IP News

Supreme Court Issues Opinion in MedImmune Case

In MedImmune, Inc. v. Genentech, Inc., 549 U.S. __ (2007), the U.S. Supreme Court, in an 8-1 decision, held that Article III jurisdiction existed over a threatened patent licensee's suit seeking a declaration that no royalties were due under the license agreement, even though the licensee continued to make royalty payments under that agreement.

In 1997, petitioner MedImmune entered into a patent license agreement with respondent Genentech, which covered an existing patent and a then-pending patent application. After the pending application issued, Genentech sent MedImmune a letter expressing its belief that MedImmune's Synagis product, a drug used to prevent respiratory tract disease in children, was covered by the patent (the 'Cabilly II patent') and that royalties would soon be due. Even though it believed the Cabilly II patent was invalid and not infringed, MedImmune paid royalties under protest rather than risk trebled damages and filed an action for declaratory judgment. Based upon prior Federal Circuit precedent ' namely the 'reasonable apprehension of imminent suit' test ' the district court dismissed Med-Immune's suit for lack of subject matter jurisdiction. The Federal Circuit affirmed that decision.

The Supreme Court reversed and remanded, ruling that the licensee need not stop paying royalties under the license agreement as a prerequisite to subject matter jurisdiction under Article III. Justice Antonin Scalia, writing for the majority, noted that '[w]here threatened government action is concerned, a plaintiff is not required to expose himself to liability before bringing suit to challenge the basis for the threat' (e.g., the constitutionality of a law threatened to be enforced). While the Court noted that Supreme Court jurisprudence is rare regarding application of the Declaratory Judgment Act to situations in which the plaintiff's self-avoidance of imminent injury is coerced by threatened enforcement action of a private party, lower federal courts have long accepted jurisdiction in such cases. Furthermore, the Court noted that in Altvater v. Freeman, 319 U.S. 359 (1943), the only Supreme Court decision on point, it held that a licensee's failure to cease payment of royalties did not render non-justiciable a dispute over the validity of the patent. While prior Federal Circuit precedent had distinguished Altvater because the licensee in that case was also faced with an injunction from an earlier case, the MedImmune Court reasoned that Altvater never mentioned the threat of prosecution for contempt or other government sanctions. Rather, Altvater acknowledged that the licensees had the option of stopping payments in defiance of the injunction, but explained that the consequences of doing so would be to risk 'actual [and] treble damages in infringement suits.' Furthermore, the Court found unpersuasive Genentech's arguments that: 1) the parties in effect settled this dispute when they entered into the 1997 license agreement, and 2) the common law rule, which provides that a party to a contract cannot at one and the same time challenge its validity and continue to reap its benefits, was applicable. Accordingly, the Court concluded that Article III did not require a plaintiff to risk damages before seeking a declaration of its actively contested legal rights.

Justice Clarence Thomas offered the lone dissent, stating that no Article III jurisdiction existed because MedImmune was a licensee in good standing that had made all necessary royalty payments, thereby depriving Genentech of any cause of action against MedImmune such that MedImmune was not facing suit.

Federal Circuit Denies Standing to Grantee of 'Right to Sue'

In Propat Int'l v. RPost, Inc., Nos. 2006-1222, 1223, 1270, 2007 U.S. App. LEXIS 77 (Fed. Cir. Jan. 4, 2007), the Federal Circuit held that a grantee, who had contracted with a patentee for the right and responsibility to license the patent, to enforce those licensing agreements, and to sue infringers, subject to the patentee's reasonable veto, did not have standing to sue on the patent, even if the patentee were joined in the action. The court reasoned that the patentee's retention of substantial rights in the patent precluded a determination that an assignment had been effected, which would have given the grantee the right to sue. Additionally, the Propat court noted that while an exclusive licensee has a sufficient interest in the patent to have standing to sue so long as the patent owner is joined, the instant agreement was silent as to the grantee's right to practice the patent, exclusive or otherwise. The court therefore opined that the grantee's legal interest, which lacked the important indicia of true ownership, was insufficient to confer standing, regardless of whether the patentee was joined as a party.

No Likelihood of Confusion Exists over Use of Trademarks in Google AdWords Program and Web Site Meta Tags

In J.G. Wentworth, S.S.C. LP v. Settlement Funding LLC, No. 06-597, 2007 U.S. Dist. LEXIS 288 (E.D.Pa. Jan. 4, 2007), the District Court for the Eastern District of Pennsylvania held that as a matter of law, defendant's use of plaintiff's mark through Google's AdWords program and in the keyword meta tags for defendant's Web sites did not constitute actionable trademark infringement under the Lanham Act because such use did not result in a likelihood of confusion by potential consumers.

Plaintiff J.G. Wentworth alleged that defendant had used its trademarks in two ways: 1) through Google's AdWords program; and 2) in the meta tags for defendant's Web sites. More specifically, the plaintiff alleged that the defendant had paid Google for the right to have defendant's Web site appear in the Sponsored Links section whenever a user searched for the words 'J.G. Wentworth' or 'JG Wentworth.' The plaintiff also alleged that defendant had inserted plaintiff's trademarks into its keyword meta tags (which are invisible to Internet users), such that search engines would include a link to defendant's Web site on the search results page whenever users searched for plaintiff's trademarks. The defendant argued that pursuant to Lanham Act requirements, 1) the plaintiff's could not demonstrate that defendant made use of plaintiff's marks to identify the source of goods or services, and 2) no likelihood of confusion exists as a matter of law.

With regard to the 'use' requirement, the court held, amidst a mixed body of precedent, that the defendant's participation in Google's AdWords program and incorporation of plaintiff's keyword meta tags constituted 'use' under the Lanham Act because such activities established an opportunity to reach customers. However, with regard to the likelihood of confusion issue, the court disagreed with the seminal Ninth Circuit decision in Brookfield Commc'ns, Inc. v. West Coast Entm't Corp. and held that defendant's actions did not create even initial interest confusion (where potential purchasers would be misled into an initial interest in the alleged infringer's product or service). The court reasoned that defendant's use of plaintiff's marks did not take users directly to defendant's site; rather 'links to defendant's Web sites always appear as independent and distinct links on the search results page regardless of whether they are generated through Google's AdWords program or search of the keyword meta tags of defendant's website.' Accordingly, the court concluded that potential customers have no opportunity to confuse defendant's services, goods, advertisements, links or Web sites for those of plaintiff.

Matt Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6462.

Supreme Court Issues Opinion in MedImmune Case

In MedImmune, Inc. v. Genentech, Inc. , 549 U.S. __ (2007), the U.S. Supreme Court, in an 8-1 decision, held that Article III jurisdiction existed over a threatened patent licensee's suit seeking a declaration that no royalties were due under the license agreement, even though the licensee continued to make royalty payments under that agreement.

In 1997, petitioner MedImmune entered into a patent license agreement with respondent Genentech, which covered an existing patent and a then-pending patent application. After the pending application issued, Genentech sent MedImmune a letter expressing its belief that MedImmune's Synagis product, a drug used to prevent respiratory tract disease in children, was covered by the patent (the 'Cabilly II patent') and that royalties would soon be due. Even though it believed the Cabilly II patent was invalid and not infringed, MedImmune paid royalties under protest rather than risk trebled damages and filed an action for declaratory judgment. Based upon prior Federal Circuit precedent ' namely the 'reasonable apprehension of imminent suit' test ' the district court dismissed Med-Immune's suit for lack of subject matter jurisdiction. The Federal Circuit affirmed that decision.

The Supreme Court reversed and remanded, ruling that the licensee need not stop paying royalties under the license agreement as a prerequisite to subject matter jurisdiction under Article III. Justice Antonin Scalia, writing for the majority, noted that '[w]here threatened government action is concerned, a plaintiff is not required to expose himself to liability before bringing suit to challenge the basis for the threat' (e.g., the constitutionality of a law threatened to be enforced). While the Court noted that Supreme Court jurisprudence is rare regarding application of the Declaratory Judgment Act to situations in which the plaintiff's self-avoidance of imminent injury is coerced by threatened enforcement action of a private party, lower federal courts have long accepted jurisdiction in such cases. Furthermore, the Court noted that in Altvater v. Freeman , 319 U.S. 359 (1943), the only Supreme Court decision on point, it held that a licensee's failure to cease payment of royalties did not render non-justiciable a dispute over the validity of the patent. While prior Federal Circuit precedent had distinguished Altvater because the licensee in that case was also faced with an injunction from an earlier case, the MedImmune Court reasoned that Altvater never mentioned the threat of prosecution for contempt or other government sanctions. Rather, Altvater acknowledged that the licensees had the option of stopping payments in defiance of the injunction, but explained that the consequences of doing so would be to risk 'actual [and] treble damages in infringement suits.' Furthermore, the Court found unpersuasive Genentech's arguments that: 1) the parties in effect settled this dispute when they entered into the 1997 license agreement, and 2) the common law rule, which provides that a party to a contract cannot at one and the same time challenge its validity and continue to reap its benefits, was applicable. Accordingly, the Court concluded that Article III did not require a plaintiff to risk damages before seeking a declaration of its actively contested legal rights.

Justice Clarence Thomas offered the lone dissent, stating that no Article III jurisdiction existed because MedImmune was a licensee in good standing that had made all necessary royalty payments, thereby depriving Genentech of any cause of action against MedImmune such that MedImmune was not facing suit.

Federal Circuit Denies Standing to Grantee of 'Right to Sue'

In Propat Int'l v. RPost, Inc., Nos. 2006-1222, 1223, 1270, 2007 U.S. App. LEXIS 77 (Fed. Cir. Jan. 4, 2007), the Federal Circuit held that a grantee, who had contracted with a patentee for the right and responsibility to license the patent, to enforce those licensing agreements, and to sue infringers, subject to the patentee's reasonable veto, did not have standing to sue on the patent, even if the patentee were joined in the action. The court reasoned that the patentee's retention of substantial rights in the patent precluded a determination that an assignment had been effected, which would have given the grantee the right to sue. Additionally, the Propat court noted that while an exclusive licensee has a sufficient interest in the patent to have standing to sue so long as the patent owner is joined, the instant agreement was silent as to the grantee's right to practice the patent, exclusive or otherwise. The court therefore opined that the grantee's legal interest, which lacked the important indicia of true ownership, was insufficient to confer standing, regardless of whether the patentee was joined as a party.

No Likelihood of Confusion Exists over Use of Trademarks in Google AdWords Program and Web Site Meta Tags

In J.G. Wentworth, S.S.C. LP v. Settlement Funding LLC, No. 06-597, 2007 U.S. Dist. LEXIS 288 (E.D.Pa. Jan. 4, 2007), the District Court for the Eastern District of Pennsylvania held that as a matter of law, defendant's use of plaintiff's mark through Google's AdWords program and in the keyword meta tags for defendant's Web sites did not constitute actionable trademark infringement under the Lanham Act because such use did not result in a likelihood of confusion by potential consumers.

Plaintiff J.G. Wentworth alleged that defendant had used its trademarks in two ways: 1) through Google's AdWords program; and 2) in the meta tags for defendant's Web sites. More specifically, the plaintiff alleged that the defendant had paid Google for the right to have defendant's Web site appear in the Sponsored Links section whenever a user searched for the words 'J.G. Wentworth' or 'JG Wentworth.' The plaintiff also alleged that defendant had inserted plaintiff's trademarks into its keyword meta tags (which are invisible to Internet users), such that search engines would include a link to defendant's Web site on the search results page whenever users searched for plaintiff's trademarks. The defendant argued that pursuant to Lanham Act requirements, 1) the plaintiff's could not demonstrate that defendant made use of plaintiff's marks to identify the source of goods or services, and 2) no likelihood of confusion exists as a matter of law.

With regard to the 'use' requirement, the court held, amidst a mixed body of precedent, that the defendant's participation in Google's AdWords program and incorporation of plaintiff's keyword meta tags constituted 'use' under the Lanham Act because such activities established an opportunity to reach customers. However, with regard to the likelihood of confusion issue, the court disagreed with the seminal Ninth Circuit decision in Brookfield Commc'ns, Inc. v. West Coast Entm't Corp. and held that defendant's actions did not create even initial interest confusion (where potential purchasers would be misled into an initial interest in the alleged infringer's product or service). The court reasoned that defendant's use of plaintiff's marks did not take users directly to defendant's site; rather 'links to defendant's Web sites always appear as independent and distinct links on the search results page regardless of whether they are generated through Google's AdWords program or search of the keyword meta tags of defendant's website.' Accordingly, the court concluded that potential customers have no opportunity to confuse defendant's services, goods, advertisements, links or Web sites for those of plaintiff.

Matt Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6462.