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Jan 15, 2007
 |  BioCentury  |  Politics, Policy & Law

More 'pay and sue' expected

Last week's Supreme Court decision in MedImmune Inc. v. Genentech Inc. gave licensees power to challenge patents without putting themselves in jeopardy of infringement. But according to intellectual property attorneys, the ruling also is likely to make patent owners more reluctant to license technologies, and lead to higher fees for those that are granted as licensors seek compensation for the newly created risk of invalidity lawsuits.

The Supreme Court decision overturned a ruling by the U.S. Court of Appeals for the Federal Circuit (CAFC) - and the long-standing assumptions of most professionals involved with IP licensing - that paying royalties under a patent license precludes a company from challenging the validity of the patent.

The ruling thus strips away one reason for granting a license - to insulate the IP owner from patent challenges - and patent specialists expect the decision to stimulate lawsuits by companies seeking to extricate themselves from royalty commitments. As a result, licensors likely will demand better terms, particularly upfront fees, to compensate for an increased exposure to such challenges.

MedImmune (Gaithersburg, Md.) brought the suit as part of its effort to get out of a commitment to pay Genentech royalties on sales of MEDI's Synagis palivizumab vaccine for respiratory syncytial virus (RSV). DNA (South San Francisco, Calif.) claims production of Synagis is covered by its Cabilly II patent on antibody synthesis technology (U.S. Patent No. 6,331,415) (see BioCentury, Oct. 9, 2006).

MEDI argued that DNA essentially bullied it into agreeing in 2001 to pay royalties on Cabilly II...

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