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AbbVie Loses Battle to Drop Royalties on Blockbuster Humira®

Last week, the Federal Circuit affirmed a lower court’s dismissal of AbbVie’s complaint seeking declaratory judgment of invalidity of U.S. Patent No. 6,248,516 (“the ’516 patent”) owned by Astra Zeneca subsidiary MedImmune.  AbbVie brought this declaratory judgment action in June 2016 in the hopes of ending its royalty obligations to MedImmune.

The Fed. Circuit’s decision on appeal from the U.S. District Court for the Eastern District of Virginia establishes that a party may not seek declaratory judgment to obtain piecemeal adjudication of subsidiary issues that do not resolve the overall dispute.

The declaratory judgment action is related to a development and licensing agreement initiated in 1995 that led to the antibody known as adalimumab.  Adalimumab is the active ingredient in the blockbuster drug Humira®.  As we reported previously, Humira® generated over $16 billion USD in 2016, becoming the world’s best-selling drug.  The agreement allowed AbbVie to practice a number of patents, including the ’516 patent, but required AbbVie to pay royalties on related sales until the later of fifteen years from the date of First Commercial Sale or the expiration date of the last patent to expire amongst the specified patents under the agreement (i.e. the expiration of the ’516 patent).  Therefore, under the agreement, royalties would be paid to MedImmune until January 2018 or June 2018, respectively.  AbbVie asserted that a declaration of the ’516 patent’s invalidity would be an expiration of the patent for the purpose of the agreement, thereby ending its royalty obligations.

The district court dismissed AbbVie’s complaint for two reasons: (1) AbbVie did not practice the ’516 patent, and therefore lacked standing since it could not be subject to patent infringement; and (2) even in the event AbbVie had standing, the court declined to use its discretionary declaratory judgment jurisdiction since the British government jointly owns the patent and the agreement is governed by British contract law.  Accordingly, the invalidity question would not likely resolve the parties’ underlying dispute in view of concerns about foreign law and sovereign immunity.

The Fed. Circuit disagreed with the district court over its holding that it lacked declaratory judgment jurisdiction.  The court reasoned that even in the absence of patent infringement, it should look to the “‘character of the threatened action’ that the declaratory judgment defendant ‘might have brought.’”  Specifically, the contractual obligations under the 1995 agreement would turn on the expiration and/or validity of the ’516 patent.  The court opined that “[i]f properly presented, such a contractual dispute could confer declaratory judgment jurisdiction.”

However, in the instant case, AbbVie sought out declaratory judgment of invalidity in regard to the ’516 patent, rather than its contractual obligations.  The court noted that AbbVie has no other pending litigation in American or British courts that could resolve the contractual dispute.  Accordingly, the court held that AbbVie cannot establish declaratory judgment jurisdiction over invalidity, reasoning that it is an open question as to how the British courts would view the invalidity of ’516 patent in relation to patent expiry under the agreement.