MedImmune V. Genentech: A Game-Theoretic Analysis of the Supreme Court's Continued Assault on the Patentee

Abstract Introduction I. Background A. The Federal Circuit's Reasonable Apprehension Standard B. MedImmune, Inc. v. Genentech, Inc C. Federal Circuit's Response to MedImmune 1. SanDisk Corp. v. ST Microelectronics, Inc 2. Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceutical Corp II. Model A. Introduction B. Assumptions C. The Players D. Strategies and Pay-Offs 1. Patentee a. Do Nothing b. Challenge 2. Licensee a. Do Nothing b. Challenge E. Bi-Matrix III. ANALYSIS A. Probability of Invalidity is Zero Percent B. Probability of Invalidity is Ten Percent C. Probability of Invalidity is Fifty Percent D. Probability of Invalidity is Seventy-five Percent E. Probability of Invalidity is One-hundred Percent F. Summary of the Model Conclusion INTRODUCTION In 1982, with the Federal Courts Improvement Act, Congress created the Court of Appeals for the Federal Circuit. The Federal Circuit was created, in part, as a response to the Supreme Court's neglect of the patent field. (1) Thus, one can say it was designed to give life to patent law by serving as an expert, specialized court that provides competency and unity to national patent law. Initially, the Supreme Court's withdrawal became even more evident after the creation of the Federal Circuit. This caused one author to declare in 2001 that the "Federal Circuit ... has become the de facto supreme court of patents." (2) Things changed in 2001. (3) The Supreme Court began to grant certiorari to an exceedingly larger amount of patent cases. In the nineteen years of the Federal Circuit's life before 2001, the Supreme Court granted certiorari to only eleven patent cases (an average of .58 cases per term), which addressed substantive issues of patent law. From 2001 to 2011, almost half the time, the Supreme Court will have decided twelve substantive patent cases (an average of 1.3 cases per term). (4) These decisions have been largely considered anti-patentee. (5) Therefore, one could say that if the Federal Circuit gives life to the patentee, the Supreme Court is where the patentee goes to die. Part of this trend was the Supreme Court's decision in MedImmune Inc. v. Genentech, Inc., (6) which, in an eight-to-one decision, made it easier for patent licensees to challenge the validity of a patent it is licensing. (7) The Court held that a licensee does not have to break the license agreement and risk being assessed breach of contract damages before filing a declaratory judgment action. (8) It reasoned that an Article Ill controversy exists, with regards to a declaratory judgment action, when "the facts alleged, under all the circumstances, show there is a substantial controversy between the parties having adverse legal interest, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." (9) Previously, the Court of Appeals for the Federal Circuit had articulated a more stringent standard for declaratory judgment actions involving patent claims: whether there was a reasonable apprehension of suit (RAS). (10) Under the RAS test, there must be (1) action(s) by the patent holder, which gives rise to a reasonable apprehension of an infringement suit against the declaratory judgment plaintiffs; and (2) action(s) by the declaratory judgment plaintiff that could constitute infringement. In sum, the Supreme Court stomped out the RAS doctrine in favor of a lesser standard. The purpose of this Comment will be to examine the effects of MedImmune on both the patentee and licensee by deploying a game theoretic model. By doing so, this Comment seeks to shed light on when and how MedImmune affects the relationship of a licensee and a patentee by analyzing the landscape of the parties' respective strategic concerns. …