# MedImmune v. Genentech: A Licensee Can Sue Without Breaching First

> The Supreme Court held that a patent licensee paying royalties under protest need not breach its license to bring a declaratory-judgment action challenging the patent.

Topic: Patents  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/medimmune-v-genentech-declaratory-judgment/


*MedImmune, Inc. v. Genentech, Inc.*, 549 U.S. 118 (2007), removed a major obstacle that had kept patent licensees from testing the patents they paid to use. The Federal Circuit had held that a licensee in good standing — one still paying royalties and not in breach — could never establish an Article III "case or controversy," because by complying it faced no imminent threat of suit. Writing for an 8–1 Court, Justice Scalia disagreed. A licensee forced to choose between paying royalties it believes it does not owe and risking treble damages and an injunction by refusing is caught in exactly the kind of coercive dilemma the Declaratory Judgment Act exists to relieve. The licensee need not "bet the farm" by breaching first. The decision expanded declaratory-judgment jurisdiction across patent law and, paired with *Lear v. Adkins*, gave licensees a practical route to challenge validity from a position of safety.

## At a glance

- **Case:** *MedImmune, Inc. v. Genentech, Inc.*, 549 U.S. 118 (2007), Docket No. 05-608
- **Court:** Supreme Court of the United States, on certiorari to the U.S. Court of Appeals for the Federal Circuit
- **Decided:** January 9, 2007; 8–1
- **Opinion:** Justice Scalia, for the Court; Justice Thomas dissenting
- **Subject matter:** Whether a patent licensee must terminate or breach its license before it may bring a declaratory-judgment action of invalidity, unenforceability, or non-infringement
- **Holding:** Article III does not require a licensee to break or repudiate its license before seeking a declaratory judgment; a licensee paying royalties under protest can present a justiciable controversy

## The Cabilly patent and royalties paid under protest

MedImmune manufactures Synagis, a monoclonal-antibody drug used to prevent respiratory disease in infants and a major share of the company's revenue. In 1997 it entered a license with Genentech covering an existing patent (Cabilly I) and a then-pending application that later issued as the Cabilly II patent. When Cabilly II issued, Genentech took the position that Synagis fell within it and demanded royalties. MedImmune disagreed, contending that Cabilly II was invalid and unenforceable and that Synagis did not infringe. Rather than refuse to pay — which would have exposed it to an infringement suit, treble damages, and a potential injunction shutting down its flagship product — MedImmune **paid the royalties under protest** and simultaneously filed a declaratory-judgment action seeking to invalidate the patent.

The District Court dismissed the suit for lack of subject-matter jurisdiction, and the Federal Circuit affirmed. Under that court's precedent, a licensee in good standing could not establish an Article III controversy over the licensed patent, because its own compliance eliminated any reasonable apprehension of an infringement suit. The Supreme Court granted certiorari to decide whether that categorical bar was correct.

## Coercion, compliance, and the case-or-controversy requirement

Justice Scalia's opinion returned to first principles. The Declaratory Judgment Act's "actual controversy" requirement refers to the same "Cases" and "Controversies" that Article III makes justiciable, and the settled test asks "whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." The dispute over Cabilly II easily met that standard: the parties genuinely disagreed about validity, enforceability, and infringement, and the disagreement had real financial stakes.

The Federal Circuit's error, the Court held, was to treat the licensee's own voluntary compliance as fatal to jurisdiction. Scalia analogized to the Court's earlier decisions allowing a party to seek a declaration without first exposing itself to liability. A plaintiff need not violate a statute, breach a contract, or commit an act of infringement — thereby courting ruinous penalties — just to earn the right to have a court resolve the underlying legal question. MedImmune's decision to keep paying "under protest," precisely to avoid the "imminent injury" of treble damages and an injunction, did not dissolve the controversy; it was a coerced choice created by Genentech's demand. As the Court put it, the "dilemma" of choosing between abandoning one's rights and risking serious consequences is what declaratory relief was designed to address. The Court expressly rejected the Federal Circuit's "reasonable apprehension of imminent suit" test as the sole gauge of jurisdiction and remanded for consideration of the merits and any remaining defenses.

## What the Court did not decide

*MedImmune* is notable for its careful reservations. The Court did not decide whether MedImmune would ultimately prevail, and it did not resolve whether the license agreement, properly construed, might independently bar the suit or otherwise insulate Genentech — for example, through a covenant not to sue or a promise that could eliminate the controversy. Those contract questions were left for remand. The Court also declined to opine broadly on how its holding would apply outside the licensing context, though its reasoning about coercive choices plainly reached beyond it. By resolving only the Article III question and reserving the contract and merits issues, the Court set a clear jurisdictional rule while leaving the surrounding doctrine to develop case by case.

## Open questions

Justice Thomas dissented alone. In his view, MedImmune had eliminated any imminent injury by choosing to comply, and a party that voluntarily removes the threat of enforcement lacks a live Article III controversy; the Declaratory Judgment Act, he stressed, cannot expand the judicial power beyond constitutional limits. That disagreement frames the questions *MedImmune* left open. How much of a dispute is "enough," and how immediate must the threat be, once the "reasonable apprehension" test is gone? The Federal Circuit soon extended *MedImmune*'s logic beyond licensees in *SanDisk Corp. v. STMicroelectronics, Inc.*, 480 F.3d 1372 (Fed. Cir. 2007), making it easier for accused infringers generally to bring declaratory-judgment suits. That expansion, in turn, sharpened practical questions about when patent-holder communications create jurisdiction, and it intensified the drafting of covenants not to sue and no-challenge provisions designed to control — or forestall — the very actions *MedImmune* enabled.

## Implications

- **Pay under protest and still sue.** A licensee no longer has to breach its license and risk infringement liability to obtain a judicial ruling on the patent's validity or scope.
- **The "reasonable apprehension of suit" test is gone.** Declaratory-judgment jurisdiction turns on the totality-of-circumstances standard — a substantial, immediate, and real controversy — not on proof of an imminent threatened lawsuit.
- **Patent owners should mind their communications and covenants.** Assertive licensing demands can manufacture a justiciable controversy; covenants not to sue and carefully drafted license terms are the principal tools for managing declaratory-judgment exposure.
- **Read MedImmune with Lear.** *Lear* supplies the right to challenge a licensed patent; *MedImmune* supplies a safe procedural vehicle, together strengthening the licensee's hand in negotiation and litigation.

## Frequently asked questions

**What did MedImmune v. Genentech decide?** That a patent licensee does not have to stop paying royalties or breach its license before it can bring a declaratory-judgment action challenging the patent's validity, enforceability, or scope. Paying under protest to avoid treble damages and an injunction still leaves a live Article III case or controversy.

**What test did the ruling reject?** It rejected the Federal Circuit's rule that a declaratory-judgment plaintiff must show a "reasonable apprehension of imminent suit." The Supreme Court held that the correct question is whether, under all the circumstances, there is a substantial controversy of sufficient immediacy and reality to warrant declaratory relief.

**How does MedImmune fit with Lear v. Adkins?** *Lear* (1969) gave licensees the substantive right to challenge a licensed patent's validity; *MedImmune* gave them the procedural path to do so without first breaching the license and exposing themselves to infringement liability. Together they let a paying licensee test the patent while preserving the safety of its license.

## Authorities and sources

- *MedImmune, Inc. v. Genentech, Inc.*, 549 U.S. 118 (2007), Docket No. 05-608 (decided January 9, 2007). [Justia](https://supreme.justia.com/cases/federal/us/549/118/); [Cornell Legal Information Institute syllabus](https://www.law.cornell.edu/supct/html/05-608.ZS.html).
- Scalia authorship, 8–1 vote, and Thomas dissent corroborated by the [Cornell LII case materials](https://www.law.cornell.edu/supct/cert/05-608) and case reporting.
- Related right to challenge: *Lear, Inc. v. Adkins*, [395 U.S. 653 (1969)](https://www.law.cornell.edu/supremecourt/text/395/653). Federal Circuit extension: *SanDisk Corp. v. STMicroelectronics, Inc.*, [480 F.3d 1372 (Fed. Cir. 2007)](https://law.justia.com/cases/federal/appellate-courts/F3/480/1372/).