Medimmune, Microsoft, and KSR: the United States Supreme Court in 2007 tips the balance in favor of innovation in patent cases, and thrice reverses the Federal Circuit.

AuthorMota, Sue Ann


"The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (1) Pursuant to this power, Congress enacted the first patent act in 1790. (2) The Patent Act of 1952 now allows an inventor to obtain a patent for "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." (3) A U.S. patent grants the inventor the exclusive right to make, use, or sell the patented item, (4) grants remedies for infringement including an injunction, (5) damages which may be trebled, (6) and attorneys' fees. (7) Thus, a patent grants a valuable property right to the inventor, because during the patent term of twenty years from the filing date of the patent application, (8) no one else may make, use or sell the patented invention. (9)

The Court of Appeals for the Federal Circuit has exclusive jurisdiction over patent appeals. (10) In the last few terms, the U.S. Supreme Court has heard several patent-related cases, yet has not affirmed any of these. In 2005, for example, the Supreme Court unanimously held in Merck KGaA v. Integra Life Sciences I, Ltd., (11) that under a Patent Act exemption from infringement, (12) the use of patented compounds in preclinical studies is protected in certain situations, vacating the judgment of the Federal Circuit. (13)

In 2006, the Supreme Court held unanimously in eBay Inc. v. Merc Exchange, LLC (14) that the traditional four-factor test used by courts of equity when awarding injunctive relief also applies to disputes under the Patent Act, vacating and remanding the decision of the Court of Appeals for the Federal Circuit. (15) Also in 2006, in a case that started as a patent case, (16) the Supreme Court again unanimously held in Illinois Tool Works, Inc. v. Independent Ink, Inc. that in a patent tying case the patent does not necessarily confer market power on the patentee. (17) Although the Supreme Court's decision was concerning antitrust law, the Court vacated and remanded the judgment of the U.S. Court of Appeals for the Federal Circuit. (18) Also in 2006, the Supreme Court dismissed a patent case, Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc. (19)

The Court in its 2006 term decided three patent cases and reversed the Court of Appeals for the Federal Circuit in each. This article will examine these three patent cases decided by the U.S. Supreme Court in 2007. First, the Court in January 2007 in MedImmune, Inc. v. Genentech, Inc. decided a patent licensee does not have to breach a license agreement before seeking declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed. (20) The Federal Circuit's judgment was reversed. (21)

On April 30, 2007, the Supreme Court decided both Microsoft Corp. v. AT&T Corp. (22) and KSR International Co. v. Teleflex Inc. (23) In the former, Microsoft was held not to have supplied a component of an invention from the United States that had the possibility of infringing under the Patent Act. (24) In the latter, which "could be one of the most significant business cases of the last decade," (25) the Court unanimously held that the Federal Circuit improperly applied a narrow and rigid approach to the requirement of non-obviousness under the Patent Act, and an expansive and flexible test must be used. (26)

This Article will examine these three patent cases from the Court and their implications. These three decisions will shape the face of patent law for years to come. The balance has been tipped by the Court away from the pro-patent perspective of the Court of Appeals for the Federal Circuit, and towards a pro-innovation approach which is necessary in the fast-paced, high-technology global business environment.


    Genentech is the assignee and owner, with the City of Hope, of U.S. Patent number 4,816,567, the Cabilly I patent, named after its first inventor Shmuel Cabilly. This application was filed in April 1983 and the patent was granted in March 1989 for an invention relating to the field of immunoglobulin production, and to using recombinant techniques to produce immunoglobulins which are analogous to those found in vertebrate systems. (27) Genentech also is the assignee of U.S. Patent number 6,331,415, the Cobilly II patent, filed in June 1988 and granted in December 2001, for a continuation of the Cobilly I patent for an invention relating to processes for producing immunoglobulins which can use one or more vectors. (28)

    MedImmune had a license agreement since 1997 with Genentech under the Cabilly I patent. (29) After the Cabilly II patent was issued in 2001, Genentech advised MedImmune that one of its products, Synagis[R], (30) was covered by the Cabilly II patent and MedImmune owed royalties. In response, MedImmune filed suit for declaratory judgment against Genentech. (31) MedImmune's claims of determination of contractual obligations, patent unenforceability, patent invalidity, and non-infringement of the patent were allowed to go forth against Genentech, and the patent claims could go forward against City of Hope. (32)

    Genentech sought dismissal of all of these claims based on lack of subject matter jurisdiction. (33) The district court cited Article III of the Constitution, which authorizes the federal judiciary to hear cases and controversies. (34) The Declaratory Judgment Act requires an actual controversy between the parties. (35) Federal Circuit precedent was deemed by the district court to be controlling, and dictated that the case be dismissed for lack of subject matter jurisdiction (36) because MedImmune was a licensee in good standing.

    MedImmune appealed, arguing that it met the requirements of the Declaratory Judgment Act, because if it stopped paying royalties, it could be sued. (37) Nonetheless, the Federal Circuit held that the district court did not err. (38) The dissent would have found no jurisdiction and would have transferred the case to the Court of Appeals for the Ninth Circuit. (39)

    The U.S. Supreme Court granted the petition for writ of certiorari (40) to decide whether Article III's limitation on federal court jurisdiction to cases and controversies, (41) as reflected in the Declaratory Judgment Act, (42) requires a patent licensee to terminate or breach the license agreement before seeking a declaratory judgment that the patent is invalid, unforeseeable, or not infringed. (43)

    Justice Scalia, in January 2007, writing for the majority, first observed that there was both a claim of patent invalidity and a contract claim. (44)

    Turning to the jurisdiction issue, the majority stated that the "case of actual controversy" language under the Declaratory Judgment Act refers to cases or controversies under Article III of the Constitution. (45) The Supreme Court observed that there would be an actual controversy if the licensee ceased to make required royalty payments, but if the royalty payments were continued, as in this case, would there be a case or controversy? (46)

    According to Supreme Court precedent, if the government, instead of a private party, threatened action, then a plaintiff would not have to expose himself to liability before bringing suit to challenge the governmental threat. (47) Concerning action by a private party, the Court examined the only Supreme Court precedent on point, Altvater v. Freeman, (48) which held that a licensee's failure to stop paying royalties did not preclude a finding of a case or controversy if the payments were involuntary or coercive. The respondent Genentech argued the common law rule that a party to a contract cannot both "challenge its validity and continue to reap its benefits." (49) The Court stated, however, that "it is hard to see how the common law rule has any application here." (50) According to the Supreme Court, if the respondents were correct that either the licensing agreement or the common law precluded suit, then the respondents would win on the merits, not that jurisdiction is defeated. (51) The merits were left to the lower court on remand. (52) Thus, a petitioner is not required to breach a license to seek declaratory judgment that a patent is invalid, unforeseeable, or non-infringed. (53) The judgment of the Federal Circuit was reversed and the case was remanded. (54)

    The lone dissenter, Justice Thomas, believed that the case in question was not a case or controversy within Article III of the Constitution. (55) MedImmune was a licensee in good standing, and thus it removed any threat of suit. (56)

    MedImmune now allows a licensee in good standing to challenge the validity of the licensed patent. (57) This tips the balance away from so-called patent trolls, who purchase patents solely to enforce them against others, and allows a licensee to challenge the patent's validity while ethically not breaching the license agreement, which is, at least occasionally, forced on the licensee. (58) The merits of the agreement will be reached on remand.


    In a big win for Microsoft, the Supreme Court held on April 30, 2007, in Microsoft Corp. v. AT&T Corp., that Microsoft was not liable for infringing AT&T's patent because Microsoft does not supply components of foreign-made competitors when it exports copies of Windows on master disks and encrypted software from the United States to be installed on foreign computers. (59) This decision, along with its ramifications for the software industry, will be discussed in this section.

    AT&T owns patent number 32,580 (the '580 patent) relating to speech processing, and more particularly to digital speech coding arrangements. (60) In June 2001, AT&T filed suit, alleging that Microsoft directly, contributorily, and willfully both infringed and induced others to infringe claims of this patent, by working, using, offering to sell, or...

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