DECLARATORY JUDGMENT ACTIONS AND PATENT LICENSING

Patent litigation is expensive.  It can easily exceed $100,000.  It is likely to be significantly more.

Recently, the US Supreme Court MedImmune v. Genentech, Inc. changed the ground rules with govern when a party may initiate a declaratory judgment action.  Prior law required that the initiating party have a “reasonable apprehension” of suit.  Now, if the initiating party can demonstration that a patentee (patent holder) asserts rights based upon the identified ongoing or planned activity of initiating party and  the initiating party contends it has the right to engage in the activity without a license to the patent holder’s patent, then the initiating party can file (initiate) a law suit (declaratory judgment) against the patent holder.

The Court of Appeals for the Federal Circuit, the final stop for most patent disputes, recently applied the Supreme Court decision and remanded (returned) a District Court decision that had refused to allow a declaratory judgment action to be commenced.

A very practical outcome of the change in ground rules is that a patent hold may not simply approach a third party and attempt licensing discussions without triggering a declaratory judgment.  A promise not to sue in not sufficient.  

Note this same case was discussed in the recent article entitled Cease and Desist.

April 28, 2007