After the parties entered into a patent license agreement covering, inter alia, respondents’ then-pending patent application, the applicationmatured into the “Cabilly II” patent. Respondent Genentech, Inc.,sent petitioner a letter stating that Synagis, a drug petitioner manufactured, was covered by the Cabilly II patent and that petitionerowed royalties under the agreement. Although petitioner believed noroyalties were due because the patent was invalid and unenforceable and because Synagis did not infringe the patent’s claims, petitionerconsidered the letter a clear threat to enforce the patent, terminatethe license agreement, and bring a patent infringement action if petitioner did not pay. Because such an action could have resulted in petitioner’s being ordered to pay treble damages and attorney’s fees andenjoined from selling Synagis, which accounts for more than 80 percent of its sales revenue, petitioner paid the royalties under protestand filed this action for declaratory and other relief. The District Court dismissed the declaratory-judgment claims for lack of subject-matter jurisdiction because, under Federal Circuit precedent, a patent licensee in good standing cannot establish an Article III case or controversy with regard to the patent’s validity, enforceability, or scope. The Federal Circuit affirmed.
Held:
1.
Contrary to respondents’ assertion that only a freestanding patent-invalidity claim is at issue, the record establishes that petitionerhas raised and preserved the contract claim that, because of patentinvalidity, unenforceability, and noninfringement, no royalties are owing. Pp. 3–6.
2.
The Federal Circuit erred in affirming the dismissal of this action for lack of subject-matter jurisdiction. The standards for determining whether a particular declaratory-judgment action satisfiesthe case-or-controversy requirement—i.e., “whether 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” relief, Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U. S. 270, 273—are satisfied here even though petitioner did not refuse to make royalty payments under thelicense agreement. Where threatened government action is concerned, a plaintiff is not required to expose himself to liability beforebringing suit to challenge the basis for the threat. His own action (orinaction) in failing to violate the law eliminates the imminent threat of prosecution, but nonetheless does not eliminate Article III jurisdiction because the threat-eliminating behavior was effectively coerced. Similarly, where the plaintiff’s self-avoidance of imminent injury is coerced by the threatened enforcement action of a private partyrather than the government, lower federal and state courts have longaccepted jurisdiction. In its only decision in point, this Court held that a licensee’s failure to cease its royalty payments did not render nonjusticiable a dispute over the patent’s validity. Altvater v. Freeman, 319 U. S. 359, 364. Though Altvater involved an injunction, it acknowledged that the licensees had the option of stopping paymentsin defiance of the injunction, but that the consequence of doing sowould be to risk “actual [and] treble damages in infringement suits”by the patentees, a consequence also threatened in this case. Id., at 365. Respondents’ assertion that the parties in effect settled thisdispute when they entered into their license agreement is mistaken. Their appeal to the common-law rule that a party to a contract cannot both challenge its validity and continue to reap its benefits is alsounpersuasive. Lastly, because it was raised for the first time here,this Court does not decide respondents’ request to affirm the dismissal of the declaratory-judgment claims on discretionary grounds. That question and any merits-based arguments for denial of declaratory relief are left for the lower courts on remand. Pp. 7–18.
427 F. 3d 958, reversed and remanded.
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