Lead Opinion
delivered the opinion of the Court.
We must decide whether Article Ill’s limitation of federal courts’ jurisdiction to “Cases” and “Controversies,” reflected in the “actual controversy” requirement of the Declaratory Judgment Act, 28 U. S. C. § 2201(a), requires a patent licensee to terminate or be in breach of its license agreement before it can seek a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.
I
Because the declaratory-judgment claims in this case were disposed of at the motion-to-dismiss stage, we take the following facts from the allegations in petitioner’s amended complaint and the unopposed declarations that petitioner submitted in response to the motion to dismiss. Petitioner Medlmmune, Inc., manufactures Synagis, a drug used to prevent respiratory tract disease
In December 2001, the “coexpression” application covered by the 1997 license agreement matured into the “Cabilly II” patent. Soon thereafter, respondent Genentech delivered petitioner a letter expressing its belief that Synagis was covered by the Cabilly II patent and its expectation that petitioner would pay royalties beginning March 1, 2002. Petitioner did not think royalties were owing, believing that the Cabilly II patent was invalid and unenforceable,
Petitioner sought the declaratory relief discussed in detail in Part II below. Petitioner also requested damages and an injunction with respect to other federal and state claims not relevant here. The District Court granted respondents’ motion to dismiss the declaratory-judgment claims for lack of subject-matter jurisdiction, relying on the decision of the United States Court of Appeals for the Federal Circuit in Gen-Probe Inc. v. Vysis, Inc.,
II
At the outset, we address a disagreement concerning the nature of the dispute at issue here — whether it involves only a freestanding claim of patent invalidity or rather a claim that, both because of
Respondents contend that petitioner “is not seeking an interpretation of its present contractual obligations.” Brief for Respondent Genentech 37; see also Brief for Respondent City of Hope 48-49. They claim this for two reasons: (1) because there is no dispute that Synagis infringes the Cabilly II patent, thereby making royalties payable; and (2) because while there is a dispute over patent validity, the contract calls for royalties on an infringing product whether or not the underlying patent is valid. See Brief for Respondent Genentech 7, 37. The first point simply does not comport with the allegations of petitioner’s amended complaint. The very first count requested a “DECLARATORY JUDGMENT ON CONTRACTUAL RIGHTS AND OBLIGATIONS,” and stated that petitioner “disputes its obligation to make payments under the 1997 License Agreement because [petitioner’s] sale of its Synagis® product does not infringe any valid claim of the [Cabilly II] Patent.” App. 136. These contentions were repeated throughout the complaint. Id., at 104,105,108,147
As to the second point, petitioner assuredly did contend that it had no obligation under the license to pay royalties on an invalid patent. Id., at 104,136,147. Nor is that contention frivolous. True, the license requires petitioner to pay royalties until a patent claim has been held invalid by a competent body, and the Cabilly II patent has not. But the license at issue in Lear, Inc. v. Adkins,
Respondents further argue that petitioner waived its contract claim by failing to argue it below. Brief for Respondent Genentech 10-11; Tr. of Oral Arg. 30-31. The record reveals, however, that petitioner raised the contract point before the Federal Circuit. See Brief for Plantiff-Appellant Medlmmune, Inc., in Nos. 04-1300, 04-1384 (CA Fed.), p. 38 (“Here, Medlmmune is seeking to define its rights and obligations under its contract with Genentech — precisely the type of action the Declaratory Judgment Act contemplates”). That petitioner limited its contract argument to a few pages of its appellate brief does not suggest a waiver; it merely reflects counsel’s sound assessment that the argument would be futile. The Federal Circuit’s Gen-Probe precedent precluded jurisdiction over petitioner’s contract claims, and the panel below had no authority to overrule Gen-Probe.
III
The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . 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.”
Aetna and the cases following it do not draw the brightest of lines between those declaratory-judgment actions that satisfy the case-or-controversy requirement and those that do not. Our decisions have required that the dispute be “definite and concrete, touching the legal relations of parties having adverse legal interests”; and that it be “real and substantial” and “admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” Id., at 240-241. In Maryland Casualty Co. v. Pacific Coal & Oil Co.,
There is no dispute that these standards would have been satisfied if petitioner had taken the final step of refusing to make royalty payments under the 1997
Our analysis must begin with the recognition that, where threatened action by government is concerned, we do not require a plaintiff to expose himself to liability before bringing suit to challenge the basis for the threat — for example, the constitutionality of a law threatened to be enforced. The plaintiff’s own action (or inaction) in failing to violate the law eliminates the immanent threat of prosecution, but nonetheless does not eliminate Article III jurisdiction. For example, in Terrace v. Thompson,
Supreme Court jurisprudence is more rare regarding application of the Declaratory Judgment Act to situations in which the plaintiff’s self-avoidance of imminent injury is coerced by threatened enforcement action of a private party rather than the government. Lower federal courts, however (and state courts interpreting declaratory-judgment acts requiring “actual controversy”), have long accepted jurisdiction in such cases. See, e. g., Keener Oil & Gas Co. v. Consolidated Gas Utils. Corp.,
The only Supreme Court decision in point is, fortuitously, close on its facts to the case before us. Altvater v. Freeman,
Respondents assert that the parties in effect settled this dispute when they entered into the 1997 license agreement. When a licensee enters such an agreement, they contend, it essentially purchases an insurance policy, immunizing it from suits
Respondents appeal to the common-law rule that a party to a contract cannot at one and the same time challenge its validity and continue to reap its benefits, citing Commodity Credit Corp. v. Rosenberg Bros. & Co.,
Lastly, respondents urge us to affirm the dismissal of the declaratory-judgment claims on discretionary grounds. The Declaratory Judgment Act provides that a court “may declare the rights and other legal relations of any interested party,” 28 U. S. C. § 2201(a) (emphasis added), not that it must do so. This text has long been understood “to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co.,
* * *
We hold that petitioner was not required, insofar as Article III is concerned, to break or terminate its 1997 license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed. The Court of Appeals erred in affirming the dismissal of this action for lack of subject-matter jurisdiction.
The judgment of the Court of Appeals is reversed, and the cause is remanded for proceedings consistent with this opinion.
It is so ordered.
Notes
Hereinafter, invalidity and unenforceability will be referred to simply as invalidity, with similar abbreviation of positive (validity and enforceability) and adjectival (valid and invalid, enforceable and unenforceable) forms.
The dissent contends that the question on which we granted certiorari does not reach the contract claim. Post, at 140-141 (opinion of Thomas, J.). We think otherwise. The question specifically refers to the “license agreement” and to the contention that the patent is “not infringed.” Pet. for Cert. (i). The unmistakable meaning is that royalties are not owing under the contract.
In addition to agreeing with respondents that (despite the face of the complaint) this case does not involve a contract claim, post, at 140-141, the dissent evidently thinks the contract claim is weak. That, however, goes to the merits of the claim, not to its existence or the courts’ jurisdiction over it. Nor is the alleged “lack of specificity in the complaint,” post, at 140, a jurisdictional matter.
The dissent observes that the District Court assumed that Synagis was “ ‘covered by the patents at issue.’ ” Post, at 141 (quoting App. 349-350). But the quoted statement is taken from the District Court’s separate opinion granting summary judgment on petitioner’s antitrust claims. For purposes of that earlier ruling, whether Synagis infringed the patent was irrelevant, and there was no harm in accepting respondents’ contention on the point. This tells us nothing, however, about petitioner’s contract claim or the District Court’s later jurisdictional holding with respect to it.
Respondents obviously agree. They said in the District Court: “The facts of this case are, for purposes of this motion, identical to the facts in Gen-Probe. . . . Like Gen-Probe, Medlmmune filed an action seeking a declaratory judgment that: (a) it owes nothing under its license agreement with Genentech because its sales of Synagis® allegedly do not infringe any . valid claim of the [Cabilly II] patent; (b) the [Cabilly II] patent is invalid; (c) the [Cabilly II] patent is unenforceable; and (d) Synagis® does not infringe the [Cabilly II] patent.” App. in Nos. 04-1300, 04-1384 (CA Fed.), p. A2829 (record citations omitted).
The dissent asserts that petitioner did not allege a contract claim in its opening brief or at oral argument. Post, at 141. This is demonstrably false. See, e. g., Brief for Petitioner 8 (the Cabilly II patent was “not infringed by Synagis®, so that royalties were not due under the license”); id., at 12 (Summary of Argument: “[The purpose] of the Declaratory Judgment Act... was to allow contracting parties to resolve their disputes in court without breach and without risking economic destruction and multiplying damages.... The holding [below]... would ... disrupt the law of licenses and contracts throughout the economy, essentially undoing the achievement of the reformers of 1934”); Tr. of Oral Arg. 15 (“We’re saying this is a' contract dispute”); id., at 16 (“[T]he purpose of [the Declaratory Judgment Act] is so that contracts can be resolved without breach”); id., at 57 (“The contract claim is clear in the record. It’s at page 136 of the joint appendix. I don’t think more needs to be said about it”).
The dissent also asserts that the validity of the contract claim “hinges entirely upon a determination of the patent’s validity,” since “ ‘the license requires [Medlmmune] to pay royalties until a patent claim has been held invalid by a competent body,’” post, at 141, quoting supra, at 124. This would be true only if the license required royalties on all products under the sun, and not just those that practice the patent. Of course it does not.
The dissent asserts, post, at 137, that “the declaratory judgment procedure cannot be used to obtain advanced rulings on matters that would be addressed in a future case of actual controversy.” As our preceding discussion shows, that is not so. If the dissent’s point is simply that a defense cannot be raised by means of a declaratory-judgment action where there is no “actual controversy” or where it would be “premature,” phrasing that argument as the dissent has done begs the question: whether this is an actual, ripe controversy.
Coffman v. Breeze Corps.,
The justiciability problem that arises, when the party seeking declaratory relief is himself preventing the complained-of injury from occurring, can be described in terms of standing (whether plaintiff is threatened with “imminent” injury in fact “‘fairly ... trace[able] to the challenged action of the defendant,’” Lujan v. Defenders of Wildlife,
The dissent claims the cited cases do not “rely on the coercion inherent in making contractual payments.” Post, at 145, n. 3. That is true; they relied on (to put the matter as the dissent puts it) the coercion inherent in complying with other claimed contractual obligations. The dissent fails to explain why a contractual obligation of payment is magically different. It obviously is not. In our view, of course, the relevant coercion is not compliance with the claimed contractual obligation, but rather the consequences of failure to do so.
The dissent incorrectly asserts that Altvater required actual infringement, quoting wildly out of context (and twice, for emphasis) Altvater’s statement that “ ‘[t]o hold a patent valid if it is not infringed is to decide a hypothetical ease.’” Post, at 139, 143 (quoting
“The District Court [in Electrical Fittings] adjudged a claim of a patent valid although it dismissed the bill for failure to prove infringement. We held that the finding of validity was immaterial to the disposition of the cause and that the winning party might appeal to obtain a reformation of the decree. To hold a patent valid if it is not infringed is to decide a hypothetical case. But the situation in the present case is quite different. We have here not only bill and answer but a counterclaim. Though the decision of non-infringement disposes of the bill and answer, it does not dispose of the counterclaim which raises the question of validity.” Altvater, supra, at 363 (footnote omitted).
As the full quotation makes clear, the snippet quoted by the dissent has nothing to do with whether infringement must be actual or merely threatened. Indeed, it makes clear that in appropriate cases to hold a noninfringed patent valid is not to decide a hypothetical case.
Though the dissent acknowledges the central lesson of Altvater, post, at 144 — that payment of royalties under “coercive” circumstances does not eliminate jurisdiction — it attempts to limit that rationale to the particular facts of Altvater. But none of Altvater’s “unique facts,” post, at 144, suggests that a different test applies to the royalty payments here. Other than a conclusory assertion that the payments here were “voluntarily made,” post, at 146, the dissent never explains why the threat of treble damages and the loss of 80 percent of petitioner’s business does not fall within Altvater’s coercion rationale.
Even if Altvater could be distinguished as an “injunction” case, it would still contradict the Federal Circuit's “reasonable
The dissent objects to our supposed “extension of Steffel [v. Thompson]| ... to apply to voluntarily accepted contractual obligations between private parties.” Post, at 145. The criticism is misdirected in several respects. The coercion principle upon which we rely today did not originate with Steffel v. Thompson,
The dissent accuses the Court of misapplying Steffel’s rationale. Post, at 146. It contends that Steffel would apply here only if respondents had threatened petitioner with a patent infringement suit in the absence of a license agreement, because only then would petitioner be put to the choice of selling its product or facing suit. Post, at 145-146. Here, the dissent argues, the license payments are “voluntarily made.” Post, at 146. If one uses the word “voluntarily” so loosely, it could be applied with equal justification (or lack thereof) to the Steffel plaintiff’s “voluntary” refusal to distribute handbills. We find the threat of treble damages and loss of 80 percent of petitioner’s business every bit as coercive as the modest penalties for misdemeanor trespass threatened in Steffel. Only by ignoring the consequences of the threatened action in this case can the dissent claim that today’s opinion “contains no limiting principle whatsoever,” post, at 146.
Dissenting Opinion
dissenting.
We granted certiorari in this case to determine whether a patent licensee in good standing must breach its license prior to challenging the validity of the underlying patent pursuant to the Declaratory Judgment Act, 28 U. S. C. §2201.
I
Article III of the Constitution limits the judicial power to the adjudication of “Cases” or “Controversies.” § 2. We have held that the Declaratory Judgment Act extends “to controversies which are such in the constitutional sense.” Aetna Life Ins. Co. v. Haworth,
The Declaratory Judgment Act did not (and could not) alter the constitutional definition of “case or controversy” or relax Article Ill's command that an actual case or controversy exist before federal courts may adjudicate a question. See Maryland Casualty Co. v. Pacific Coal & Oil Co.,
We have also held that no controversy exists when a declaratory judgment plaintiff attempts to obtain a premature ruling on potential defenses that would typically be adjudicated in a later actual controversy. In Coffman v. Breeze Corps.,
These principles apply with equal force in the patent licensing context. In Altvater v. Freeman,
II
Against the foregoing background, the case before us is not a justiciable case or controversy under Article III.
A
As a threshold matter, I disagree with the Court’s characterization of this case as including a “contractual dispute.” Ante, at 125. To substantiate this characterization, the Court points to a three-paragraph count in Medlmmune’s complaint entitled “‘DECLARATORY JUDGMENT ON CONTRACTUAL RIGHTS AND OBLIGATIONS’” and to Medlmmune’s broad allegations that “‘its Synagis® product does not infringe any valid claim of the [Cabilly II] Patent.’ ” Ante, at 123. Nowhere in its complaint did Medlmmune state why “sale[s] of its Synagis® product d[o] not infringe any valid claim of the [Cabilly II] Patent.” App. 136.
Probably for this reason, Medlmmune has not pursued a contract claim at any level of the litigation. The District Court stated that the product that was the subject of the license, Synagis, was “covered by the patents at issue,” App. 349-350, and Medlmmune has never challenged that characterization. The Federal Circuit decided this case on the sole ground that a licensee in good standing may not bring a declaratory judgment action to challenge the validity of the underlying patent without some threat or apprehension of a patent infringement suit. See
In short, Medlmmune did not “rais[e] and preserv[e] a contract claim.” Ante, at 125. In reaching a contrary conclusion, the Court states that its identification of a contract claim “probably makes no difference to the ultimate” outcome of this case. Ante, at 123. This may very well be true, if only because of the broad scope of the Court’s holding.
The facts before us present no case or controversy under Article III. When Medlmmune filed this declaratory judgment action challenging the validity of the Cabilly II patent, it was under no threat of being sued by Genentech for patent infringement. This was so because Medlmmune was a licensee in good standing that had made all necessary royalty payments. Thus, by voluntarily entering into and abiding by a license agreement with Genentech, Medlmmune removed any threat of suit. See ante, at 128 (stating the threat of suit was “remote, if not nonexistent”). Medlmmune’s actions in entering into and continuing to comply with the license agreement deprived Genentech of any cause of action against Medlmmune. Additionally, Medlmmune had no cause of action against Genentech. Patent invalidity is an affirmative defense to patent infringement, not a freestanding cause of action. See 35 U. S. C. §§282(2)-(3). Therefore, here, the Declaratory Judgment Act must be something more than an alternative procedure for bringing an otherwise actual case or controversy before a federal court. But see Aetna Life Ins.,
Because neither Genentech nor Medlmmune had a cause of action, Medlmmune’s prayer for declaratory relief can be reasonably understood only as seeking an advisory opinion about an affirmative defense it might use in some future litigation. Medlmmune wants to know whether, if it decides to breach its license agreement with Genentech, and if Genentech sues it for patent infringement, it will have a successful affirmative defense. Presumably, upon a favorable determination, Medlmmune would then stop making royalty payments, knowing in advance that the federal courts stand behind its decision. Yet as demonstrated above, the Declaratory Judgment Act does not allow federal courts to give advisory rulings on the potential success of an affirmative defense before a cause of action has even accrued. Calderon,
Finally, as this Court has plainly stated in the context of a counterclaim declaratory judgment action challenging the validity of a patent, “[t]o hold a patent valid if it is not infringed is to decide a hypothetical case.” Altvater,
Ill
To reach today’s result, the Court misreads our precedent and expands the concept of coercion from Steffel,
The Court inappropriately relies on Altvater, which is inapplicable to this case for three reasons. First, in Altvater, the affirmative defense of patent invalidity arose in a declaratory judgment motion filed as a counterclaim to a patent infringement suit. See
Cardinal Chemical Co.,
“[T]he issue before us, therefore[,] concernís] the jurisdiction of an intermediate appellate court — not the jurisdiction of... a trial court.... In the trial court, of course, a party seeking a declaratory judgment has the burden of establishing the existence of an actual case or controversy.” Id., at 95.
We went on to offer a hypothetical that showed a party could seek a declaratory judgment “[i]n patent litigation ... even if the patentee has not filed an infringement action.” Ibid. However, that hypothetical involved a patent holder that threatened an infringement suit against a competitor Cnot a licensee) that continued to sell the allegedly infringing product and faced growing liability. In doing so, we hypothesized a situation that paralleled the facts in Aetna Life Ins.: The patentee had a cause of action against an alleged infringer and could have brought suit at any moment, and the declaratory judgment procedure simply offered the alleged infringer a different method of bringing an otherwise justiciable case or controversy into court.
B
The Court’s more serious error is its extension of Steffel, supra, to apply to voluntarily accepted contractual obligations between private parties. No court has ever taken such a broad view of Steffel.
In Steffel, the Court held that in certain limited circumstances, a party’s anticipatory cause of action qualified as a case or controversy under Article III. Based expressly on the coercive nature of governmental power, the Court found that “it is
The majority not only extends Steffel to cases that do not involve governmental coercion, but also extends Steffel’s rationale. If “coercion” were understood as the Court used that term in Steffel, it would apply only if Genentech had threatened Medlmmune with a patent infringement suit in the absence of a license agreement. At that point, Medlmmune would have had a choice, as did the declaratory plaintiff in Steffel, either to cease the otherwise protected activity (here, selling Synagis) or to continue in that activity and face the threat of a lawsuit. But Medlmmune faced no such choice. Here, Medlmmune could continue selling its product without threat of suit because it had eliminated any risk of suit by entering into a license agreement. By holding that the voluntary choice to enter an agreement to avoid some other coerced choice is itself coerced, the Court goes far beyond Steffel.
The majority explains that the “coercive nature of the exaction preserves the right ... to challenge the legality of the claim.” Ante, at 131 (internal quotation marks omitted). The coercive nature of what “exaction”? The answer has to be the voluntarily made license payments because there was no threat of suit here. By holding that contractual obligations are sufficiently coercive to allow a party to bring a declaratory judgment action, the majority has given every patent licensee a cause of action and a free pass around Article Ill’s requirements for challenging the validity of licensed patents. But the reasoning of today’s opinion applies not just to patent validity suits. Indeed, today's opinion contains no limiting principle whatsoever, casting aside Justice Stewart’s understanding that Steffel’s use would “be exceedingly rare.”
For the foregoing reasons, I respectfully dissent.
In addition, the fact that Medlmmune did not identify anywhere in the record which provision of the contract was at issue suggests that there is no contractual provision to “be construed before or after breach.” Advisory Committee’s Notes on Fed. Rule Civ. Proc. 57, 28 U. S. C. App., pp. 790-791.
Additionally, Lear, Inc. v. Adkins,
Admitting that such decisions are “rare,” ante, at ISO, the Court cites cases predating Steffel that hold that a court may construe contractual provisions prior to breach. Those cases do not rely on the coercion inherent in making contractual payments. See, e. g., Keener Oil & Gas Co. v. Consolidated Gas Util. Corp.,