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. The U.S. Court of Appeals for the Federal Circuit had previously adopted a procedural rule that a licensee must stop paying royalties (and thereby materially breach the agreement) before bringing suit to challenge the validity or scope of the licensed patent. The MedImmune decision thus repudiates the Federal Circuit's rule that had resulted in federal courts dismissing such declaratory judgment actions for lack of subject matter jurisdiction. Because the Patent Act expressly provides that "patents shall have the attributes of personal property," patent holders may sell their patent rights in a legal transfer called an "assignment." Alternatively, patent holders may grant others a "license" to exercise one of the five statutory patent rights. A license is not a transfer of ownership of the patent, but rather is the patent holder's permission to another entity to use the invention in a limited way, typically in exchange for periodic royalty payments during the term of the patent. A patent holder may grant to a licensee the right to practice the invention through a contract (typically known as a patent licensing agreement). The terms of the licensing agreement, however, may include conditions upon the grant of rights—for example, restricting the licensee from making the invention but allowing that party to sell it. A licensee that performs an act that exceeds the scope of the license (through a violation of the limitations and conditions of the grant of rights) or refuses to comply with the terms of the license agreement (such as by refusing to pay the required royalties) is potentially liable to the patent holder for breach of contract as well as for patent infringement. Over the term of a patent license agreement, a licensee may wish to challenge the validity of the underlying patent because he or she discovers information suggesting that the patent had been improvidently granted by the U.S. Patent and Trademark Office (for example, if the new information demonstrates that a patent had been issued for an invention that actually fails to meet all of the statutory standards for patentability—novelty, utility, and nonobviousness). By challenging the validity of the underlying patent, the licensee could avoid paying royalties or freely pursue other activities that had previously appeared to come within the scope of the patent. However, prior to 1969, an equitable doctrine known as "licensee estoppel" prevented a patent licensee from denying the validity of the licensed patent; this doctrine was developed by courts that were interested in supporting general principles of contract law, which normally do not permit buyers to repudiate their promises to purchase goods when they become unhappy with the contract made with the sellers, at least without some form of compensation to the other party. In 1969, the Supreme Court overruled the licensee estoppel doctrine by announcing in Lear, Inc. v. Adkins that a license agreement does not bar the licensee from challenging the validity of a patent. The Court explained that "the important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain" trumps "the technical requirements of contract doctrine." Furthermore, other policy considerations weigh in favor of abrogating licensee estoppel: "Licensees may often be the only individuals with enough economic incentive to challenge the patentability of an inventor's discovery. If they are muzzled, the public may continually be required to pay tribute to would-be monopolists without need or justification." Under Article III of the U.S. Constitution, the jurisdiction of federal courts is limited to actual, ongoing cases and controversies. The Declaratory Judgment Act, codified at 28 U.S.C. § 2201, authorizes a federal court to issue a judgment declaring the legal rights of any interested party seeking such declaration, "whether or not further relief is or could be sought," in a "case of actual controversy within its jurisdiction." The U.S. Supreme Court has held that an action for declaratory relief qualifies as a "case or controversy" under Article III; furthermore, it has explained: "[T]he question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." The Court has also stressed that Article III requires that the dispute at issue "must be definite and concrete, touching the legal relations of parties having adverse legal interests"; and that "[i]t must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." However, the Supreme Court has previously opined that "the difference between an abstract question and a 'controversy' contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy." The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) had attempted to articulate such a test. The Federal Circuit developed a two-part test to determine whether there was an "actual controversy" in a declaratory judgment action for patent non-infringement or invalidity: There must be both (1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory judgment plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity. In the Lear case discussed above, the licensee had refused to continue paying royalties and thus was sued by the licensor-patentee for breach of contract. The lower courts in that case had applied the licensee estoppel doctrine to prevent the licensee from raising patent invalidity as a defense to the lawsuit; as previously discussed, the Supreme Court overruled those courts and expressly repudiated the licensee estoppel doctrine. In 2004, the Federal Circuit, in Gen-Probe Inc. v. Vysis, Inc ., opined that the Lear doctrine "does not grant every licensee in every circumstance the right to challenge the validity of the licensed patent." The appellate court in Gen-Probe explained: [A] licensee ... cannot invoke the protection of the Lear doctrine until it (i) actually ceases payment of royalties, and (ii) provides notice to the licensor that the reason for ceasing payment of royalties is because it has deemed the relevant claims to be invalid. This language posits that a licensee must, at a minimum, stop paying royalties (and thereby materially breach the agreement) before bringing suit to challenge the validity or scope of the licensed patent. The question that the U.S. Supreme Court faced in MedImmune v. Genentech was whether a patent licensee in good standing (meaning that the licensee is complying fully with the license terms, meeting royalty payment obligations, and cannot be sued by the licensor-patentee) must terminate or breach its license agreement before it can bring a declaratory judgment action to challenge a demand to pay royalties, on the grounds that the underlying patent is invalid, unenforceable, or not infringed. MedImmune, Inc. is a pharmaceutical company that manufactures a drug, Synagis, used to prevent respiratory tract disease in infants and young children. A year before the U.S. Food and Drug Administration approved Synagis for marketing to consumers, MedImmune had entered into a patent license agreement with the biotechnology company Genentech in 1997, concerning an existing Genentech patent relating to the production of "chimeric antibodies" (the Cabilly I patent) and also a then-pending patent application for "the coexpression of immunoglobulin chains in recombinant host cells." MedImmune agreed to pay royalties on sales of any "licensed products" that it may make or sell which would infringe the claims of either of the patents, if not for the license agreement. In December 2001, Genentech was awarded a patent on the "coexpression" application that was the subject of the licensing agreement (Cabilly II patent). Genentech sent MedImmune a letter, asserting that the Synagis drug came within the scope of the new Cabilly II patent, and that therefore it was a "licensed product" for which royalties are owed under the 1997 license agreement. MedImmune, however, believed the Cabilly II patent invalid and unenforceable or, alternatively, that Synagis did not infringe the patent's claims. Despite this assessment, MedImmune paid the royalties "under protest," because it considered Genentech's letter a threat to sue for patent infringement if it failed to comply with the demands therein. As this drug accounted for more than 80% of the company's revenue from sales since 1999, MedImmune was unwilling to risk the consequences of losing a patent infringement suit, which included being enjoined from selling Synagis. MedImmune initiated a declaratory judgment action against Genentech, seeking a declaration that the patent was invalid and unenforceable. Genentech filed a defense motion pursuant to Federal Rules of Civil Procedure 12(b)(1), asserting that the federal courts lacked Article III jurisdiction over the claim because no "actual controversy" existed between the parties. The U.S. District Court for the Central District of California granted Genentech's motion, dismissing the case for lack of subject matter jurisdiction.