Prior to the Supreme Court’s decision in Medimmune v. Genentech Inc. (S. Ct. 2007), the federal circuit did not permit a licensee that was paying royalties to the patent owner to challenge the validity of the patent or to assert non-infringement of the patent. Prior to Medimmune, a licensee in such a situation was required to stop making royalty payments and give notice to the patent owner of the basis for the invalidity before bring a declaratory judgment action.
However, the Supreme Court, in Medimmune, stated that the continued payment of royalties under the patent owner’s threat of an infringement action was sufficient to find an actual case or controversey under Article III. The Court analogized the situation to instances when a government action coerces compliance by a private party. Moreover, the Court held that this is very similar to Altvater v. Freeman, 319 US 359 (1943), where the court found jurisdiction to contest the validity of a license agreement. In Altvater, the patent owner had already procured an injunction against the licensee and the court permitted the licensee to bring a suit challenging the validity of the patent.
The Supreme Court focused on the coerced payment of royalties by the patent owner’s threat of an infringement action against the licensee to find an actionable controversey under Article III. It remains to be seen how the Medimmune opinion will be interpreted in the context of a copyright or trademark infringement or any similar claims. It seems that licensees have a new recourse to deal with the threats of willful infringement and even attempt to renegotiate license agreements based on newly discovered information or design around efforts.