In a dispute over royalty payments, the US Court of Appeals for the Federal Circuit held that a patent holder lacked standing under the Declaratory Judgment Act to challenge its own patent’s validity to expedite the termination of its royalty payments. AbbVie Inc. v. MedImmune Ltd., Case No. 17-1689 (Fed. Cir., Feb. 5, 2018) (Dyk, J).

In 1995, AbbVie and MedImmune’s predecessors entered into an agreement to develop and license adalimumab, the active ingredient in Humira. The agreement provided that AbbVie’s predecessor would pay royalties on the sale of certain products until (1) the last of a number of certain patents expired, or (2) 15 years after the first commercial sale of a certain product, whichever was later. The last patent was set to expire on June 19, 2018, and the first commercial sale was made 15 years before January 2018 (in January 2003).

In June 2016, AbbVie sought a declaration that the patent set to expire in 2018 was invalid. AbbVie believed that a declaration of invalidity would act as an “expiration” of the patent and thereby end AbbVie’s obligation to pay royalties in January 2018 instead of in June 2018. However, AbbVie did not seek a declaration that it would no longer need to pay royalties if the patent was declared invalid. The district court found that AbbVie lacked standing to bring the action because it did not practice the patent and therefore was not subject to a potential infringement claim. The district court also held that it would not exercise jurisdiction over the action, finding that deciding the patent’s validity would not necessarily end the dispute over AbbVie’s royalty payments. AbbVie appealed.

The Federal Circuit affirmed the district court’s conclusion but rejected its reasoning. The Court noted that standing to bring declaratory actions is examined “by looking to the mirror image suit the declaratory defendant might bring.” While the district court treated the “mirror image” of this lawsuit as an infringement suit, the Federal Circuit explained that the proper mirror image was actually a contractual dispute over the agreement to pay royalties. Citing to ample Supreme Court of the United States and Federal Circuit precedent, the Court found that contractual disputes can confer declaratory judgment jurisdiction. 

Nevertheless, the Federal Circuit found that even if the patent was found invalid, the contractual dispute between the parties would not have been resolved, because AbbVie did not seek a declaration regarding its contractual obligations. The Court reasoned that under the 2007 Supreme Court decision in MedImmune v. Genentech (IP Update, Vol. 10, No. 1), a litigant may not use a declaratory judgment action to obtain piecemeal adjudication of defenses that would not finally and conclusively resolve the underlying controversy. Applying that principle here, the Court held that it was an “open question” whether invalidation of the patent alone would be tantamount to its expiration for purposes of the parties’ agreement. Without a resolution to this question, the parties’ contractual dispute would persist, and AbbVie therefore lacked standing to bring its declaratory judgment on invalidity.