## United States Court of Appeals for the Federal Circuit

04-1499

MEDIMMUNE, INC., Plaintiff-Appellant,

v.

CENTOCOR, INC., Defendant-Appellee, and THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK and THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, Defendants-Appellees.

Harvey Kurzweil , Dewey Ballantine LLP, of New York, New York, argued for plaintiff-appellant. With him on the brief were Aldo A. Badini and Henry J. Ricardo . Of counsel on the brief was Elliot M. Olstein , Carella Byrne Bain Gilf illan Cecchi Stewart & Olstein, of Roseland, New Jersey. Teresa M. Corbin , Howrey Simon Arnold & White, LLP, of San Francisco, of Los Angeles, California, argued for defendants- appellees. With her on the brief was Jennifer A. Sklenar . Of counsel was Jayna R. Whitt , of Menlo Park, Californi a. Of counsel on the brief were John C. Dougherty , Natalie F. Zaidman , and Sonia Cho , DLA Piper Rudnick Gray Cary US LLP, of Ba ltimore, Maryland. Appealed from: United States Distric t Court for the District of Maryland Judge Alexander Williams, Jr.

## United States Court of Appeals for the Federal Circuit

04-1499 MEDIMMUNE, INC., Plaintiff-Appellant,

v. CENTOCOR, INC., Defendant-Appellee, and THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK and THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, Defendants-Appellees.

__________________________ DECIDED: June 1, 2005

__________________________ Before SCHALL, BRYSON, and GAJARSA, Circuit Judges

. SCHALL, Circuit Judge

. MedImmune, Inc. (“MedImmune”) appeals from the final decision of the United States District Court for the District of Maryl and that dismissed, for lack of subject matter jurisdiction, MedImmune’s declaratory judgment action against Centocor, Inc. (“Centocor”), the trustees of Columbia Univer sity in New York Cit y, and the Board of Trustees of the Leland Stanford Junior University in Californi a. In its suit, MedImmunesought to have U.S. Patent No. 5,807,715 (“the ’715 patent”) declared inv a lid and/or unenforceable. The c ourt dismissed the ac tion after it determined that MedImmune had failed to establish that an actual contro versy existed between it and Centocor, as required under the Declar atory Judgment Act, 28 U.S.C. § 2201(a). MedImmune, Inc. v. Centocor, Inc. , No. AW-02-1135 (D. Md. June 17, 2004). We affirm. BACKGROUND
I. The ’715 patent is titl ed “Methods and Transformed Mammalian Lymphocytic Cells for Producing Functional Antigen-Bi nding Protein Including Chimeric Immunoglobulin and Fragments. ” Columbia University and Leland Stanf ord Junior University are the assignees of the ’715 patent. Centocor is the exc l usive licensee of the patent, with the right to s ublicense the patent to others. The ’715 patent issued in September of 1998. In a M a y 1999 let t er, Centocor offered MedImmune a sublicense under t he patent t o cover M edImmune’s Synagis ® product. In August of 1999, MedImmune res ponded to Centocor’s letter. In its response, MedImmune stated t hat it did not agree that Synagis® was cover e d by the ’715 patent , and it indicated that i t would not take a license. In May of 2000, represent atives from Centocor and MedImmune began lic ense negotiations. The negotiations spanned seve ral months. In these negotiations, MedImmune took the position that Synagis ® did not infringe the ’715 patent, that the patent was invalid and, alter natively, that MedImmune c ould design around the ’715 patent. MedImmune claims t hat “facing mounting pressu re and fearing an imminent infringement suit,” it finally concluded a s ublic ense agreement with Cent ocor. The

04-1499 2agreement was executed on December 29, 2000. Thereafter, MedImmune began paying royalties on Synagis® under the agr eem ent. It is undisputed that MedImmune continues to make timely royalty payments and is not otherwise in breach of the licens e agreement. After concluding the license agreement, Me dImmune asserted to Centocor that it did not infringe the ’715 patent and that the patent was inva lid and/or unenfor ceable. I n response, Centocor told MedImmune that it expected MedImmune to continue to adhere to its license obligations. II. In April of 2002, MedImmune filed the present declar a tory judgment suit in the District of Maryland, seeking a declaration that it owes no royalties under the licens e agreement with Centocor and t hat the ’715 patent is inva lid and/or unenforceable. Shortly thereafter, Centocor and the universit ies filed what they characterize as a “mirror-image” declaratory judgment suit agai nst MedImmune in t he Norther n District of California. In their suit, Centocor and the univ e rsities alleged that, in view of MedImmune’s suit in Maryland, a case or controversy existed between them and MedImmune. They sought a declaratory ju dgment that the ’715 patent is valid an d enforceable, and that MedImmune’s manufactur e and sale of Synagis® infringes the patent. The Maryland district court granted C entocor and the universities’ motion to dismiss for lack of jurisdiction. Relying on Gen-Probe, Inc. v. Vysis, Inc. , 359 F.3d 1376 (Fed. Cir. 2004), the court det ermined that MedImmune had fa iled to establish that an actual controversy existed betw een it and Centoc or, as required under 28 U.S.C.

04-1499 3§ 2201(a). Centocor and the univers ities’ suit in the Northern District of California was also dismissed, on the ground that there was “no actual cont roversy to satisfy the Declaratory Judgment Act” in light of the Maryland suit. MedImmune timely appeals the decision of the Maryland district court dismissing its suit. We have jurisdiction purs uant to 28 U.S.C. § 1295(a)(1).
ANAL YSIS
I. Whether an ac tual cas e or controversy exists so that a district court may entertain an action for a declaratory judgment of non-infringement and/or i n validity is governed by Federal Circuit law. Minn. Mining & Mfg. Co. v. Norton Co. , 929 F.2d 670, 672 (Fed. Cir. 1991); Goodyear Tire & Rubber Co . v. Releasomers, Inc. , 824 F.2d 953, 954 n.3 (F ed. Cir. 1987). The determination of whether an ac t ual controversy exists under the Declaratory Judgm ent Act in a patent case is a question of law that we review de novo. Vangu ard Research, Inc. v. PEAT, Inc. , 304 F.3d 1249, 1254 (Fed. Cir. 2002). The Declaratory Judgment Act provides t hat “[i]n a case of actual controversy within its jurisdiction . . . [a court] may decla re the rights and other legal relations of any interested party seeking such declaration, w hether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). Paralleling Article III of the Constitution, the Act “requires an actual controversy between the par ties before a federal court may exercise jurisdiction over an action for a declaratory judgment.” Teva Pharms. USA, Inc. v. Pfizer, Inc. , 395 F.3d 1324, 1331 (F ed. Cir. 2005) (quoting EMC Corp. v. Norand Corp. , 89 F.3d 807, 810 (Fed. Cir. 1996)). “Basic ally, the question in each case is whether

04-1499 4the facts alleged, under all t he circumstances, show that there is a substantial controversy, between parties having adver s e le gal int e rests, of sufficient im mediacy and reality to warrant the issuance of a dec laratory judgment.” Md. Cas. Co. v. Pac. Coal & Oil Co. , 312 U.S. 270, 273 (1941). To keep watch over the subtle li ne between an “ abstract question” and “a controversy contemplated by th e Dec l aratory Judgm ent Act,” id

. , an inquir y has been formulated that focuses on the conduct of both the patentee and the accused infringer. When a potential infr inger seek s declaratory relief in the absenc e of a lawsuit by the patentee, there must be bot h (1) a reas onable ap prehension on the part of the declaratory judgment plaintiff that it will f a ce an inf r ingement suit; and (2) present activity by the dec laratory judgment plainti ff which could cons titu te infringement, or concrete steps taken with the int ent to conduct such activity. Teva , 395 F. 3d at 1330; Gen-Probe , 359 F.3d at 1380; E M C Corp. , 89 F.3d at 811. II. As noted above, the district court relied on our decis ion in Gen-Pr obe to dismiss MedImmun e ’s declaratory judgment suit fo r lack of Article III jurisdiction. In Gen-Probe , we considered the case of a licensee in good standing who sou ght a declaratory judgment that it was not in fringing the licensed paten t, and that the lic ensed patent wa s invalid. 359 F.3d at 1377. T h e lic ensee s ought a decl aratory judgment while timely paying roy a lties and r e maining faithful to t he licens e agreement in all other respects. Id.
at 1380.

04-1499 5In holding that there was no ac tual case or controversy for purposes of the Declaratory Judgment Act, we determined that the license, “unless materially breached, obliterated any reasonable appr ehension of a laws uit,” and that once the licensor and licens ee “formed the license, an enforceable covenant not to s ue, the events that led to the formation [of the license] became irrelevant.” Id. at 1381. We agree with the di strict court that Gen-Probe is determinative of this c a se. Any controversy that may have existed bet ween MedImmune and Centocor prior to and during their various negotiations vanished when MedImmune exec uted t he license agreement, which is a covenant by Centocor not to sue. Quite simply, once the lice n se agreement was in place and MedImmune was in complianc e with the terms of the agreement, MedImmune could not be under a reasonable appr ehensi on that i t w o ul d face an infringement suit by Centocor. 1
III. MedImmune does not serious ly dispute that Gen-Probe is virtually on “all fours” with this case. Rather, it c ontends that we should not follow Gen-Probe . Me dImmune argues that Gen-Probe is incons istent with Suprem e Court precedent and with prior Federal Cir cuit precedent. C onsequently, it urges that, as a panel, we are not obligated to follow it. See Atl. Thermoplastics Co . v. Faytex Corp. , 970 F.2d 834, 839 n.2 (Fed. Cir. 1992) (positing that “[a] decision that fails to consi der Supr eme Court precedent

1 MedImmune argues that t he license agreement contem plated that it could institute a declaratory judgment action of invalidity and/or unenforceability with respect to the ’715 patent. This is so, M edImmune asserts, because “the sublicens e agreement contained . . . no agreement not to litigate.” (Br. of Appellant at 22.) This assertion overlooks the fact t hat a licens e is , by its nature, an agreement not to litigate. A lic ensor agrees to receive r o yalties or other con s ideration fr om the licensee in exchange for a covenant not to sue or disturb the licens ee’s activities.

04-1499 6does not control if the court determines t hat the prior panel w ould hav e reached a different conclusion if it had cons idered cont rollin g prec edent”); Newell Cos. v. Kenney Mfg. Co. , 864 F.2d 757, 765 (Fed. Cir. 1988) (“Where ther e is direct conflic t” between two Federal Circuit panel dec isions, “the prec edential decision is the first.”). We do not agree with MedImmune that Gen-Probe is inconsistent with controlling Supr eme Court and Federal Circuit authority. First, MedImmune argues that Gen-Probe is fatally flawe d bec a use it failed to recognize the decision of the Supreme Court in Cardinal Chemical Co. v. Morton International , 508 U. S. 83 (1993). We think, however, that Gen-Probe ’s failure to mention Cardinal Chemical reflects the fact that Cardina l Che m ical was inapposite to Gen-Probe , rather than oversight on the part of the Gen-Probe court. The Suprem e Court stated in Cardinal Chemical that its decision did not concern the jurisdiction of federal district courts: Under its current practice, the Federal Circ u it uniformly declares that the issue of patent validity is “moot” i f it affirms the District Court’s finding of noninfringement and if, as in the us ual case, the dispute between the parties does not extend beyond t he patentee’s particular claim of infringement. That practice, and the issue bef ore us, therefore concern the jurisdiction of an int e rmediate appella te c ourt — not the jurisdiction of either a trial cour t or th is Court

. Id. at 95 (emphasis added). Co nsistent wit h the Court’s st atement of the limited issu e before it in Cardinal Chemical , we have twice rejected the idea that Cardinal Chemic al was meant to alter how a federal trial cour t determines whether a case or controversy exists over a declaratory judgment suit. See Super Sack Mfg. Corp. v. Chase Packaging Corp. , 57 F.3d 1054, 1060 (Fed. Cir. 1995) ( Cardin al Chemic al “does not revolutioniz e the justiciability of declara tor y judgment actions attacking a patent’s

04-1499 7validity. . . and nothing in Cardin al undermines our decisions on declaratory justiciabilit y at the trial court level.”); Lamb-Weston, Inc. v. McCain Foods, Ltd. , 78 F.3d 540, 545 (Fed. Cir. 1996) (“The Supr eme Court’s decision in Cardinal Chemical is limited to the specific facts of that case.”). MedImmune also argues that Gen-Probe is inco nsistent with the Supr eme Court’s rejection of the doctrine of licensee estoppel in Lear, Inc. v. Adkins , 395 U.S. 653 (1969) . This argument was addressed and rejected in Gen-Probe , 359 F.3d at 1381, and we lik ewis e reject it here. Although Lear held that a licensee is not estopped from challenging the va lidity of a licens ed paten t, 395 U.S. at 670-71, “ Lear . . . left unresolved the question when a f ederal c o urt has jurisdiction of a licensee ’s claim of patent inva lid ity.” C.R. Bard, Inc. v. Schwartz , 716 F.2d 874, 878 (Fed. Cir. 1983). In other words, the fact that a party is not estopped from making an argument does not mean that federal courts ha ve jurisdic tion to entert ain that argument in all circumstances. Second, M edImmune urges that Gen-Probe is at odds with three decisions o f this
court: C.R. Bard , Cordis Corp. v. Medtronic, Inc. , 780 F.2d 991 (Fed. Cir. 1985), and Intermedics Infusaid, Inc. v. Regent s of the University of Minnesota , 804 F.2d 129, 133 (Fed. Cir. 1986). We do not agree. C.R. Bard noted that complete termination of the license may not be required for a licensee to sustain a declaratory judgment suit. 716 F.2d at 880. It does not follo w from that proposition, however, that all lic ensees in good standing can challenge the validity of the licens ed patent at their discret ion, without regard to whether an actual controversy exists wit h the licens or.

04-1499 8Specifically , in determining that ther e was a case or controversy supporting jurisdiction over a licensee’s declaratory judgm ent suit for, among other things, invalidity of the licensed patent, the C.R. Bard court found two facts to be important. First, the licens ee had ceased paying royalt ies. Although this fact di d not itself terminate the licens e, it c onstituted “a material breach of t he agreem ent that, under the ver y terms of the agreement, enabled [the licensor] to terminate the agreement.” Id. at 881. Second, the licenso r had shown a willingn ess to enforce its rights by filing a state court action to recover the royalty payments. Id. at 881. This court then applied the “reasonable apprehens ion” test to these facts, determining that t he licens e e had a reasonable apprehens ion of suit. Id. By contrast, in this case MedImm une can have no reasonab le apprehension of suit—indeed, it can have no apprehension of su it at all—because there is nothing for which Cent ocor can s ue MedImmune. It is undis puted that MedImmune continues to pay timely royalties for Synagis® and is not otherwise in breach of the agreement. The fact that Centocor did sue MedI mmune, after MedImmune filed its declaratory judgment suit, does not alter the analys is. The presence or absence of a case or controversy is based on facts at the time t he complaint wa s filed. See, e.g. , GAF Bldg. Materials Corp. v. Elk Corp . of Dallas , 90 F.3d 479, 483 (F ed. Cir. 1996) (“Later events may not create jurisdiction where none ex isted at the time of filing. Ra ther, the presence or absence of jurisdiction must be determined on the facts existing at the time the complaint under consideration was filed.” (c itations omitted)). MedImmune’s relianc e on Cord is also is m i splac ed. Cordis did not address the question of whether there is a case or contro versy sufficient to s upport subject matter

04-1499 9jurisdiction over a lic ensee’s suit for a dec laratory judgment of patent invalidity where the licens ee is not in br each of the lic ense agreement. See ge nerally 780 F. 2d at 993- 95. In Cordis , the licensee sought a dec laration that t he licensed patent was invalid. Id. at 993. However, the li censee also s ought to pay royalties into escrow pendente lite , and to enjoin the lic ensor from canceling the licens e agreement. Id. It was these latter two reques ts, granted by the dist rict court, that were before this court on appeal. Se e id. 2 MedImmune points to Intermed i cs for the proposition that when a licen see wishes to maintain its license, it must c onti nue to pay royalties to the licensor. See 804 F.2d 129, 133 (citing Cordis ). That proposition, however , does not explain how ther e could be a case or controversy where, as here, the licensee is fully pay ing royalties directly to the licens or and is maintaining the license. IV. Finally, MedImmune urges us—assuming we conclude that we are bound by Gen-Probe —to recommend to the full c ourt that it ac t en banc to overrule that decis ion. Although a three-judge panel of this court ma y not over rule a prec edential decision of a previous panel, see, e.g. , Tate Access Floors, Inc. v. In terface Architectural Res., Inc. , 279 F.3d 1357, 1366 (Fed. Cir. 2002), it ma y recommend en banc review of the decision. See Feder al Circuit Rule 35(a)(2) (2004). We decline to do that in this case. Most importantly, as we have just explained, Gen-Probe is consisten t with both Supreme Court precedent and with prior precedent of this court.

2 These issues were before the co urt based upon 28 U. S.C. §§ 1292(a) & (c), which confer jurisdiction upon this court to hear appeals from orders granting injunctions.

04-1499 10Beyond that, we reject MedImmune’s ar gument that Gen-Probe should be overruled because it creates a “Hobson’s choi ce.” Specifically, MedImmune argues that it must “choose between pay ing tribute to a suspect patent and tying its fate to the uncertainty of patent litigation,” with all of the attendant risks of suc h litigation. (Reply Br. of Appellant, at 2.) MedImm une’s argument proves too much. Every potential infringer who is threatened wit h suit, or w ho is sued, for patent infringement must decide whether to settle or fight. In short, the “Hobson ’s c hoice” about which MedImmune complains arises not from Gen-Probe , but from Article III’s requirem ent that, before a district court exercis e s jurisdiction in a declaratory judgment sui t, there must be an actual controversy between the parties . For the reasons set forth above, such a c ontroversy does not exist here. CONCLUS ION Because the district court did not e rr in ruling that no Article III case or controversy existed t o support MedImmune’s declar a tory judgment suit, it properly dismissed the suit for l a ck of jurisdiction. Ther efore, the judgment of the distri ct court is AFFIRMED

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