and
  MedImmune is not barred from asserting patent
  invalidity (Contd)
• The District Court found that In this case,
  where invalidity has been raised affirmatively by
  the licensee, the Lear Courts reasoning applies
  in full force even though MedImmune has not
  repudiated the license to prevent MedImmune
  from challenging the validity of the patent would
  give greater weight to the technicalities of
  contract doctrine than to federal patent policy.
  Id. 17.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.2007 WL 3391339 (C.A. 3 (N.J.))

• BACKGROUND
• Metrologic and Symbol are competitors in the
  design, manufacture and sale of laser bar code
  scanning devices. Id. 1.
• In 1996, Metrologic and Symbol entered into a
  patent license agreement pursuant to which
  Metrologic received licenses under certain of
  Symbols patents. Id. 2.
• In 1999, the patent license agreement was amended
  to provide Symbol with licenses under
  Metrologics families of patents. Id. 2.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.2007 WL 3391339 (C.A. 3 (N.J.))

• BACKGROUND (Contd)
• The license royalty provision for the first three
  elected Metrologic patent families is as follows
• 6.2 Royalties Due for License of First Three
  Elected METROLOGIC Patent Families.
• 6.2.1 License Fee. For the license of the First
  Three Elected Metrologic Patent Families, and the
  rights an immunities granted under this Article,
  during the term of, and subject to the terms and
  conditions of this Agreement, SYMBOL shall pay
  METROLOGIC as follows

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.2007 WL 3391339 (C.A. 3 (N.J.))

• BACKGROUND (Contd)
• (a) on November 1, 1999 the sum of 661,250
  and
• (b) commencing January 1, 2000, a fixed running
  royalty as set forth in the Royalty Table below,
  payable in four equal quarterly installments each
  year
• (c) an aggregate credit of 325,000, which may
  be taken by METROLOGIC and applied to royalty
  payments due to SYMBOL under Article 5 of this
  Agreement.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.2007 WL 3391339 (C.A. 3 (N.J.))

• BACKGROUND (Contd)
• In February 2005, after making royalty payments
  in accordance with Section 6.2 of the agreement,
  Symbol informed Metrologic that it would stop
  paying royalties because it believed that none
  of its products were covered by a valid claim of
  a patent in the first three elected Metrologic
  families. Id. 2.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.2007 WL 3391339 (C.A. 3 (N.J.))

• BACKGROUND (Contd)
• In May 2005 Metrologic brought an action in the
  United States District for New Jersey, seeking a
  declaratory judgment of material breach of the
  License Agreement by Symbol and seeking damages
  caused by Symbols breach. Id. 2.
• Metrologic moved for summary judgment, arguing
  that Symbols failure to pay royalties in
  accordance with Section 6.2 of the agreement
  constituted a material breach. Id. 2.
• Symbol opposed the motion, arguing that it was
  not obligated under the agreement to pay any
  royalties for the licenses to the first three
  elected Metrologic patent families unless or
  until a court determined that Symbol product
  infringed a patent in those families. Id. 2.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.2007 WL 3391339 (C.A. 3 (N.J.))

• BACKGROUND (Contd)
• The District Court rejected Symbols argument and
  granted Metrologics motion for summary judgment
  that Symbols failure to pay royalties
  constituted a material breach. Id. 2.
• Symbols appealed to the United States Court of
  Appeals for the Third Circuit. Id. 2.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.3r Cir (Nov. 15, 1007)

• DECISION OF CIRCUIT COURT OF APPEALS FOR THE
  THIRD CIRCUIT
• The Court of Appeals affirmed the District
  Courts grant of summary judgment that Symbols
  failure to pay royalties in accordance with
  Section 6.2 of the Agreement was a material
  breach. Id. 4.
• The Court of Appeals rejected Symbols argument
  that Metrologic must establish that a Symbol
  product is covered by a patent in the first three
  elected Metrologic families, to support for its
  claim for royalties pursuant to Section 6.2 of
  the agreement. Id. 4.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.3r Cir (Nov. 15, 1007)

• DECISION OF CIRCUIT COURT OF APPEALS FOR THE
  THIRD CIRCUIT (Contd)
• The Court of Appeals also rejected Symbols
  argument that requiring it to pay royalties
  regardless of whether it infringes, is
  inconsistent with long standing patent licensing
  law. Id. 4.
• The Court of Appeals stated that There is no
  rule of law that requires a judicial finding of
  infringement as a prerequisite to licensing. It
  is difficult to take seriously Symbols
  contention to the contrary, since it is at odds
  both with common sense and Symbols own behavior
  in this case. Symbol paid royalties for years
  under the Agreement and, given the plain language
  of the Agreement, was correct to do so. Id. 4.

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METROLOGIC INSTRUMENTS, INC. v. SYMBOL
TECHNOLOGIES, INC.3r Cir (Nov. 15, 1007)

• DECISION
• The Court of Appeals also rejected Symbols
  argument that the District Courts grant of
  summary judgment is at odds with the Supreme
  Courts decision in MedImmune v. Genentech
  because it the District Courts grant of
  summary judgment deprives Symbol of the
  opportunity to challenge the infringement and
  validity of Metrologics patents. Id. 4.
• In response to this Symbol argument, the Court of
  Appeals stated We fail to see how the Supreme
  Courts decision in MedImmune relates to this
  caseMedImmune does not, as Symbol appears to
  suggest, stand for the proposition that one can
  breach a contract with impunity merely because
  that contract involves a patent license. Id. 4.

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• THANK YOU.