Amicus Curiae Brief — MedImmune, Inc. v. Genentech, Inc.

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JUL 2 6 2006

t CLERK

GENENTECH, INC., ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FEDERAL CIRCUIT

BRIEF OF AMICI CURIAE THE TRUSTEES OF

COLUMBIA UNIVERSITY IN THE CITY OF NEW

YORK, THE BOARD OF TRUSTEES OF THE

LELAND STANFORD JUNIOR UNIVERSITY, THE

AMERICAN ASSOCIATION OF MEDICAL

COLLEGES, THE ASSOCIATION OF AMERICAN

UNIVERSITIES AND OTHERS SUPPORTING

RESPONDENTS

TERESA M. CORBIN JERROLD J. GANZFRIED

JENNIFER A. SKLENAR Counsel of Record

HowreEyY LLP JOHN F, STANTON

525 Market Street, Suite 3600 Howrey LLP

San Francisco, CA 94105 1299 Pennsylvania Avenue, N.W.

(415) 848 4900 Washington, D.C. 20004

(202) 783-0800

RICHARD G. TARANTO

FARR & TARANTO

Suite 800

1220 19th Street, N.W.

Washington, DC 20036-2435

————————

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

TABLE OF CONTENTS

TASLE OR ATION... iii

INTEREST OF AMICI CURIAE coccccccccccccccccoccccccccescessecece i

INTRODUCTION AND STATEMENT OF THE CASE... 2

SUMMARY OF ARGUMENT ...........:cc.cc.csscsscsssssssssssersecees 6

"ee ce SO IC SAD ERED EDEN. ON 8

I. A Licensee’s Continuing, Voluntary Performance

Of Its Agreement To Pay Patent Royaltics Bars

Article III Jurisdiction Over The Licensee’s

Declaratory Judgment Challenge To The Patent’s

Validity, Enforceability, Or Coverage .................ccc00000. 8

A. Traditional Article II] Standards Preclude

RP TEREST RI SET p Neve EUS Ee OP aT ENE 8

1. Lear Does Not Authorize a Challenge to

Patent Validity in These Circumstances.......... 14

2. Federal Patent Law Should Respect, Not

Preempt, License Agreements Like

8g TEINS DELON E PURE. RR, Oe ee 19

3. The Policy Considerations are Reinforced

in the University Setting By the Bayh-

| BES EA ee ee ET SE ae 20

It. Even If Medimmune’s Suit Presented A Case Or

Controversy, It Seeks Equitable Relief That

Should Be Categorically Unavailable Under The

Declaratory Judgment Act................scccceseccesseeceseseeenees 23

ce ES ER Cea RAN ea ed 30

TABLE OF AUTHORITIES

Page(s)

CASES

AirLine Pilots Ass'n, International v. O'Neill,

499 U.S. 65 (1991) SERED Gd MOEN ESS Ma be 17

Ake v. Oklahoma.

I 13

Albemarle Paper Co. v. Moody,

TE UP ih oD a 24

Allen v. Wright,

la Fe IN scctnicinssslinsidncovieDsccdetisaidianint 8,9

Altvater v. Freeman,

BR ELIS aC eRADEE ONAN 6,9

Aro Corp. v. Allied Witan Co.,

S31 F.2d 1368 (Gti Cir. 1976)......cc0cccssccscecoccccees 18

Aronson v. Quick Point Pencil Co.,

ne Me EN Cacti 16, 17

Babbitt v. United Farm Workers National

Union, 442 U.S. 289 (1979) oo... ceececeseeeees 25

Bement v. Nat'l Harrow Co.,

Ee RETRY ene SRE A Ree Sie 19

Buckley v. Airshield Corp.,

977 F. Supp. 375 (D. Md. 1997) ...............cee 20

CR. Bard. Inc. v. Schwartz,

716 F.2d 874 (Fed. Cir. 1983).............000.cc eee 28

TABLE OF AUTHORITIES—Continued

Cipollone v. Liggett Group, Inc.,

FE SE a Fe CP OED tcccncidinsvivesanticinguibaicvies

City of Los Angeles v. Lyons,

GE RIAD. OP CU OED coctnatitvibinteciiontnedicinboon

Coleman v. Thompson,

FOU IR. TEs CODGE) cevcesiiiseninnesonicbesasecints

Cont 'l Paper Bag Co. v. Eastern Paper

Bag Co., 210 U.S. 405 (1908)........... ee

DaimlerChrysler Corp. v. Cuno,

19GB. Ca; TRIG TO aesitkaivesinecccicssceccs

De Forest Radio Telegraph Co. v.

United States, 273 U.S. 236 (1927)...........

Dura Pharmaceuticals., Inc. v. Broudo,

SOE UE, FIG N ccenesssiceceticnsipntiarapintes

eBay Inc. v. MercExchange, L.L.C.,

ED BA, FST CRIS OP icttorntevessvcecisineviocsces

Eccles v. Peoples Bank of Lakewood

Village, 333 U.S. 426 (1948)..cccccessecseesseen

Enterprise Irrigation District v. Farmers

Mutual Canal Co., 243 U.S. 157 (1917)............

Ford Motor Co. v. EEOC.

GEE UE. BUS COPED hersiscoctnscincscevessivieisintes

Foster v. Hallco Manufacturing Co.,

947 F.2d 469 (Fed. Cir. 1991)... eee

iV

soni 12

20

vibekeees 23

13

odie 24

pivepbesil 20

TABLE OF AUTHORITIES—Continued

Gen-Probe Inc. v. Vysis, Inc...

359 F.3d 1376 (Fed. Cir.),

cert. dismissed, 543 U.S. 941 (2004) 2200000000000... 4

Golden v. Zwickler,

a ST et iclac els daria ccemtenmiiiainene 25

Herb v. Pitcairn,

ee Ee TEED cinidichbttainistuisidithiapascgnsancsstoens 13

Illinois Tool Works, Inc. v. Independent

Ink, Inc., 126 S. Ct. 1281 (2006) ............ cece 16

Kelly v. Kosuga,

I aia nstcteninisicninadndvcbnpubvchnineds 28

Lear, Inc. v. Adkins,

a GOR COUT bneksdecriiintesivasinpbrindocteesei passim

Local 28 of the Sheet Metal Workers’

International Ass'n v. EEOC.

ETERS SEAT AR Re Oe 24

Louisville & Nashville Railroad v.

Woodford, 234 U.S. 47 (1914) wooccccccccccceeeeeeeeenees 13

Lujan v. Defenders of Wildlife.

id sccncratdninicduailithisicpebesninednntisiil )

Martin v. Franklin Capital Corp.

I SI creases cssteseaehcehsbapouneden 24

McConnell v. FEC.

REEL PT SR Ee Pa a 9

Maryland Casualty Co. v. Pacific Coal

& Oil Co., 312 U.S. 270 (1941) ooo. 10

v

TABLE OF AUTHORITIES—Continued

MedImmune, Inc. v. Centocor. Inc., No.

AW-02-1135, 2004 U.S. Dist. LEXIS

28800 (D. Md. June 17, 2004),

aff'd, 409 F.3d 1376 (Fed. Cir. 2005) .....

MedImmune, Inc. v. Centocor, Inc.,

271 F. Supp. 2d 762

(D. Md. 2003), aff'd, 409 F.3d 1376

CI CAE, BD cccceecsconinsevenerstnnaintecssvunsies

MedImmune v. Centocor,

409 F.3d 1376 (Fed. Cir. 2005)...............

Public Affairs Associates, Inc. v. Rickover,

SE TIS. CSE ( UTED cccsccevrcetscsessvesitecsnscns

Quick Point Pencil Co. v. Aronson,

425 F. Supp. 600 (E.D. Mo. 1976)..........

Steffel v. Thompson,

SES VLD, Gao CIID cccnnecccsnescvescscncensvcesecs

U.S. Bancorp Mortgage Co. v.

Bonner Mall Partnership.

FEF I: Te PSOE weerentetccericcnntemerpennnies

U.S. National Bank of Oregon

v. Independent Insurance Agents

of America, 508 U.S. 439 (1993).............

United Public Workers v. Mitchell,

FE ak FO CO PET Pectterrnrctminsnccimeniotintivin

United States v. Criden,

648 F.2d 814 (3d Cir. 1981)... eee

vi

mapeanest 3.4

nendiibesed 23

peoweugie 6.9

vesanicined 25

TABLE OF AUTHORITIES—Continued

Unitherm Food Systems, Inc. v.

Swift-Eckrich, Inc., 126 S. Ct. 980 (2006) ......... 26

Vermont Agency of Natural Resources v.

U.S. ex rel. Stevens, 529 U.S. 765 (2000) .......... 13

Whitmore v. Arkansas,

a I ainicscicdtitedcntnenctionindinsncabdeatianiets 10

Wilton v. Seven Falls Co.,

a i 23, 24

Yakus v. United States,

Rae CRE See 26

Younger v. Harris,

Re Eee a eee ners 25

Zenith Radio Corp. v. Hazeltine Research,

Es I Ghcncdtiitetieisitenn idendiccanteeneness 19

STATUTES

cle HET dich tctisdeianinciensdiistinnaiistissnidstiaseiidithbinicsnin 13

a inca itcinicinihadasinibsanssateatiitsa tic sdidae tei caciisies 4

RS SE see ee ee 11,17

COMMENTATORS

Edwin Borchard,

DECLARATORY JUDGMENTS (1941) ......... 23, 26-27

Rochelle Cooper Dreyfuss, Dethroning Lear:

License Estoppel and the Incentive to

Innovate, 72 VA. L. REV. 677 (1986)........... 16, 18

vil

TABLE OF AUTHORITIES—Continued

Richard H. Fallon, Jr., et al. HART AND WECHSLER’S

FEDERAL COURTS AND THE FEDERAL SYSTEM

SERRATE RAE ag ark SRO 13

Nellie A. Fisher, The Licensee's Choice:

Mechanics of Successfully Challenging

a Patent Under License, 6 FEX. INTELL.

Pe: Sich, Ce ciicticddcthdcbetieseinniettoicnbiigiamiiesd 28

Henry J. Friendly, /ndiscretion About -

Discretion, 31 Emory L.J. 747 (1982)............... 24

Emmette F. Hale, I1l, The “Arising

Under” Jurisdiction of the Federal Circuit:

An Opportunity for Uniformity in Patent Law,

14 FLA. ST. U. L. REV. 229 (1986) ......00.0 20

Note, Patent Licensee Standing

and the Declaratory Judgment Act,

83 CoLum. L. REV. 186 (1983) ................... passim

John W. Schlicher. A Lear v. Adkins Allegory,

68 J. PAT. & TRADEMARK

Be gE coon 18

John W. Schlicher, LICENSING INTELLECTUAL

PROPERTY: LEGAL, BUSINESS, AND MARKET

ERI ERIN Aaa Rede 11,27

Kim R. Smith, Foreclosure of License

Validity Challenges with Procedural

Barriers: Federal Jurisdiction,

61 J. PAT. OFF. SOC’Y 690 (1979) ooo eee 11

Vili

TABLE OF AUTHORITIES—Continued

Mary Margaret Styer, et al., A Guide

Through the Labyrinth: Evaluating

and Negotiating a University

Technology Transfer Deal,

11 B.U. J. Sci. & Tecu. L. 221 (2005) «0000.0... l

William C. Rooklidge, Licensee Validity

Challenges and the Obligation to

Pay Accrued Royalties: Lear v. Adkins

Revisited (Part II), 69 J. Pat. &

TRADEMARK OFF. SOcC’Y 5 (1987) «0.0.0.0... 15, 16

4 Pat. L. Persp. (MB) § 6.2[2.-2]

ERECT OESSIRSE DCR se se re Oey 28

7 PAT. L. Persp. (MB) § 12.4[6]

a ctshastncciicinentinitininitiesiediicnins 19, 20, 29

iX

INTEREST OF AMICI CURIAE!

Amici and their member universities are non-profit

academic institutions that invest significant resources in the

scientific research of their faculty, staff and students.2 The

Bayh-Dole Act (P.L. 96-517, Patent and Trademark Law

Amendments Act of 1980) encourages such institutions to

obtain patent protection for their scientific research and to

license those patents to the private sector. This-statute has

been hailed as “[p]ossibly the most inspired piece of

legislation to be enacted in America over the past half-

century” because it “unlocked all the inventions and

discoveries that had been made in laboratories throughout the

United States with the help of taxpayers’ money. More than

anything, this single policy measure helped to reverse

America’s precipitous slide into industrial irrelevance.”

Innovation 's Golden Goose, THE ECONOMIST’S TECHNOLOGY

QUARTERLY (Dec. 2002).

Among the more prominent technological advances

made available to the public through Bayh-Dole licensing are

the Google and Lycos Internet search engines (Stanford and

Carnegie Mellon Universities, respectively); the co-

transformation process, a pioneering recombinant DNA

technology used to make pharmaceutical products thattreat

many different diseases and ailments (Columbia University);

the cancer drug Taxol (Florida_State University); and the

nicotine patch (UCLA). See Mary Margaret Styer, et al., 4

Guide Through the Labyrinth: Evaluating and Negotiating a

' The parties’ letters of consent to the filing of amici briefs have been

lodged with the Clerk. Pursuant to Rule 37.6, amici state that no counsel

for a party has written this brief in whole or in part and that no person or

entity, other than amici, their members, or their counsel, has made a

monetary contribution to the preparation or submission of this brief.

> A full list of amici filing this brief is set out in Appendix A.

2

University Technology Transfer Deal, 11 B.U. J. Sci. &

Tecu. L. 221, 222-23 (2005); Technology Transfer Stories:

25 Innovations that Changed the World, (2006 ed.) (available

at http://www.autm.net/documents/AUTM_BWR.pdf).

Universities use royalty revenue from their licenses to

fund further scientific research and educational programs.

The continued success of the important national policy

embodied in the Bayh-Dole Act depends on the stability of

patent licenses, which would be threatened if MedImmune’s

position were accepted in the present case. In particular,

MedImmune’s arguments urge an unwarranted expansion of

the holding in Lear, Inc. v. Adkins, 395 U.S. 653 (1969) that

would erode the sanctity of contracts and interfere with vital

policies favoring amicable resolution of commercial matters.

Amici The Trustees of Columbia University in the

City of New York (“Columbia”), and The Board of Trustees

of the Leland Stanford Junior University (“Stanford”) have

an additional, unique interest in the outcome of this case.

They are respondents in Med/mmune, Inc. v. Centocor, Inc.,

et al., No. 05-656, pet. for cert. filed Nov. 22, 2005.

MedImmune’s declaratory judgment action in the Centocor

litigation was dismissed on the same jurisdictional basis as its

complaint in this case; moreover, MedI nmune’s petition for

certiorari in Centocor presents the same question as this case.

Because MedIimmune’s actions in Centocor strongly

highlight the issues underlying the Genentech case,

Columbia and Stanford are well suited to address the

pernicious ramifications of the legal standard MedImmune

advocates.

INTRODUCTION AND STATEMENT OF THE CASE

The Federal Circuit decided Genentech on October

18, 2005, subsequent to, and in reliance upon, its decision in

3

Med/mmune v. Centocor. 409 F.3d 1376 (Fed. Cir. 2005).

MedImmune, however, reversed that chronological order,

filing its petition for certiorari in Genentech on November

10, 2005, and later petitioning for certiorari in Centocor

(Nov. 22, 2005). As a result, Genentech is before this Court

on the merits and the petition in Centocor is being held.

Despite similar procedural and jurisdictional histories, the

facts of the two cases differ. Accordingly, a brief recitation

of Medimmune’s conduct in Centocor should inform any

analysis of the practical consequences of the tactics

MedImmune asks this Court to condone.

In late 1998, Medimmune approached Columbia

seeking a license for U.S. Patent No. 5,807,715 (the *715

patent), which Columbia jointly owns with Stanford. The

‘715 patent reflects the ground-breaking work of prominent

research scientists in the field of monoclonal antibody

technology. Columbia referred MedImmune to Centocor,

Inc., the exclusive licensee of the *715 patent. Thereafter,

MedImmune spent nearly two years negotiating a sublicense

with Centocor. During that process, MedImmune analyzed

and obtained opinions from multiple law firms about the

validity of the patent and whether it covered MedImmune’s

product Synagis®. Medimmune’s negotiating posture

included a number of arguments (e.g., patent invalidity and

non-infringement) designed to drive down the negotiated

royalty rate. Although the universities disagreed with

MedImmune’s contentions, important concessions were

made in order to reach an accord satisfactory to all parties.

Ultimately, the sublicense agreement was approved at a

reduced royalty rate — less than originally proposed and less

than if MedImmune’s various contentions had already been

rejected in court - and a substantial postponement in the date

on which MedImmune’s obligation to pay royalties began.

See 271 F. Supp. 2d 762, 765 (D. Md. 2003).

4

After signing the sublicense agreement in December

2000, MedImmune began making royalty payments under the

*715 patent as of the date specified in the contract. Having

resolved all issues with MedImmune, the universities ordered

their affairs around the agreed-upon royalty payments,

relying on expected revenues to fund further scientific

research and educational activities. Unbeknownst to them,

however, MedImmune was plotting a very different course.

Within days of executing the sublicense agreement,

MedImmune sent a copy to its current litigation counsel and

began assessing options for a lawsuit. Some fifteen months

later, MedImmune first contacted Centocor requesting

consent to the cessation of royalties. MedImmune did not

identify any meaningful change of circumstances that

occurred after it signed the sublicense agreement or any

ambiguity in the agreement. Unable to secure Centocor’s

assent in its newly-proposed non-payment option, and

explicitly indicating that it would continue to make the

royalty payments specified in the agreement, MedImmune

filed a declaratory judgment suit asserting the same invalidity

and non-infringement arguments it had raised during the

original pre-sublicense negotiations. See 409 F.3d at 1378:

271 F. Supp. 2d at 765.

Prior to the Federal Circuit’s decision in Gen-Probe

Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir.), cert. dismissed,

543 U.S. 941 (2004), Columbia and Stanford filed a motion

to dismiss MedImmune’s complaint for lack of jurisdiction.

Although the motion was initially denied, the district court

eventually dismissed the case after Gen-Prohe was decided.

The district court held that where there was a license

agreement with which all parties were complying ~ and

expressing their continuing intention to comply — there was

~ no actual controversy under 28 U.S.C. § 2201(a). 2004 US.

Dist. LEXIS 28800, at **8-9 (D. Md. June 17, 2004).

5

In affirming, the court of appeals applied its holding

in Gen-Probe and explained why MedImmune was incorrect

in asserting that Gen-Probe was inconsistent with Supreme

Court and Federal Circuit authority. 409 F.3d at 1379-82.

Moreover, the court held that MedImmune “can have no

apprehension of suit at all” since “there is nothing for which

Centocor can sue MedI[mmune.” /d. at 1381. This conclusion

follows ineluctably from the fact that “[i]t is undisputed that

MedImmune continues to pay timely royalties for Synagis®

and is not otherwise in breach of the agreement.” /d As the

court explained, “a license is, by its nature, an agreement not

to litigate. A licensor agrees to receive royalties or other

consideration from the licensee in exchange for a covenant

not to sue or disturb the licensee’s activities.” /d at 1379

nl.

The circumstances of the Centocor _ litigation

highlight the more pernicious aspects of the tactics employed

by licensees. The licensee in Centocor (Medimmune) made

the initial approach to the patent owner requesting a license;

the licensee sought the license under a patent that had already

issued; the parties negotiated and had every opportunity to

explore all aspects of their differing views on patent validity

and infringement; the parties reached a written accord

reflecting a compromise that settled all outstanding issues;

there are no changed circumstances subsequent to execution

of the agreement; and the licensee continues to enjoy all the

benefits of the agreement and, in return, continues to make

all royalty payments; the parties remain bound by the

contract to which they are adhering.

This brief recitation provides some context for the

following arguments against the disruption of established

legal relationships that will occur if this Court reverses the

judgment and adopts the standard MedImmune urges. These

untoward consequences are not merely hypothetical, nor are

6

they a rhetorical parade of conjured-up horribles. They are

the actual circumstances in which Stanford and Columbia

were placed by MedImmune’s tactics. As a practical matter.

they are the inequitable reality any patent holder may face if

MedImmune’s position is upheld.

SUMMARY OF ARGUMENT

3 Article III precludes jurisdiction over issues

resolved in an ongoing license agreement that all parties

continue to honor. Indeed, the licensee here positively insists

on maintaining the agreement in force to keep all the benefits

for which it bargained. The circumstance of a voluntary,

still-operational agreement, with the plaintiff demanding

retention of its negotiated shelter, readily distinguishes this

case from the two principal authorities being invoked to

support Article III jurisdiction: Altvater v. Freeman, 319

U.S. 359 (1943), and Steffel v. Thompson, 415 U.S. 452

(1974). This circumstance also defeats the licensee’s ability

to meet several established Article III requirements.

At the core of its argument, Medimmune urges an

extension of Lear to entitle a licensee, asymmetrically, to

press its challenges while retaining the benefits of its license

without the risks faced by an infringer. But Lear merely

protected a licensee who faced actual litigation commenced

by the licensor; it did so by permitting a full range of

defenses, including the defense of patent invalidity.

MedImmune seeks to transform that limited protection into

an offensive weapon for licensees to wield against licensors

at any time. Lear does not compel that result; nor does the

rationale of Lear support it. Just as the Court has previously

refused to extend Lear, it should do so again now.

In fact, even if the express policy underpinning of

Lear — promoting prompt adjudication of patent validity — is

7

viewed (incorrectly) as the only policy relevant to the

question, that policy itself is contrary to MedImmune’s

contention. | Medimmune’s argument would permit a

prospective licensee to forgo all pre-agreement opportunities

to litigate patent validity, to enter into a negotiated resolution

of all outstanding issues (including patent validity), and to

wait years before launching litigation against a patent holder

who made substantial concessions in the original agreement

and has no recourse against the belatedly litigious licensee.

2. The rule MedImmune: advocates assumes that

in the circumstances presented in this case, federal patent law

displaces valid contracts that are fully enforceable under state

law. MedImmune’s contention is wrong as a matter of

federalism and general patent law, and especially so in the

context of universities fulfilling the statutory mission of the

Bayh-Dole Act. The invaluable benefits that the Act has

achieved (encouraging inventions by university researchers

to benefit the public) would be drastically curtailed if

licensors lose the repose that their contractual agreements

were intended to produce. Under MedIimmune’s approach,

substantial litigation expenses would have to be built into the

royalty calculations of license agreements, thus raising the

cost of providing breakthrough technology to the public.

3. Even if Article III requirements could be

satisfied by a plaintiff in MedImmune’s position, a

declaratory judgment action should not be allowed to

proceed. The standard employed by the Federal Circuit in

cases where license agreements remain operational, is an

appropriate guideline for district courts asked to entertain

claims under the Declaratory Judgment Act. Indeed, the line

drawn by the Federal Circuit is consistent with this Court’s

precedents, with the need to consider the public interest, and

with the practical exigencies of the world of commerce.

8

ARGUMENT

I. A LICENSEE’S CONTINUING, VOLUNTARY

PERFORMANCE OF ITS AGREEMENT TO PAY

PATENT ROYALTIES BARS ARTICLE II

JURISDICTION OVER THE LICENSEE’S

DECLARATORY JUDGMENT CHALLENGE TO

THE PATENT’S VALIDITY, ENFORCEABILITY,

OR COVERAGE

A. Traditional Article Iff Standards Preclude

Jurisdiction

““INJo principle is more fundamental to the

judiciary’s proper role in our system of government than the

constitutional limitation of federal-court jurisdiction to actual

cases or controversies.” DaimlerChrysler Corp. v. Cuno,

126 S. Ct. 1854, 1861 (2006) (quotation omitted). This

principle “is as true of declaratory judgments as any other

field.” United Pub. Workers v. Mitchell, 330 U.S. 75, 89

(1947); accord U.S. Nat'l Bank of Oregon y. Indep. Ins.

Agents of Am., 508 U.S. 439, 446 (1993).

The Court has elaborated the constitutional

requirements through a number of overlapping doctrines.

See Allen v. Wright, 468 U.S. 737, 750 (1984). Because of

that overlap, there are multiple doctrinal ways of identifying

the fundamental problem presented by suits filed by licensees

who continue to perform under operational agreements:

plaintiff voluntarily entered into an agreement that affords

substantial benefits that it positively insists on retaining even

while it litigates. This amicus brief does not exhaustively

explore all the ways in which this core fact defeats Article III

jurisdiction. Instead, this brief explains why a selected few

of the established Article [I] requirements cannot be met by a

9

licensee like MedImmune while it enjoys the self-protection

afforded by the license agreement.

At the outset, it is clear that neither of the two

principal authorities invoked to support Article III

jurisdiction involves the distinctive feature of the present

case — plaintiffs continuing, voluntary performance of an

operative agreement it seeks to maintain. Neither Altvater

nor Steffel involved an unquestionably valid agreement

which both parties were performing without breach. In

Altvater, there was no license. The agreement had already

been terminated, the patentee had sued for infringement and

other claims, and the licensee’s continuing payment of

royalties was wholly involuntary, “under the compulsion of

an injunction decree.” 319 U.S. at 365. In Steffel, there was

plainly no agreement by the plaintiff not to distribute protest

handbills on private property. He ceased the protest activities

under “a genuine threat of enforcement” of a state criminal

trespass statute. 415 U.S. at 475. The parties also stipulated

that if plaintiff engaged in such conduct “a warrant would be

sworn out” and he would be arrested. /d. at 456 & n.4. By

no stretch of the imagination is MedImmune’s voluntary

performance of its agreement comparable to compliance with

a coercive injunction (A/ftvater) or forbearance under a

genuine threat of criminal prosecution (Steffe/).

For Article III jurisdiction to exist, plaintiff must

show: a legally cognizable “injury in fact” (1) that is

“concrete and particularized,” (2) that is “fairly traceable” to

the defendant’s action, and (3) that can be redressed by a

favorable judicial decision. McConnell v. FEC, 540 U.S. 93,

225-27 (2003); Lujan v. Defenders of Wildlife, 504 U.S. 555,

560-61 (1992); Allen, 468 U.S. at 751-52, 755-59. A

plaintiff must “show that there is a substantial controversy,

between parties having adverse legal interests, of sufficient

immediacy and reality to warrant the issuance of a

10

declaratory judgment.” Md. Cas. Co. v. Pac. Coal & Oil Co.,

312 U.S. 270, 273 (1941): Whitmore v. Arkansas, 495 U.S.

149, 155, 158 (1990); City of Los Angeles v. Lyons, 461 U.S.

95. 101 (1983). In various ways, suits like MedImmune’s

fall short under these standards.

The situation presented by MedImmune’s agreement

with the respondents — and even more starkly by its

agreement with Centocor — is a common one, replicated in

the daily routine of patent licensing that spreads technology

throughout the economy. A patentee and a firm wanting to

engage in conduct arguably covered by a patent enter into an

extended negotiation about whether the conduct is covered

and whether the patent is a valid, enforceable one. In that

negotiation, they press their respective views and also

consider the costs (e.g., in money, delay, distraction of

personnel) of litigating the dispute to a judicial resolution.

Often, they including a desire to avoid the costs of litigation,

they reach an agreement in which the amouni paid reflects

assessments of likely litigation outcomes: more than if the

licensee were to prevail in court; less than if the patentee

were to prevail in court. The licensee gets substantial

benefits: the right to practice the patent free of litigation

threat; the freedom to do so immediately without awaiting

years of litigation; and a negotiated royalty rate reduced from

the patentee’s initial offer to reflect any perceived uncertainty

over issues of patent validity, enforceability, and coverage.

Indeed, the very point of the agreement is to settle the dispute

and to put the technology into practice without wasteful

expenditures on judicial processes.

The post-agreement state of repose is inherent in the

partics’ arrangement and derives from the options facing

potential licensees: “to use the rights under a license, to not

use the rights (and avoid any need for a license), or to use the

rights without a license and litigate any infringement claim.”

1]

John W. Schlicher, LICENSING INTELLECTUAL PROPERTY:

LEGAL, BUSINESS, AND MARKET DyNAMICS 48 (1996). Once

the prospective licensees opt to execute negotiated

agreements, their licenses “are often best viewed as

settlements of potential future litigation.” /d. at 49.

There is a fatal tension between the Article III

requirements of a live controversy of sufficient immediacy

and reality (injury-in-fact, traceability, redressability) and the

absence of any potential liability for infringement during the

full term of a license agreement as the licensee enjoys

immunity from any such claim. See De Forest Radio Tel.

Co. v. United States, 273 U.S. 236, 241 (1927). Licensees

who make timely payments under their agreements not only

lack any present threat of an infringement claim, but also

enjoy a binding contractual promise barring precisely that

claim. See Kim R. Smith, Foreclosure of License Validity

Challenges with Procedural Barriers, 6\ J. PAT. OFF. SOC’Y

690. 701 (1979); Note, Patent Licensee Standing and the

Declaratory Judgment Act, 83 Covum. L. REV. 186, 197

(1983). Moreover, if the licensee stops performing under the

agreement and is sued for breach, there is no impediment to

the defense of patent invalidity. Lear, 395 U.S. 653. Should

another party successfully challenge the patent’s validity, the

royalty obligation would cease. /d. And, if the licensee

learns of any reason to doubt the patent's validity because of

prior art it can commence a re-examination proceeding at the

Patent and Trademark Office (“P.T.O.”) while still honoring

its obligation to pay royalties. 35 U.S.C. §§ 301-307.

The lack of Article III jurisdiction in this case fits

within several well-established jurisdictional categories. For

example, the licensee is fairly viewed as failing to meet the

threshold requirement of legally cognizable injury. When a

party has made an exchange for equal value, it has not

suffered a harm. See Dura Pharms.. Inc. v. Broudo, 544 U.S.

12

336, 342 (2005) (“as a matter of pure logic, at the moment

the transaction takes place, the plaintiff has suffered no loss;

the inflated purchase payment is offset by ownership of a

share that at that instant possesses equivalent value”). When

a licensee like MedImmune enters into its license agreement,

it receives what it has judged to be equal value in return for

its payment: freedom from suit and from the risk of an

injunction against its business and from a much higher

royalty rate should any uncertainties about the validity,

enforceability and coverage be resolved in favor of the

patentee. As long as the licensee retains those benefits, it

keeps the agreed-upon equivalent of the payment obligation

about which it seeks to complain. Of course, repudiation

would eliminate that equal value, as in Lear. But without

repudiation, the licensee suffers no cognizable harm.

Medimmune’s argument also may be viewed as

foundering on the causation requirement of an injury

traceable to the defendant's action. Its claimed injury —

payment of royalties for practicing the patents — was a

voluntary obligation undertaken in light of the usual business

and legal uncertainties. That act, like the act of a third party,

breaks the chain of causation leading back to the licensor.

Distinctions of this sort are commonplace in causation

analysis and echo the distinction that, in a different context,

informed the plurality opinion in Cipollone v. Liggett Group,

Inc.. 505 U.S. 504>-525-26 (1992) (Stevens, J.) (noting

difference between express warranty claims imposed under

State law and those imposed “hy the warrantor”).

Medimmune’s claim can also be seen as failing the

Article [If justiciability standard in another critical respect.

The interest MedImmune asserts — cessation of agreed upon

payments — is entirely dependent on the lawsuit. After all.

the obligation arose from MedIimmune’s voluntary

agreement, and would end (during the prescribed term of the

13

license) only as a result of the litigation. But this Court has

held that “an interest that is merely a ‘byproduct’ of the suit

itself cannot give rise to a cognizable injury in fact for

Article III standing purposes.” Vermont Agency of Natural

Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 773 (2000). That

principle is fully applicable here, where Medimmune’s

alleged injury is necessarily framed in terms of the result in

the lawsuit.

Finally, these circumstances also fit within another

established category in which Article III jurisdiction is

lacking. This Court has made clear that a valid state law bar

to the relief sought — an “adequate and independent state

ground” — eliminates Article III jurisdiction to hear a federal-

law claim. See Coleman v. Thompson, 501 U.S. 722 (1991);

Ake v. Oklahoma, 470 U.S. 68, 75 (1985): Herb v. Pitcairn,

324 U.S. 117, 126 (1945): Enter. Irrigation Dist. v. Farmers

Mut. Canal Co., 243 U.S. 157, 164 (1917). Although stated

in terms of this Court’s review of state court judgments, the

principle is not in any way dependent on the language of 28

U.S.C. § 1257. The operative principle is that there is no

case or controversy if state law validly bars relief sought in

federal court. One kind of state ground that can be adequate

and independent is a waiver or other forfeiture, such as a

procedural default. See Louisville & Nashville RR. v.

Woodford, 234 U.S. 47, 51 (1914); Richard H. Fallon Jr., et

al.. HART AND WECHSLER’S THE FEDERAL COURTS AND THE

Feperat System 525 n.2 (4th ed. 1996) (“[t]he same

principle operates when there is an antecedent state law

procedural ground — ordinarily that the party seeking

Supreme Court review failed to raise the federal question in

accordance with state procedural rules”).

Similarly. in this case (and in Centocor) Medimmune

does not suggest that its agreements are invalid in any way.

The sole basis. therefore. on which MedIimmune seeks to

14

cease paying royalties is by federal preemption of contracts

whose validity and enforceability are unquestioned under

state law. Under this analytical framework, therefore, the

ultimate jurisdictional issue turns on the preemption

question. From that perspective, it should be clear that

MedImmune’s position cannot prevail, especially where it is

relying on the same license as enforceable under state law —

paying royalties and obtaining all the benefits for which it

bargained (including the right to use the patented invention,

immunity from a claim of infringement, treble damages and

attorneys’ fees; and, in return, all the favorable consequences

of being the first to market).

B. Federal Law Respects the Licensor’s

Repose While the Licensee is Sheltered by

the License

A contract creates repose that should preclude federal

jurisdiction as long as no party is threatening to terminate the

agreement. At the core of the argument of MedIimmune and

its amici is the submission that federal patent policy upsets,

rather than respects, this repose by allowing a challenge to

the patent’s validity, enforceability, or coverage, even while

the licensee maintains the benefits of the license. This Court

should reject that submission. A licensee who chooses to

maintain the shelter of the license has no standing to contest

the repose that is the essence of the agreement.

1. Lear Does Not Authorize a Challenge to

Patent Validity in These Circumstances

The principal basis upon which MedImmune argues

that federal patent law should control rests on Lear. Much of

Medimmune’s argument, however, is premised on a

misreading of Lear, coupled with a misguided effort to

expand Lear well beyond its limited scope. Before Lear,

15

licensors had considerable power over their licensees,

including the doctrine of licensee estoppel that precluded a

licensee from challenging the validity of the license — even to

defend a breach of contract suit by the patentee. Lear

abolished the licensee estoppel doctrine to provide patent

licensees with a full range of defenses and established a

particular measure of parity between the legal arsenals of

licensees and patent holders. See 395 U.S. at 657.

MedIimmune now wishes to transmogrify the

protection afforded by Lear into 21 equilibrium-destroying

weapon to give licensees an unfettered right to challenge a

patent even as they continue to enjoy the contractual right to

practice that patent and retain the other benefits of the

license. Lear never contemplated such a situation. See, e.g.,

William C. Rooklidge, Licensee Validity Challenges and the

Obligation to Pay Accrued Royalties: Lear v. Adkins

Revisited (Part II), 69 J. PAT. & TRADEMARK OFF. Soc’y 5,

10 (1987) (“If the licensee filed a declaratory judgment

action without repudiation, there should be no jurisdiction

because of a lack of ‘a case or controversy." The Supreme

Court in Lear did not write that requirement out of the

Declaratory Judgment Act”). Indeed, as pointed out in

Justice White’s concurrence, the Lear licensee “concede{d]

that it would be estopped to contest the validity of any patent

issued to Adkins . . . so long as it continued to operate under

that agreement.” 395 U.S. at 679 n.1 (quoting Adkins v.

Lear, Inc., 52 Cal. Rptr. 795, 805 (Cal. App. 1996)).

The licensee in Lear stopped paying royalties three

years prior to the commencement of suit by the patentee. See

395 U.S. at 661-62. Hence, unlike the instant case, “a

controversy existed in the Lear case.” Note, Patent Licensee

Standing, 83 Coi.um. L. Rev. at 200. All Lear held was that

a licensee could raise a defense of patent invalidity when

sued in state court by a patentee for royalties due. See id. at

16

200-01. MedIimmune and its amici incorrectly equate the

absence of estoppel (Lear), with the presence of a justiciable

controversy. Lear, which did not involve any Article III

issue, neither requires nor even supports that conclusion.

Aside from the dispositive factual differences

between this case and Lear, there are additional reasons why

Lear should not be extended to reach the facts presented

here. Lear, decided the same Term as Fortner /, has been

described as the apex of an “anti-patent anti-monopoly”

milieu. Rooklidge, Licensee Validity Challenges 69 J. PAT.

& TRADEMARK OFF. Soc’y 5 at 15 & n.22; Rochelle Cooper

Dreyfuss, Dethroning Lear: Licensee Estoppel and the

Incentive to Innovate, 72 VA. L. REV. 677, 724 (1986). In the

intervening four decades, the Court has employed more

discerning analyses in both areas of law. See, e.g., Ill. Tool

Works, Inc. v. Indep. Ink, Inc., 126 S. Ct. 1281, 1289-92

(2006). That is good reason not to extend Lear.

Indeed, the Court has already declined to extend Lear.

In Aronson v. Quick Point Pencil Co., 440 U.S. 257 (1979),

the Court held that federal patent law does not preempt the

enforcement of a contract valid under state law. Although

Aronson’s facts differ from those here, the Court’s opinion is

instructive. The parties entered into a licensing agreement

while a patent application was pending, specifying that the

royalty rate would drop if the patent application was not

allowed within five years. When the patent did not issue by

the prescribed time (it was subsequently rejected by the

Patent and Trademark Office), the licensee continued to pay

royalties at the reduced rate for 14 years. By then, rivals with

no obligation to pay royalties had entered the market and the

licensee refused to make further payments. See Quick Point

Pencil Co. v. Aronson, 425 F. Supp. 600, 601 (E.D. Mo.

1976). The licensee subsequently sued for a declaratory

judgment, claiming that “state law which might otherwise

17

make the contract enforceable, was pre-empted by federal

patent law.” 440 U.S. at 260. Relying on Kewanee Oil and

Brulotte v. Thys Co., the Court rejected the licensee’s claim,

holding that “[s]tate law is not displaced merely because the

contract relates to intellectual property which may or may not

be patentable.” /d. at 262. The Court noted that the parties

had contracted with “full awareness of . . . the possibility that

a patent might not issue.” /d. at 261. Of even additional

importance for present purposes, Aronson concluded that

“neither the holding nor the rationale of Lear” controlled in

those circumstances. /d. at 264. Forgoing an opportunity to

extend Lear, the Court recognized that there were valid

economic reasons why a firm would be willing to “pay for

the opportunity to be first in the market” even in the absence

of a valid patent or trade secret, and that “[f]ederal patent law

is not a barrier to such a contract.” /d. at 266.

Today, and in the circumstances presented by

Medimmune, there is even less justification to extend Lear.

First, even at the time of Lear, the value of clearing away bad

patents was dominant (over policies favoring licensing,

litigation avoidance, and respect for contracts) only where

litigation was already underway and the contract was no

longer being respected. There is no reason to apply Lear’s

balance when the licensee insists on continued operation of

the contract. More generally, since Lear this Court has taken

a less cne-sided view of the multiple policies underlying

federal law affecting intellectual property, as reflected in

Kewanee Oil, Aronson and Illinois Tool. See also AirLine

Pilots Ass'n, Int'l v. O'Neill, 499 U.S. 65, 78 (1991) (policy

favoring contractual resolution of labor disputes).

Even as to the policy that Lear emphasized, the

statutory law has been changed in a vital respect.

Amendments subsequent to Lear provide that any party may

request a re-examination by the P.T.O. 35 U.S.C. §§ 301-

18

307. Accordingly, Lear's concern for resolution of patent

validity issues would not be thwarted if this Court affirms the

judgment in this case.

Further, to the substantial extent that Lear was

expressly premised on a policy of promoting prompt

adjudication of patent validity (395 U.S. at 673-74), that

policy is not advanced in the slightest by conferring on

licensees an open-ended opportunity to challenge patent

validity at any time during the term of the license agreement.

See, e.g. Centocor, 409 F.3d at 1377-78 (MedImmune

waited sixteen months after license before suing); cf Aro

Corp. v. Allied Witan Co., 531 F.2d 1368, 1373 (6th Cir.

1976) (Markey, C.J.. sitting by designation) (“Whatever boon

Lear may have provided those who take licenses under

certain conditions, it cannot be interpreted so broadly as to

condone a kind of gamesmanship, wherein an alleged

infringer, after employing the judicial system for months of

discovery, negotiation, and sparring, abandons its challenge

to validity, executes a license in settlement, and then

repudiates the license and seeks to start the fight all over

again in the courts”). To the contrary, it is far more

consistent with the policy articulated in Lear to respect

operative licenses by barring the licensee’s suit. Doing so

encourages potential licensees to seek judicial resolution of

validity issues hefore entering a license agreement. See

Dreytuss, Dethroning Lear, 72 VA. L. REV. at 722 (“[T]he

right to challenge validity, standing alone, will not stimulate

early patent challenges. Rather, that incentive is better

_furnished by a rule that warns licensees that if they do not

challenge at first opportunity, they may lose that right

forever”); Schlicher, 4 Lear v. Adkins Allegory, 68 J. PAT &

TRADEMARK OFF. SOC’Y 427 (1986).

19

2. Federal Patent Law Should Respect,

Not Preempt, License Agreements

Like MedImmune’s

There are also compelling affirmative reasons why, in

the circumstances presented here, federal patent law should

not preempt operative contracts. First, as a matter of

federalism, there is a _ general presumption against

preemption, and intellectual property cases reflect this

principle. See, e.g, Brulotte, Kewanee. Aronson. Second,

the presumption is fortified here by the patent statute’s long-

accepted protection of a patentee’s broad freedom to parcel

out its exclusivity rights as it chooses (subject to very limited

constraints). See, e.g., Zenith Radio Corp. v. Hazeltine, 395

U.S. 100, 135-36 (1969); Cont'l Paper Bag Co. v. Eastern

Paper Bag Co., 210 U.S. 405, 423-25 (1908); Bement v.

Nat'l Harrow Co., 186 U.S. 70, 88-91 (1902).

Preemption in these circumstances would adversely

affect patent licensing, which fosters competition and

economic growth and efficiency by making technology and

intellectual property more widely available. See Note, Patent

Licensee Standing, 83 CoLum. L. REv. at 206 (“[i]f current

licensees are allowed to bring offensive patent validity

challenges, the patent system may be injured. Injury to the

patent system may, in turn, harm our long-standing policy of

promoting invention, and may ultimately reduce both

competition and technological advance”); 7 PAT. L. PERSP. §

12.4[6] (Matthew Bender 2d ed. 2005) at 12-123 (“| W]e may

see a major contraction in the number of licenses granted”).

Indeed, unrestricted licensee suits would burden patentees

whose “constitutionally recognized property right may

become too expensive to maintain” and would “ultimately

result in higher costs as patentees increase their fees to cover

anticipated litigation expenses.” See Note, Patent Licensee

Standing, 83 CotuM. L. REV. at 192, 211. These costs will

20

undoubtedly be passed along to the public, “thus diminishing

the benefits the public currently receives from the patent

system.” /d.; see also Emmette F. Hale, Ill, The “Arising

Under” Jurisdiction of the Federal Circuit: An Opportunity

for Uniformity in Patent Law, 14 FLA. St. U. L. Rev. 229,

259 (1986) (making same point). Many useful technologies

are licensed by universities for relatively small financial

returns; the prospect of expensive patent litigation would at a

minimum raise the cost of making these inventions available

to the public.

Alternatively, prospective licensors would seek to

ensure the benefit of their bargain by filing an infringement

suit first and then entering into a license agreement as part of

a consent decree. See 7 PAT. L. Persp. § 12.4[6] at 12-124.

Licensors would thereby obtain the benefit of res judicata

with respect to the licensees’ patent validity claims. See

Foster v. Hallco Mfg. Co., 947 F.2d 469, 476-77 (Fed. Cir.

1991); Buckley v. Airshield Corp., 977 F. Supp. 375, 377-78

(D. Md. 1997). Encouraging licensors to file such plainly

unnecessary suits whenever they consider granting a license

would be detrimental in obvious ways to the judicial system.

the patent system, and the flow of commerce.

3. The Policy Considerations are

Reinforced in the University Setting

By the Bayh-Dole Act

The adverse consequences of MedImmune’s

arguments in this case would be particularly damaging to

educational institutions that support scientific innovation in

the United States by reinvesting royalty payments in further

research and educational activities. Cf eBay Inc. v.

Merckxchange, L.L.C., 126 S. Ct. 1837, 1840 (2006) (noting

that most university researchers prefer to license their patents

rather than obtain financing to market inventions

21

themselves). As universities, public and private, divert funds

from research and educational programs to combat the

licensee gamesmanship MedImmune urges, the licensees

face no commensurate risk. That result is plainly contrary to

the public interest (especially when taxpayer money is being

diverted from research) and, more specifically, to the

important national policy embodied in the Bayh-Dole Act.

That Act is designed to promote the transfer of useful

(and often ground-breaking) technology from non-profit

research institutions to the public. As Congress understood,

special circumstances characterize the reality of patent

licensing by universities. First, universities lack the internal

capacity to bring their inventions to market. They are not

commercial institutions; they have no manufacturing

capability; and their financial resources are dedicated to

educational and research purposes. As a consequence, all

prospects for commercial application of the patents must

come from the licensee: this reality gives the prospective

licensee greater leverage than it would enjoy in negotiations

with a commercial patentee.

Second, many universities do not have sufficient

litigation budgets to spend the millions necessary to defend

their patents. The need for true patent peace with licensees is

therefore particularly compelling in this context, a point that

is underscored by the significant technology transfers from

institutions with relatively modest endowments and financial

resource’ * Major advances in genetic research flowed from

inventions licensed by Tufts University (Bead Away

technology that helps analyze genetic variation and function)

and the University of Maryland, Baltimore County (Cell

station reactor that speeds the discovery and process

development stages of fermentation and _ culture-based

medical products). Researchers at North Dakota State

University invented an additive for weed control that reduces

22

farmer's costs by half. New technology developed at the

University of Akron eases eye strain from viewing computer

monitors and other consumer products. Under the regime

MedImmune posits, costs would skyrocket for providing the

public with the benefit of these and hundreds of other

inventions in fields such as agriculture, biotechnology,

computer science, health, medicine, safety, nanotechnology

and the environment. See generally Technology Transfer

Works: 100 Cases from Research to Realization (2006)

http://www.autm.net/documents/06ReportsFromF ield.pdf.

Because the Bayh-Dole Act expresses so clear a mandate to

promote the efficient transfer of technology for public

benefit, it reinforces the view that, at least in the university

setting, nO expansive preemption implications can be drawn

from the Patent Act.

When the practical realities of the licensing

arrangement are properly understood, it is evident that

Article II] would not permit a lawsuit commenced by a party

adhering to a binding resolution of the very issue it seeks to

litigate. For just this reason, the line drawn by the Federal

Circuit comports with established Article III jurisprudence

because it accurately reflects the fact that at the crucial time

(i.e., the date a complaint is filed), the licensee is fully

protected by the agreement it voluntarily entered and

continues to honor. Whether viewed under the rubric of

standing, injury, traceability or causation, a licensee in good

standing therefore falls outside the ambit of Article III.

23

Il. EVEN IF MEDIMMUNE’S SUIT PRESENTED A

CASE OR CONTROVERSY, IT SEEKS

EQUITABLE RELIEF THAT SHOULD BE

CATEGORICALLY UNAVAILABLE UNDER

THE DECLARATORY JUDGMENT ACT

The absence of a live case or controversy should

bring the analysis to a close with the Federal Circuit’s

standard upheld. Surely that should be the case when, as in

Centocor, the patent issued prior to the license, the licensee

had ample opportunity to review and assess the patent (and

did so, with multiple opinions of counsel), and the licensee

obtained substantial concessions on timing and amount of

royalty payments during negotiations that culminated in the

resolution set forth in the license agreement.

This Court has long recognized that the Declaratory

Judgment Act “was an authorization; not a command. It gave

the federal courts competence to make a declaration of rights;

it did not impose a duty to do so.” Public Affairs Assocs.,

Inc. v. Rickover, 369 U.S. 111, 112 (1962). Thus, in

assessing a declaratory judgment claim, “[i]t is always the

duty of a court of equity to strike a proper balance between

the needs of the plaintiff and the consequences of giving the

desired relief.” Eccles v. Peoples Bank of Lakewood Village,

333 U.S. 426, 431-32 (1948). Recognizing that the Act

“created an opportunity, rather than a duty, to grant a new

form of relief to qualifying litigants” (Wilton v. Seven Falls

Co., 515 U.S. 277, 288 (1995)), the Court has expressly

endorsed the views of Professor Edwin Borchard, the

acknowledged author of the Act (id. ):

We agree, for all practical purposes, with Professor

Borchard. who observed half a century ago that

“there is .. . nothing automatic or obligatory about

the assumption of “jurisdiction” by a federal court”

24

to hear a declaratory judgment action. Borchard,

DECLARATORY JUDGMENTS, at 313.

Inherent in the grant of discretionary authority to

issue declaratory relief is the companion authority for

appellate courts to set appropriate boundaries for the exercise

of that discretion. In the absence of limits and standards,

discretion would devolve into random, even arbitrary,

decisions that would diminish the public’s ability to assess

precedent as a guide to conduct. Any semblance of

predictability, or instruction for ordering one’s affairs, would

be lost. But, this Court has stoutly resisted the notion that

discretion should drift into a regime of random

decisionmaking. Where a trial court exercises discretion, its

“judgment is to be guided by sound legal principles” because

“[d]iscretion is not whim, and limiting discretion according

to legal standards helps promote the basic principle of justice

that like cases should be decided alike.” Martin v. Franklin

Capital Corp., 126 S. Ct. 704, 710 (2005) (quoting United

States v. Burr, 25 F. Cas. 30, 35 (C.C. D. Va. 1807)

(Marshall, C.J.)); cf Henry J. Friendly, /ndiscretion About

Discretion, 31 Emory L.J. 747, 771-73 (1982). Lower

courts’ discretion is necessarily constrained by accumulated

precedent, by guidelines established in appellate decisions,

and by the mandate that courts “must also take account of the

public interest.” U.S. Bancorp Mortgage Co. v. Bonner Mall

P’ship, 513 U.S. 18, 26 (1994). Assessment of the public

interest results in the articulation of general rules that govern

the lower courts, a course this Court follows in multiple

contexts. E.g.. Martin, 126 S. Ct. at 710: Wilton v. Seven

Falls Co., 515 U.S. 277, 288 (1995), Albemarle Paper Co. v.

Moody, 422 U.S. 405, 416, 422 (1975).3

3 See also Local 28 of the Sheet Metal Workers’ Int'l Assoc. v. EEOC.

478 U.S. 421, 475 (1986) (“While the fashioning of ‘appropriate’

25

In the operative-license context, the Federal Circuit

standard articulated in Gen-Probe, Centocor, and Genentech

is the most appropriate one for the exigencies of patent

licensing. The standard serves Article III principles, general

principles governing the availability of judicial relief, and the

policies specific to the patent context. See pages 8-20 supra.

The Federal Circuit standard is directly *:oted in

Article III tenets (even if, as this portion of the brief assumes,

Article III does not of its own force require this standard).

See pages 8-14 supra, see also Babbitt v. United Farm

Workers Nat'l Union, 442 U.S. 289, 298-99 (1979) (Article

[Il requires plaintiff to show “credible” threat of prosecution

before challenging statute); Younger v. Harris, 401 U.S. 37,

42 (1971) (“persons having no fears of state prosecution

except those that are imaginary or speculative, are not to be

accepted as appropriate plaintiffs”); Golden v. Zwickler, 394

U.S. 103, 109-10 (1969) (plaintiff must show that threat of

prosecution is real and immediate before challenging validity

remedies for a particular Title VII violation invokes the ‘equitable

discretion of the district courts,” we emphasize that a court’s judgment

should be guided by sound legal principles. In particular, the court

should exercise its discretion with an eye towards Congress’ concern that

race-conscious affirmative measures not be invoked simply to create a

racially balanced work force.”) (quotation omitted); Ford Motor Co. v.

EEOC, 458 U.S. 219, 227 (1982) (“*[W]hen Congress invokes the

Chancellor's conscience to further transcendent legislative purposes, what

is required is the principled application of standards consistent with

those purposes and not equity [which] varies like the Chancellor's foot.)

(emphasis added: quotation omitted), United States v. Criden, 648 F.2d

814, 818 (3d Cir. 1981) (“[T}he contours of a guiding rule or even

principle may develop as the courts begin to identify the policies which

should control. Thus, for example, although the selection of an

appropriate remedy has been generally deemed to lie in the equitable

discretion of the trial judge, affer experience has accumulated the

appellate courts may decide that a specific remedy should be awarded as

a general rule”) (emphasis added).

26

of statute). Even if, arguendo, Congress could press the

limits of Article IIl and constitutionally provide for

declaratory judgment suits in circumstances like this, the

Federal Circuit bar on such suits is a proper standard limiting

the exercise of equitable authority under the Declaratory

Judgment Act at least until Congress speaks to the contrary.

A rule denying relief in the present circumstances

also reflects the broadly applicable principle that a claimant’s

voluntary act may operate to disentitle him to relief. See US.

Bancorp, 513 U.S. at 25 (‘a suitor’s conduct in relation to

the matter at hand may disentitle him to the relief he seeks”)

(quoting Sanders v. United States, 373 U.S. 1,-17 (1963) and

citing Fay v. Noia, 372 U.S. 391, 438 (1963)). The Court

recently applied this principle in the context of appellate

jurisdiction. Unitherm Food Systems, Inc. v. Swift-Eckrich.

Inc., 126 8. Ct. 980, 988 (2006), held that a court of appeals

is “powerless” to grant relief a party chose to forgo in the

district court. The analysis in Unitherm was informed by the

statement in Yakus v. United States, 321 U.S. 414, 444

(1944), that “[n]o procedural principle is more familiar to this

Court than that a. . . right may be forfeited . . . by the failure

to make timely assertion of the right before a tribunal having

jurisdiction to determine it.” (quoted in Unitherm, 126 S. Ct.

at 988). A prospective licensee who opts to resolve

outstanding issues with the patent holder rather than pursue

prompt pre-license judicial resolution should similarly leave

the courts powerless to entertain belated efforts to obtain

relief the licensee chose previously to forgo.

In the patent setting, precluding suit when a license

remains operative faithfully embodies Professor Borchard’s

views on the availability of declaratory remedies in patent

cases. His treatise’s chapter on “Patents” contains a sub-

section entitled “Cases or Controversies,” which advises that

“a patentee’s claim of infringement is a condition precedent”

27

of a declaratory judgment action challenging validity. Edwin

Borchard, DECLARATORY JUDGMENTS 807 (2d ed. 1941).4

This commentary provides the short and complete answer to

MedImmune’s contention that the Act’s drafters could not

have imagined that a holder of a valid license lacked an

actual case or controversy. Pet. Br. 12, 28-31.

Additional public policy factors weigh decisively in

favor of the Federal Circuit rule against declaratory judgment

actions by licensees in good standing. For many licenses, the

patent granted by the P.T.O. is available for the public to

examine in its final form before the parties commence their

license negotiations. The prospective licensee thus has the

ability to study the patent’s claims, including its validity and

scope, and to obtain an opinion of counsel. The prospective

licensee then makes a business decision weighing the cost of

accepting a license and paying royalties against the benefit of

4 Professor Borchard explained at greater length (id.; emphases added):

[I]t seems best to limit declaratory relief for the infringer

to cases in which an adversary claim has been made

against him, though it may, it is believed, apply to an

article not yet manufactured but only about to be

manufactured. This requirement, present in practically all

the adjudicated cases. refutes the fear that patentees might

be harassed by prospective infringers and be obliged

continually to defend their patents. The fact that a

patentee 's claim of infringement is a condition precedent

of this type of action places the matter of adjudication of

the patent within the control of the patentee, for, if he

wishes to avoid adjudication, he can refrain from making

charges of infringement. But having made the charge, he

then exposes himself to adjudication. In other words, the

mere existence of the patent is not a cloud on title,

enabling any apprehensive manufacturer to remove it by

suit. /t requires an assertion of right under the patent to

place the alleged infringer in gear to join issue and

challenge the title.

28

eliminating the litigation risk that the patent will be found

valid and infringed by the licensee’s product. See Schlicher.

LICENSING INTELLECTUAL PROPERTY at 48.

MedImmune’s arguments will shatter the equilibrium

in patent license agreements in a disruptive way that unfairly

favors patent licensees. Under MedImmune’s position,

licensors will lose rights to continued royalty payments with

no chance of recovering any concessions they made during

license negotiations. However, the licensee risks nothing to

challenge the patent other than its litigation costs. Even if the

challenge fails, the licensee continues to enjoy the same

immunities and benefits under the license agreement at the

same royalty rate. In contrast to MedImmune’s contention,

the neutral approach taken by the Federal Circuit in Gen-

Probe, Centocor, Genentech, and C.R. Bard, Inc. v.

Schwartz, 716 F.2d 874 (Fed. Cir. 1983) preserves the

balance of benefits set forth in license agreements.

Neither MedImmune nor its amici supporters identify

any compelling public policy reason to afford patent

licensees such a uniquely harmful advantage. In fact, there is

no equitable basis to allow licensees to maintain the benefits

of their license at the same time that they are trying to take

away the rights of the licensor. See generally Nellie A.

Fisher, The Licensee's Choice: Mechanics of Successfully

Challenging a Patent Under License, 6 TEX. INTELL. PROP.

L.J. 1, 43 (1997) (“the licensee who elects to pay royalties

while challenging the patent's validity is in effect “having its

cake and eating it too”); 4 PAT. L. Persp. § 6.2[2.-2], at 6-41

(“There is “no reason to let the licensee have the best of both

worlds. To do so permits him to litigate validity with total

immunity from the normal consequences of a holding that a

patent is valid and infringed”); cf Kelly v. Kosuga, 358 U.S.

516, 520-21 (1959) (“| T]he courts are to be guided by the

overriding general policy, as Mr. Justice Holmes put it, ‘of

29

preventing people from getting other people’s property for

nothing when they purport to be buying it.”) (quoting

Continental Wall Paper Co. v. Louis Voight & Sons Co. , 212

U.S. 227, 271 (Holmes, J., dissenting)).

The foregoing applies at a minimum to all existing

licenses. Were this Court to reverse the Federal Circuit’s bar

on declaratory judgment actions by licensees _ in

MedImmune’s position, the effects on future licenses would

also be harmful. Although the Solicitor General suggests

that licensors may include enforceable provisions terminating

licenses upon licensee suit, or establishing higher royalty

rates upon prevailing in such a suit, there are two

fundamental problems with the suggestions. First, even such

provisions add to negotiations, thus delaying and increasing

the costs of reaching any agreement. Second, the Solicitor

General is unwilling to assert that such provisions actually

would be enforceable. Without that certainty such provisions

are no comfort. Prospective licensors would therefore have a

strong incentive, or even be compelled, before entering into a

license, to file suit against the potential licensee (perhaps.

with its consent) and propose the license as a settlement that

would then have res judicata effect. The remedy of a

declaratory judgment should not be made available to

produce such waste of judicial and private resources.

Permitting declaratory judgment suits by licensees in

good standing would also lead to “a deterioration in business

ethics in the patent licensing marketplace.” 7 PAT. L. Persp.

§ 12.4[6], at 12-123. Medlmmune’s proposed standard

would encourage licensees to enter into license agreements as

a pre-litigation tactic affording a safe platform from which to

litigate. Operating under the protection of the license, the

licensee could then turn around and sue the licensor (who

remains bound by the contract) at a time and often in a

jurisdiction of the licensee's choosing.

30

This is not hypothetical - it is precisely the tactic

used by MedImmune prior to filing the Centocor litigation.

There is, accordingly, a real danger that other current and

potential licensees’ will

engage

in similar conduct if

MedImmune’s tactics are rewarded by this Court.

Under settled declaratory judgment standards, the

adverse consequences for licensors and the resulting danger

to the public substantially outweigh the needs of a plaintiff

licensee in good standing who is in no danger of being sued.

Medimmune offers no valid, supportable principle for

rejecting a standard that holds licensees to obligations they

voluntarily undertook, while providing a prompt, pre-license

(or post-breach) opportunity to litigate patent validity.

CONCLUSION

The judgment should be affirmed.

Respectfully submitted.

RICHARD G. TARANTO

FARR & TARANTO

Suite 800

1220 19th Street, N.W.

Washington, DC 20036-2435

JULY 26, 2006

JERROLD J. GANZFRIED

Counsel of Record

JOHN F. STANTON

Howrey LLP

1299 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

(202) 783-0800

TERESA M. CORBIN

JENNIFER A. SKLENAR

HowreY LLP

525 Market Street. Suite 3600

San Francisco, CA 94105

(415) 848 4900

APPENDIX

la

APPENDIX A

LIST OF AMICI CURIAE

THE AMERICAN ASSOCIATION

OF MEDICAL COLLEGES

The Association of American Medical Colleges

(“AAMC”), founded in 1876, is a private voluntary non-

profit association of medical schools, teaching hospitals,

health systems, and academic societies. [ts membership

includes the nation’s 126 accredited medical schools, nearly

400 teaching hospitals, and more than 105,000 faculty in 98

academic and scientific socicties.

THE ASSOCIATION OF AMERICAN UNIVERSITIES

The Association of American Universities (“AAU”)

is an organization of research universities devoted to

maintaining a strong system of academic research and

education. It consists of 60 U.S. universities and two

Canadian universities, divided about evenly between public

and private. Today, the primary purpose of the AAU is to

provide a forum for the development and implementation of

institutional and national policies promoting strong programs

in academic research and scholarship and undergraduate,

graduate, and professional education.

THE BOARD OF TRUSTEES OF THE

LELAND STANFORD JUNIOR UNIVERSITY

The Board of Trustees of the Leland Stanford Junior

University (“Stanford”) is one of a select group of

universities that has achieved eminence in_ both

undergraduate and graduate education in a broad range of

2a

academic disciplines. Stanford has more than 6,700

undergraduate students, nearly 8,200 graduate students and

nearly 1,800 faculty members. The accomplishments of

Stanford faculty member include 15 Nobel laureates, 3

National Medal of Technology recipients, 134 members of

the National Academy of Sciences and 82 National Academy

. of Engineering members. Stanford's Office of Technology

Licensing, which is responsible for the issuance of more than

1,500 patents, is guided by the principle of “doing what is

best for the technology” which routinely results in licensing

for the public benefit.

THE CALIFORNIA INSTITUTE OF TECHNOLOGY

The California Institute of Technology (Caltech) is

one of the world’s major research centers with an outstanding

faculty, including five Nobel Laureates, and a student body

of approximately 900 undergraduates and 1000 graduate

students in science and engineering. Caltech is consistently

among the top three universities that receive United States

patents, which it licenses to benefit the public and to fund

research.

THE COUNCIL ON GOVERNMENTAL RELATIONS

The Council on Governmental Relations (““COGR”)

is an association of more than 170 U.S. research universities

and their affiliated academic medical centers and research

institutes. COGR concerns itself with the influence of

government regulations, policies, and practices on the

performance of research conducted at its member institutions.

COGR has a longstanding interest in and concern for

assuring the continued effectiveness of the Bayh-Dole Act

(P.L. 96-517) and implementing federal regulations (37

3a

C.F.R. 401 et. seq.) in facilitating technology transfer by U.S.

universities.

THE NATIONAL ASSOCIATION OF STATE

UNIVERSITIES AND LAND-GRANT COLLEGES

The National Association of State Universities and

Land-Grant Colleges (*NASULGC”) was founded in 1887

and is the nation’s oldest higher education association. Its

members include public universities, public-university

systems, and land-grant institutions from all 50 states, the

U.S. territories and the District of Columbia. Many of the top

100 recipients of federal funds for research and development

are NASULGC-affiliated institutions.

Much research performed by universities affiliated

with NASULGC is directed to core issues at the forefront of

basic science. Groundbreaking university research is later

developed - through substantial investment by licensees -

into products with wide public benefit. NASULGC and its

members have an interest in assuring that universities should

not be disadvantaged in their patent rights.

THE REGENTS OF THE UNIVERSITY OF

CALIFORNIA

The Regents of the University of California is a

public university of ten campuses and five medical schools

together with two national laboratories operated by The

Regents on behalf of the U.S. Department of Energy. The

Regents provide for technology transfer for each site as a part

its mission of education, research and public service.

4a

THE TRUSTEES OF COLUMBIA UNIVERSITY IN

THE CITY OF NEW YORK

The Trustees of Columbia University in the City of

New York (“Columbia”) is a private, nonprofit institution of

higher education whose activities are concentrated at two

locations in New York City and extend around the globe.

Columbia provides instruction through 16 undergraduate,

graduate, and professional schools, including one of the

largest academic medical centers in the United States,

and conducts research, training, and other services under

grants and contracts with agencies of the federal government

and other sponsoring organizations. Columbia enrolls

approximately 23,800 students and employs approximately

12,600 full-time employees, including 4.700 full-time faculty

members.

THE UNIVERSITY OF WASHINGTON

The University of Washington is a public research

university with campuses in Seattle, Bothell, and Tacoma. It

has over 27,600 faculty and staff, and almost 43,000

students. Annually, the University receives almost $1.0

billion in sponsored research support from federal,

foundation, and industrial sources.