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Patent litigation could explode in the wake of the Supreme Court’s ruling Tuesday in a closely watched dispute over patent validity between two biotechnology firms. The Court, by an 8-1 vote, reinstated a lawsuit by MedImmune challenging a Genentech patent related to Synagis, a popular drug for treatment of respiratory disease in children. The opinion in MedImmune v. Genentech, written by Justice Antonin Scalia, says patent licensees no longer have to breach the license in order to have standing to challenge the patent that they dispute. Patent lawyers say the ruling could lead to a flurry of challenges to existing patents. “It’s a rare patent where you can’t find something to challenge. There will be an explosion in litigation by these licensees,” says Jim Badke, a partner at Ropes & Gray. “Companies can have their cake and eat it too.” The Jan. 9 ruling overturns a decision by the U.S. Court of Appeals for the Federal Circuit, which since 2004 had held that a breach — such as ceasing royalty payments — was necessary in order to establish the “case or controversy” required to challenge the patent. Critics of the Federal Circuit’s doctrine said it discouraged challenges against invalid patents, because breaking a license agreement can be risky. Such a breach can prompt the patent holder to retaliate by suing for infringement and seeking an injunction against further sales of the product, along with treble damages. Now a licensee can challenge a patent while still honoring it and paying royalties — as MedImmune did in the case before the Supreme Court — and patent challenges will be safer and easier to file without fear of retaliation. In overturning the Federal Circuit’s ruling, Scalia wrote that the dispute leading up to the patent challenge was a real and “lively” controversy that was sufficient to trigger a challenge to the patent’s validity, even if the royalties were still being paid. Badke, who worked on the case for MedImmune at an earlier stage, says that in the long run, the ruling will help clear out invalid patents that impede innovations in areas like biotech and software. But the decision also introduces more uncertainty into the status of patents, says George Best, senior counsel at Foley & Lardner. Under the old rules, a licensing agreement amounted to an insurance policy against litigation over patent validity or infringement. But now, he says, “unhappy licensees” can challenge patents that both parties previously thought were settled and protected by the license agreement. “By allowing licensees that are taking full advantage of the benefits of the license, including immunity from a patent infringement lawsuit, to challenge the patents in the agreement, patentees lose the quid pro quo in the arrangement,” says Raymond Van Dyke of Nixon Peabody. “Countless�licensed patents�are now potentially open to a new attack from even good licensees. To the IP community, this is yet another curtailment of the strength of patent rights.” The decision also represents another bad day for the Federal Circuit, which handles patent appeals and is on a long-term losing streak at the Supreme Court. Several analysts on Tuesday said the ruling does not bode well for KSR International v. Teleflex, the other Federal Circuit patent ruling that is under challenge before the Court this term, involving the test for determining whether an innovation is so obvious that it does not deserve patent protection.
Tony Mauro can be contacted at [email protected].

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