 United States Court of Appeals for the Federal Circuit


                                         04-1499



                                   MEDIMMUNE, INC.,

                                                       Plaintiff-Appellant,

                                            v.


                                   CENTOCOR, INC.,

                                                       Defendant-Appellee,

                                           and

                   THE TRUSTEES OF COLUMBIA UNIVERSITY IN
                            THE CITY OF NEW YORK
                      and THE BOARD OF TRUSTEES OF THE
                     LELAND STANFORD JUNIOR UNIVERSITY,

                                                       Defendants-Appellees.


        Harvey Kurzweil, Dewey Ballantine LLP, of New York, New York, argued for
plaintiff-appellant. With him on the brief were Aldo A. Badini and Henry J. Ricardo. Of
counsel on the brief was Elliot M. Olstein, Carella Byrne Bain Gilfillan Cecchi Stewart &
Olstein, of Roseland, New Jersey.

       Teresa M. Corbin, Howrey Simon Arnold & White, LLP, of San Francisco, of Los
Angeles, California, argued for defendants-appellees. With her on the brief was Jennifer
A. Sklenar. Of counsel was Jayna R. Whitt, of Menlo Park, California. Of counsel on the
brief were John C. Dougherty, Natalie F. Zaidman, and Sonia Cho, DLA Piper Rudnick
Gray Cary US LLP, of Baltimore, Maryland.

Appealed from: United States District Court for the District of Maryland

Judge Alexander Williams, Jr.
    United States Court of Appeals for the Federal Circuit

                                          04-1499

                                   MEDIMMUNE, INC.,

                                                                Plaintiff-Appellant,

                                             v.

                                    CENTOCOR, INC.,

                                                                Defendant-Appellee,

                                            and

                   THE TRUSTEES OF COLUMBIA UNIVERSITY IN
                            THE CITY OF NEW YORK
                      and THE BOARD OF TRUSTEES OF THE
                     LELAND STANFORD JUNIOR UNIVERSITY,

                                                                Defendants-Appellees.


                             __________________________

                             DECIDED: June 1, 2005
                             __________________________


Before SCHALL, BRYSON, and GAJARSA, Circuit Judges.

SCHALL, Circuit Judge.


       MedImmune, Inc. (“MedImmune”) appeals from the final decision of the United

States District Court for the District of Maryland that dismissed, for lack of subject matter

jurisdiction, MedImmune’s declaratory judgment action against Centocor, Inc.

(“Centocor”), the trustees of Columbia University in New York City, and the Board of

Trustees of the Leland Stanford Junior University in California. In its suit, MedImmune
sought to have U.S. Patent No. 5,807,715 (“the ’715 patent”) declared invalid and/or

unenforceable. The court dismissed the action after it determined that MedImmune had

failed to establish that an actual controversy existed between it and Centocor, as

required under the Declaratory Judgment Act, 28 U.S.C. § 2201(a).         MedImmune, Inc.

v. Centocor, Inc., No. AW-02-1135 (D. Md. June 17, 2004). We affirm.

                                      BACKGROUND

                                              I.

           The ’715 patent is titled “Methods and Transformed Mammalian Lymphocytic

Cells   for    Producing   Functional    Antigen-Binding     Protein   Including   Chimeric

Immunoglobulin and Fragments.”          Columbia University and Leland Stanford Junior

University are the assignees of the ’715 patent. Centocor is the exclusive licensee of

the patent, with the right to sublicense the patent to others.

           The ’715 patent issued in September of 1998. In a May 1999 letter, Centocor

offered MedImmune a sublicense under the patent to cover MedImmune’s Synagis®

product.      In August of 1999, MedImmune responded to Centocor’s letter. In its

response, MedImmune stated that it did not agree that Synagis® was covered by the

’715 patent, and it indicated that it would not take a license.

        In May of 2000, representatives from Centocor and MedImmune began license

negotiations. The negotiations spanned several months. In these negotiations,

MedImmune took the position that Synagis® did not infringe the ’715 patent, that the

patent was invalid and, alternatively, that MedImmune could design around the ’715

patent. MedImmune claims that “facing mounting pressure and fearing an imminent

infringement suit,” it finally concluded a sublicense agreement with Centocor.         The




04-1499                                       2
agreement was executed on December 29, 2000.            Thereafter, MedImmune began

paying royalties on Synagis® under the agreement. It is undisputed that MedImmune

continues to make timely royalty payments and is not otherwise in breach of the license

agreement.

       After concluding the license agreement, MedImmune asserted to Centocor that it

did not infringe the ’715 patent and that the patent was invalid and/or unenforceable. In

response, Centocor told MedImmune that it expected MedImmune to continue to

adhere to its license obligations.

                                            II.

       In April of 2002, MedImmune filed the present declaratory judgment suit in the

District of Maryland, seeking a declaration that it owes no royalties under the license

agreement with Centocor and that the ’715 patent is invalid and/or unenforceable.

Shortly thereafter, Centocor and the universities filed what they characterize as a

“mirror-image” declaratory judgment suit against MedImmune in the Northern District of

California.   In their suit, Centocor and the universities alleged that, in view of

MedImmune’s suit in Maryland, a case or controversy existed between them and

MedImmune. They sought a declaratory judgment that the ’715 patent is valid and

enforceable, and that MedImmune’s manufacture and sale of Synagis® infringes the

patent.

       The Maryland district court granted Centocor and the universities’ motion to

dismiss for lack of jurisdiction. Relying on Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376

(Fed. Cir. 2004), the court determined that MedImmune had failed to establish that an

actual controversy existed between it and Centocor, as required under 28 U.S.C.




04-1499                                     3
§ 2201(a). Centocor and the universities’ suit in the Northern District of California was

also dismissed, on the ground that there was “no actual controversy to satisfy the

Declaratory Judgment Act” in light of the Maryland suit.

         MedImmune timely appeals the decision of the Maryland district court dismissing

its suit. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

                                         ANALYSIS

                                              I.

         Whether an actual case or controversy exists so that a district court may

entertain an action for a declaratory judgment of non-infringement and/or invalidity is

governed by Federal Circuit law. Minn. Mining & Mfg. Co. v. Norton Co., 929 F.2d 670,

672 (Fed. Cir. 1991); Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953,

954 n.3 (Fed. Cir. 1987). The determination of whether an actual controversy exists

under the Declaratory Judgment Act in a patent case is a question of law that we review

de novo.     Vanguard Research, Inc. v. PEAT, Inc., 304 F.3d 1249, 1254 (Fed. Cir.

2002).

         The Declaratory Judgment Act provides that “[i]n a case of actual controversy

within its jurisdiction . . . [a court] may declare the rights and other legal relations of any

interested party seeking such declaration, whether or not further relief is or could be

sought.”    28 U.S.C. § 2201(a).       Paralleling Article III of the Constitution, the Act

“requires an actual controversy between the parties before a federal court may exercise

jurisdiction over an action for a declaratory judgment.” Teva Pharms. USA, Inc. v.

Pfizer, Inc., 395 F.3d 1324, 1331 (Fed. Cir. 2005) (quoting EMC Corp. v. Norand Corp.,

89 F.3d 807, 810 (Fed. Cir. 1996)). “Basically, the question in each case is whether




04-1499                                       4
the facts alleged, under all the circumstances, show that there is a substantial

controversy, between parties having adverse legal interests, of sufficient immediacy and

reality to warrant the issuance of a declaratory judgment.” Md. Cas. Co. v. Pac. Coal &

Oil Co., 312 U.S. 270, 273 (1941).

       To keep watch over the subtle line between an “abstract question” and “a

controversy contemplated by the Declaratory Judgment Act,” id., an inquiry has been

formulated that focuses on the conduct of both the patentee and the accused infringer.

When a potential infringer seeks declaratory relief in the absence of a lawsuit by the

patentee, there must be both (1) a reasonable apprehension on the part of the

declaratory judgment plaintiff that it will face an infringement suit; and (2) present

activity by the declaratory judgment plaintiff which could constitute infringement, or

concrete steps taken with the intent to conduct such activity. Teva, 395 F.3d at 1330;

Gen-Probe, 359 F.3d at 1380; EMC Corp., 89 F.3d at 811.

                                            II.

       As noted above, the district court relied on our decision in Gen-Probe to dismiss

MedImmune’s declaratory judgment suit for lack of Article III jurisdiction. In Gen-Probe,

we considered the case of a licensee in good standing who sought a declaratory

judgment that it was not infringing the licensed patent, and that the licensed patent was

invalid. 359 F.3d at 1377. The licensee sought a declaratory judgment while timely

paying royalties and remaining faithful to the license agreement in all other respects. Id.

at 1380.




04-1499                                     5
       In holding that there was no actual case or controversy for purposes of the

Declaratory Judgment Act, we determined that the license, “unless materially breached,

obliterated any reasonable apprehension of a lawsuit,” and that once the licensor and

licensee “formed the license, an enforceable covenant not to sue, the events that led to

the formation [of the license] became irrelevant.” Id. at 1381.

       We agree with the district court that Gen-Probe is determinative of this case.

Any controversy that may have existed between MedImmune and Centocor prior to and

during their various negotiations vanished when MedImmune executed the license

agreement, which is a covenant by Centocor not to sue. Quite simply, once the license

agreement was in place and MedImmune was in compliance with the terms of the

agreement, MedImmune could not be under a reasonable apprehension that it would

face an infringement suit by Centocor.1

                                            III.

       MedImmune does not seriously dispute that Gen-Probe is virtually on “all fours”

with this case. Rather, it contends that we should not follow Gen-Probe. MedImmune

argues that Gen-Probe is inconsistent with Supreme Court precedent and with prior

Federal Circuit precedent. Consequently, it urges that, as a panel, we are not obligated

to follow it. See Atl. Thermoplastics Co. v. Faytex Corp., 970 F.2d 834, 839 n.2 (Fed.

Cir. 1992) (positing that “[a] decision that fails to consider Supreme Court precedent



       1
              MedImmune argues that the license agreement contemplated that it could
institute a declaratory judgment action of invalidity and/or unenforceability with respect
to the ’715 patent.        This is so, MedImmune asserts, because “the sublicense
agreement contained . . . no agreement not to litigate.” (Br. of Appellant at 22.) This
assertion overlooks the fact that a license is, by its nature, an agreement not to litigate.
A licensor agrees to receive royalties or other consideration from the licensee in
exchange for a covenant not to sue or disturb the licensee’s activities.


04-1499                                      6
does not control if the court determines that the prior panel would have reached a

different conclusion if it had considered controlling precedent”); Newell Cos. v. Kenney

Mfg. Co., 864 F.2d 757, 765 (Fed. Cir. 1988) (“Where there is direct conflict” between

two Federal Circuit panel decisions, “the precedential decision is the first.”). We do not

agree with MedImmune that Gen-Probe is inconsistent with controlling Supreme Court

and Federal Circuit authority.

       First, MedImmune argues that Gen-Probe is fatally flawed because it failed to

recognize the decision of the Supreme Court in Cardinal Chemical Co. v. Morton

International, 508 U.S. 83 (1993).      We think, however, that Gen-Probe’s failure to

mention Cardinal Chemical reflects the fact that Cardinal Chemical was inapposite to

Gen-Probe, rather than oversight on the part of the Gen-Probe court. The Supreme

Court stated in Cardinal Chemical that its decision did not concern the jurisdiction of

federal district courts:

       Under its current practice, the Federal Circuit uniformly declares that the
       issue of patent validity is “moot” if it affirms the District Court’s finding of
       noninfringement and if, as in the usual case, the dispute between the
       parties does not extend beyond the patentee’s particular claim of
       infringement. That practice, and the issue before us, therefore concern the
       jurisdiction of an intermediate appellate court — not the jurisdiction of
       either a trial court or this Court.

Id. at 95 (emphasis added). Consistent with the Court’s statement of the limited issue

before it in Cardinal Chemical, we have twice rejected the idea that Cardinal Chemical

was meant to alter how a federal trial court determines whether a case or controversy

exists over a declaratory judgment suit.          See   Super Sack Mfg. Corp. v. Chase

Packaging Corp., 57 F.3d 1054, 1060 (Fed. Cir. 1995) (Cardinal Chemical “does not

revolutionize the justiciability of declaratory judgment actions attacking a patent’s




04-1499                                       7
validity. . . and nothing in Cardinal undermines our decisions on declaratory justiciability

at the trial court level.”); Lamb-Weston, Inc. v. McCain Foods, Ltd., 78 F.3d 540, 545

(Fed. Cir. 1996) (“The Supreme Court’s decision in Cardinal Chemical is limited to the

specific facts of that case.”).

       MedImmune also argues that Gen-Probe is inconsistent with the Supreme

Court’s rejection of the doctrine of licensee estoppel in Lear, Inc. v. Adkins, 395 U.S.

653 (1969). This argument was addressed and rejected in Gen-Probe, 359 F.3d at

1381, and we likewise reject it here. Although Lear held that a licensee is not estopped

from challenging the validity of a licensed patent, 395 U.S. at 670-71, “Lear . . . left

unresolved the question when a federal court has jurisdiction of a licensee’s claim of

patent invalidity.” C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 878 (Fed. Cir. 1983). In

other words, the fact that a party is not estopped from making an argument does not

mean that federal courts have jurisdiction to entertain that argument in all

circumstances.

       Second, MedImmune urges that Gen-Probe is at odds with three decisions of this

court: C.R. Bard, Cordis Corp. v. Medtronic, Inc., 780 F.2d 991 (Fed. Cir. 1985), and

Intermedics Infusaid, Inc. v. Regents of the University of Minnesota, 804 F.2d 129, 133

(Fed. Cir. 1986). We do not agree.

       C.R. Bard noted that complete termination of the license may not be required for

a licensee to sustain a declaratory judgment suit. 716 F.2d at 880. It does not follow

from that proposition, however, that all licensees in good standing can challenge the

validity of the licensed patent at their discretion, without regard to whether an actual

controversy exists with the licensor.




04-1499                                      8
       Specifically, in determining that there was a case or controversy supporting

jurisdiction over a licensee’s declaratory judgment suit for, among other things, invalidity

of the licensed patent, the C.R. Bard court found two facts to be important. First, the

licensee had ceased paying royalties. Although this fact did not itself terminate the

license, it constituted “a material breach of the agreement that, under the very terms of

the agreement, enabled [the licensor] to terminate the agreement.” Id. at 881. Second,

the licensor had shown a willingness to enforce its rights by filing a state court action to

recover the royalty payments. Id. at 881. This court then applied the “reasonable

apprehension” test to these facts, determining that the licensee had a reasonable

apprehension of suit. Id.

       By contrast, in this case MedImmune can have no reasonable apprehension of

suit—indeed, it can have no apprehension of suit at all—because there is nothing for

which Centocor can sue MedImmune. It is undisputed that MedImmune continues to

pay timely royalties for Synagis® and is not otherwise in breach of the agreement. The

fact that Centocor did sue MedImmune, after MedImmune filed its declaratory judgment

suit, does not alter the analysis. The presence or absence of a case or controversy is

based on facts at the time the complaint was filed. See, e.g., GAF Bldg. Materials Corp.

v. Elk Corp. of Dallas, 90 F.3d 479, 483 (Fed. Cir. 1996) (“Later events may not create

jurisdiction where none existed at the time of filing. Rather, the presence or absence of

jurisdiction must be determined on the facts existing at the time the complaint under

consideration was filed.” (citations omitted)).

       MedImmune’s reliance on Cordis also is misplaced. Cordis did not address the

question of whether there is a case or controversy sufficient to support subject matter




04-1499                                       9
jurisdiction over a licensee’s suit for a declaratory judgment of patent invalidity where

the licensee is not in breach of the license agreement. See generally 780 F.2d at 993-

95. In Cordis, the licensee sought a declaration that the licensed patent was invalid. Id.

at 993. However, the licensee also sought to pay royalties into escrow pendente lite,

and to enjoin the licensor from canceling the license agreement. Id. It was these latter

two requests, granted by the district court, that were before this court on appeal. See

id.2

       MedImmune points to Intermedics for the proposition that when a licensee

wishes to maintain its license, it must continue to pay royalties to the licensor. See 804

F.2d 129, 133 (citing Cordis). That proposition, however, does not explain how there

could be a case or controversy where, as here, the licensee is fully paying royalties

directly to the licensor and is maintaining the license.

                                             IV.

       Finally, MedImmune urges us—assuming we conclude that we are bound by

Gen-Probe—to recommend to the full court that it act en banc to overrule that decision.

Although a three-judge panel of this court may not overrule a precedential decision of a

previous panel, see, e.g., Tate Access Floors, Inc. v. Interface Architectural Res., Inc.,

279 F.3d 1357, 1366 (Fed. Cir. 2002), it may recommend en banc review of the

decision. See Federal Circuit Rule 35(a)(2) (2004). We decline to do that in this case.

Most importantly, as we have just explained, Gen-Probe is consistent with both

Supreme Court precedent and with prior precedent of this court.



       2
             These issues were before the court based upon 28 U.S.C. §§ 1292(a) &
(c), which confer jurisdiction upon this court to hear appeals from orders granting
injunctions.


04-1499                                      10
       Beyond that, we reject MedImmune’s argument that Gen-Probe should be

overruled because it creates a “Hobson’s choice.” Specifically, MedImmune argues that

it must “choose between paying tribute to a suspect patent and tying its fate to the

uncertainty of patent litigation,” with all of the attendant risks of such litigation. (Reply Br.

of Appellant, at 2.) MedImmune’s argument proves too much. Every potential infringer

who is threatened with suit, or who is sued, for patent infringement must decide whether

to settle or fight. In short, the “Hobson’s choice” about which MedImmune complains

arises not from Gen-Probe, but from Article III’s requirement that, before a district court

exercises jurisdiction in a declaratory judgment suit, there must be an actual

controversy between the parties. For the reasons set forth above, such a controversy

does not exist here.

                                        CONCLUSION

       Because the district court did not err in ruling that no Article III case or

controversy existed to support MedImmune’s declaratory judgment suit, it properly

dismissed the suit for lack of jurisdiction. Therefore, the judgment of the district court is

                                         AFFIRMED.




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