Supreme Court makes it easier to dispute patents

By allowing a biotech firm to fight a patent deal, the court opens the door to many other cases.

Published January 10, 2007

WASHINGTON - The Supreme Court made it easier Tuesday to challenge patents, bolstering arguments by some in business that they are too readily granted and can stymie new drugs and other innovations.

In an 8-1 decision, the court said that biotech firm MedImmune Inc. may pursue a court case in a patent dispute over its childhood respiratory drug Synagis.

MedImmune, based in Gaithersburg, Md., went to court to challenge a patent agreement with Genentech Inc. Genentech argued that the case should be dismissed because MedImmune had agreed to make royalty payments, although under protest.

The decision "opens the courthouse door and lets people come in and possibly allows them to challenge, but it also leaves many questions unanswered," said Washington lawyer George C. Best. The outcome, he said, will depend on how lower courts interpret MedImmune's contract with Genentech.

Corporations that are major patent holders backed Genentech, saying that creating a unilateral right for a licensee like MedImmune to challenge a licensed patent will destabilize thousands of existing patent settlements and license agreements.

Twenty years ago, the government issued 77,000 patents a year; for the 12 months ending Sept. 30, the number was 183,000. The volume of patent applications has exploded in the past two decades - from 131,000 in 1986 to 443,000 last year.

The debate over patents also has been fueled by the Internet explosion and questions over whether some patents for e-commerce and software should have been granted.

Justice Antonin Scalia, writing for the majority in Tuesday's case, said that MedImmune had satisfied the legal requirement that there was in fact a dispute, despite the continued royalty payments.

MedImmune "assuredly did contend that it had no obligation under the license to pay royalties on an invalid patent," Scalia wrote. "Promising to pay royalties on patents that have not been held invalid does not amount to a promise" not to contest the matter.

In dissent, Justice Clarence Thomas said that by continuing to make royalty payments, MedImmune had no cause of action against Genentech.

MedImmune has said it could not take the risk of violating its agreement with Genentech, because an injunction blocking sales of Synagis, one of MedImmune's top sellers, could put the company out of business. Synagis accounted for 70 percent of the company's sales in the third quarter of 2006. After the ruling, MedImmune said it would "vigorously" pursue its case. Genentech said it remains confident in the validity of the patent.