Court shakes up biotech patent world

Court shakes up biotech patent world

	Published : Tue, 09 Jan 2007 23:34 By : Agencies Print this Story

SAN FRANCISCO - Biotechnology analysts and lawyers said a key U.S. Supreme Court ruling Tuesday could help companies who license patents get out of bad deals easier.

The Supreme Court ruled that Gaithersburg, Md.-based MedImmune Inc. could sue Genentech Inc. for patent infringement even though MedImmune continues to pay fees to Genentech to use the disputed technology to develop the drug Synagis that treats childhood respiratory problems. The high court didn't rule on the merits of MedImmune's claims Tuesday, the outcome of which analysts said is more important to the patent landscape of the biotechnology industry.

Licensing the rights to use another company's patent technology is the lifeblood of the biotechnology industry. Many smaller companies have long complained that larger companies with extensive patent portfolios often hold monopolistic grips on certain manufacturing processes. For instance, several biotechnology companies pay Genentech royalties to access the technology at the heart of the MedImmune dispute.

'This is definitely a major ongoing controversy,' said Jason Kantor, an analyst with RBC Market Capitals. 'The decision today does not have far-reaching implications.'

The ruling did little to the sector's stock prices and both companies involved in the litigation experienced small rises in their share prices.

South San Francisco-based Genentech's stock rose 89 cents a share to $84.69 at the close of trading on the New York Stock Exchange. MedImmune's share price rose 58 cents to $34.83 at the close of trading on the Nasdaq Stock Market.

Still, lawyers said the ruling will give biotechnology companies locked in bad licensing deals with larger partners an attractive option to change the terms of the agreement without terminating the agreement.

'If their patent challenge fails, that's a big business risk,' said Bart Showalter, head of intellectual property at the Baker Botts law firm in Dallas. 'This is a big win for licensees, who can have their cake and eat it too.'

Showalter predicted the ruling will alter how future contracts are hammered out.

MedImmune Inc. sued Genentech in 2003, claiming a deal between Genentech and British biotechnology company Celltech R&D Ltd. violated antitrust laws. But it was thrown out by the federal courts, which ruled MedImmune didn't have the right to sue because it continued to pay royalties on the patent even as it claimed in court the patent was unfair.

The Supreme Court said MedImmune's 'pay and sue' strategy doesn't preclude it from suing. MedImmune said it continued to pay Genentech royalties because if it lost its case, it would be liable for triple damages and unable to use the technology needed to manufacturer Synagis, which accounted for than $1 billion in sales last year.

MedImmune said it would vigorously pursue its case in the lower court. Genentech said it remains confident in the validity of the patent.