	Introduction

In MedImmune v. Genentech , the U.S. Supreme Court held that, at least in instances where the licensor-patentee has implicitly or explicitly threatened to sue for patent infringement if the licensee did not pay the demanded royalties, a patent licensee need not terminate or breach its license agreement before it may bring suit to obtain a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed. Subject Matter Jurisdiction and the Declaratory Judgment Act

Under Article III of the U.S. Constitution, the jurisdiction of federal courts is limited to actual, ongoing cases and controversies. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) had attempted to articulate such a test. The district court explained that it was obliged to dismiss the case due to the controlling precedent of the Federal Circuit's Gen-Probe Inc. v. Vysis, Inc. decision in 2004, which had held that "a patent licensee in good standing cannot establish an Article III case or controversy with regard to validity, enforceability, or scope of the patent because the license agreement 'obliterates any reasonable apprehension' that the licensee will be sued for infringement." § 2201(a), require a patent licensee to refuse to pay royalties and commit material breach of the license agreement before suing to declare the patent invalid, unenforceable or not infringed? MedImmune's payment of royalties under such "coercive" circumstances does not eliminate jurisdiction of a court to entertain a declaratory judgment action, Justice Scalia stated. Justice Scalia cautioned that the Supreme Court's decision in this case is limited to the procedural issue of whether federal courts have subject matter jurisdiction over these types of declaratory judgment actions brought by nonrepudiating licensees; the Court declined, however, to express an opinion on the merits of the arguments made by the licensor-patentee for denying declaratory relief to the licensee.
According to earlier precedent of the U.S. Court of Appeals for the Federal Circuit, a suit filed by a patent licensee in good standing, seeking to declare the underlying patent invalid, unenforceable, or not infringed, is non-justiciable under the Declaratory Judgment Act because there is no actual controversy between the licensee and licensor. The Federal Circuit had asserted that a license agreement eliminates any "reasonable apprehension" that the nonrepudiating licensee will be sued for infringement and thus federal courts must dismiss such declaratory judgment actions for lack of subject matter jurisdiction under Article III of the U.S. Constitution.
In MedImmune v. Genentech (549 U.S. __, No. 05-608, decided January 9, 2007), the U.S. Supreme Court rejected the jurisdictional rule adopted by the Federal Circuit, holding to the contrary that a patent licensee need not materially breach its license agreement (for example, by ceasing royalty payments to the patent holder) before it may bring suit to obtain a judgment that the underlying patent is invalid, unenforceable, or not infringed, in situations where the licensor-patentee has implicitly or explicitly threatened to sue for patent infringement if the licensee did not pay the demanded royalties. Payment of royalties under such "coercive" circumstances does not eliminate the jurisdiction of the federal courts to entertain declaratory judgment actions from patent licensees in good standing, the Court explained. Notably, this decision is limited to the procedural issue of whether federal courts have subject matter jurisdiction over these types of claims; the Supreme Court declined to express an opinion on the merits of the arguments made by the licensor-patentee in the case for denying declaratory relief to the licensee.
This report provides a summary and analysis of the Supreme Court's opinion in MedImmune and discusses its potential ramifications on patent law.