Supreme Court: Challenging patents OK
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Supreme Court: Challenging patents OK
Legal News Update | 2007/01/10 08:16

The U.S. Supreme Court sided with MedImmune Inc. yesterday, ruling that the Gaithersburg biotech is allowed to sue over the validity of a patent - even while paying user fees to the patent holder. 

Legal scholars said the decision opens the door for more patent lawsuits across a variety of sectors. And some said it could have a chilling effect on licensing deals - particularly those in key Maryland industries such as biotechnology, which often relies on such collaboration to further drug development.

Previous legal interpretations have said that active licensing contracts between companies essentially act as a "covenant not to sue," according to the American Bar Association. As such, the "actual controversy" required to have a case under the U.S. Constitution doesn't exist.

But in an 8-1 opinion yesterday - with Justice Clarence Thomas dissenting - the court struck down that idea as "mistaken."

"Promising to pay royalties on patents that have not been held invalid does not amount to a promise not to seek a holding of their invalidity," Justice Antonin Scalia wrote on behalf of the majority. (Thomas contended the courts had no jurisdiction over the case because no controversy existed.)

Those who license access to patented technology may now decide it's more in their interests to try to have a suspect patent legally overturned. And patent holders may likely scrutinize potential partners more closely or charge higher fees to cover the risk of a lawsuit.

"Clearly, this will have some impact on how people look at licensing their technology," said Lawrence M. Sung, a professor and director of the Intellectual Property Law Program at University of Maryland School of Law.

"The difficult question is knowing how much of an impact there will be," Sung said.

For MedImmune, the opinion means a lower court will have to consider the company's original 2003 claim filed in California U.S. District Court. The case contends that a patent held by California competitor Genentech Inc. was obtained through improper collusion with a British biotechnology company and amounts to an illegal 12-year extension of an earlier patent.



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