Maryland's largest biotech is before the Supreme Court seeking interpretation of patent licensing law

Patent spat goes to court

October 05, 2006|By Tricia Bishop | Tricia Bishop,Sun reporter

WASHINGTON -- Compared to the global warming and abortion cases set to go before the U.S. Supreme Court this term, yesterday's arguments in MedImmune Inc. v. Genentech Inc. seem easy to dismiss as insignificant.

The case involves two biotechnology companies in a legal spat over a patent. And while that patent protects technology used to manufacture monoclonal antibodies - an increasingly important substance in the drug-making world - it's not the sort of thing discussed in the neighborhood coffeeshop.

But for those in business, the suit brought by Maryland's largest biotechnology company is critical, intellectual property attorneys said.

At its heart are the licensing relationships so many companies rely on to bring in revenue and build their products. The court's ruling could have a chilling effect on such deals by en- couraging higher fees and fewer con- tracts.

MedImmune's case asks whether a patent licensee has to refuse to pay royalties - therefore breaking its contract and putting itself in danger of being sued - before it is allowed to file its own suit "to declare the patent invalid, unenforceable or not infringed."

"Licensing relationships are such an integral part of everyday business, that I think there's a lot of interest [from the corporate world in this case]," said Astrid R. Spain, an attorney with McDermott, Will & Emery in San Diego.

A Google search of "MedImmune v. Genentech" provides more than 13,000 hits. Cornell Law School has written a memo on it, dozens of patent-attorney bloggers have opined about it, and at least 16 groups have filed briefs on the case with the high court.

Then there's the interest of the justices. Of the 8,000 or so petitions filed with the court each term, just 100 cases are taken on. But over the past year, justices have agreed to hear more intellectual property cases than they have in decades.

MedImmune's case made the cut - which means at least four of the nine justices selected it "as being of such importance that the Supreme Court must resolve the legal issues" - for several reasons, experts say.

It asks for an interpretation of the U.S. Constitution and federal law. And experts say it has the potential to shift the power between patent-holders and those who want to license protected intellectual property by making it easier to challenge patents in court.

The case also brings up dueling concerns. One, that weakening the rights of patent-holders would make people less likely to innovate. The other that strengthening the rights of those who would question patents might also spur innovation by others and help wipe out so-called bad patents.

In 2001, Genentech, which is based in San Francisco, said MedImmune was infringing on one of its patents by making Synagis, a monoclonal antibody treatment administered to premature infants. The drug is MedImmune's No. 1 breadwinner, worth more than $1 billion last year.

MedImmune says it wasn't infringing on the patent, which it also claims is invalid and unenforceable. But, the Gaithersburg company didn't want to risk being sued, so it signed a licensing agreement and began paying royalties "under protest," according to a filing with the court.

In 2003 "with demand for Synagis growing and payments to Genentech correspondingly rising," according to a court filing, MedImmune sued its competitor in a California U.S. District Court over the alleged bad patent.

Then, in 2004, a separate court said licensees "must ... materially breach the agreement ... before bringing suit." The court interprets a requirement that "actual controversy" exist to file suit as meaning breaking the contract and not paying.

That was essentially the end for MedImmune's suit. The District Court dismissed the case, and the decision was upheld on appeal. The company's last chance at reopening the issue now rests with the Supreme Court.

Patent attorneys said if the court sides with MedImmune, it could decrease the number of corporate licensing deals.

If the court sides with Genentech, the status quo will be maintained, at the expense of encouraging entities to challenge bad patents, something the courts have long supported.

The justices seemed mindful of the balancing act yesterday, asking questions of attorneys for MedImmune, Genentech and the federal government. Federal lawyers sided with MedImmune, claiming the company could sue because it was paying for something it shouldn't have to.

The justices asked the lawyers if companies could write contracts in such a way as to preserve a patent's power, perhaps by asking others to promise not to sue.

"We're trying to see how far you want our ruling to push your argument," Chief Justice John G. Roberts said to MedImmune's attorney, who - like others - did not answer the hypothetical line of questioning.

After the arguments, MedImmune Chief Executive Officer David M. Mott deferred questions to his company's general counsel William Bertrand as he left the court.

"It's hard to tell," Bertrand said about the case. "[The justices] asked a lot of questions from both sides. We remain optimistic that we'll prevail, but it is litigation after all."

tricia.bishop@baltsun.com

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