The United States Patent and Trademark Office ("PTO") has rejected Genentech’s patent covering methods for making monoclonal antibiodies, which patent also was the subject of the recent Supreme Court Decision in MedImmune, Inc. v. Genentech, Inc., No. 05-608, slip op., (U.S. January 9, 2007) (Thomas, J., dissenting), which decided in favor of MedImmune. The PTO’s action is certain to be viewed as yet another MedImmune victory.

The suit to invalidate the patent was brought in 2003 by MedImmune, which had entered into a license agreement with Genentech in 1997 agreeing to pay  royalties to Genentech in order to manufacture, use, or sell its monoclonal antibody therapy Synagis.  Synagis is a pediatric treatment for a specific type of respiratory virus.  The San Francisco Business Journal reported that the patent is projected to generate $120 million in revenue in 2007, up from $105 million in 2006, and that it is set to expire in 2018.  

Genentech, of course, plans to respond to the PTO’s action.  The patent will remain valid and enforceable during the appeals process, which could take several years to complete.

As previously stated, the PTO’s decision follows the recent Supreme Court Decision in MedImmune, Inc. v. Genentech, Inc., which has been described by many as a victory for licensees that will alter the balance of power between licensors and licensees.  That Decision decided two separate issues.  First, the Court held that petitioners raised and preserved a contract claim pertaining to the license agreement negotiated between the parties that, because of patent invalidity, unenforceability, and noninfringement, no royalties are owed.  Second, the Court held that the Federal Circuit erred in affirming the dismissal of the declaratory judgment action on the royalty issue for lack of subject matter jurisdiction.

It remains to be seen what will be the long-term impact of the MedImmune decision.  Certainly, it grants a licensee the ability to pay a royalty under a patent and to subsequently claim that the patent is invalid, but will the impact go beyond this?

According to attorneys Charles S. Barquist and Jason A. Crotty, the answer is yes.   Barquist and Crotty wrote as follows:

The MedImmune decision will likely have significant ramifications for licensee/licensor relationships, the number of patent suits and the terms found in license agreements. MedImmune may cause licensors to demand higher royalties because the incentive to compromise is reduced if the licensor knows that the license is not a final resolution, but rather that the licensee can simply turn around and file a declaratory judgment action challenging the validity of the patent or whether it is used, or infringed, at all.

On the other hand, licensees may be more willing to enter into patent licenses, since doing so will not limit their ability to challenge a licensed patent. Licensees may view licenses as a kind of insurance policy, giving them downside protection by limiting the scope of their liability if they unsuccessfully challenge a licensed patent. . . . The decision may also increase the number of declaratory judgment actions challenging the validity of patents, particularly in areas such as biotechnology where patents may be particularly vulnerable to written description and enablement challenges under 35 U.S.C. §112. Indeed, the patent at issue in MedImmune is a biotechnology patent.

Regardless of how these longer term issues unfold, there is little doubt that MedImmune has scored two clear victories against Genentech.  Genentech can now only hope for a better outcome in Round 3 with its appeal of the PTO action.