Institut Pasteur v. Cambridge Biotech

The Institut Pasteur (Pasteur) (plaintiff) owned U.S. Patent Nos. 5,055,391 and 5,051,496 (the ’391 and ’496 patents) related to methods for detecting a virus, HIV-2. Genetic Systems Corporation (Genetic) (plaintiff) held the exclusive right to license the ’391 and ’496 patents in the United States. In 1984, an entity named Diagnostic Pasteur (DP) had a license to use the ’391 and ’496 patents as part of a joint venture with Genetic. In 1989, DP entered a cross-license agreement with Cambridge Biotech Corporation (CBC) (defendant). CBC manufactured and sold test kits for detecting HIV-2. Under the cross-license agreement, CBC agreed to license patent rights to DP, and in exchange, DP agreed to license patent rights to CBC. At that time, DP no longer had rights related to the ’391 and ’496 patents, but DP agreed to use its “best efforts to recover” those rights, which, once recovered, were included in the license to CBC. Pasteur signed its “approval” of the cross-license agreement. Subsequently, through a series of corporate transactions, DP obtained all the stock of a corporation that in turn owned all the stock of Genetic. Pasteur was a minority shareholder of DP, while Sanofi, S.A., was the majority shareholder of DP. CBC believed that, through the Genetic acquisition, DP had successfully recovered its license rights, and that rights under the ’391 and ’496 patents therefore extended to DP through the parties’ cross-license agreement. CBC tendered royalty payments to DP, which were rejected. Thereafter, CBC became a Chapter 11 bankruptcy debtor. In an adversary proceeding, Pasteur and Genetic claimed that CBC was infringing the ’391 and ’496 patents. CBC’s defense was that it had a license notwithstanding Genetic’s exclusive license rights. It was undisputed that the ’391 and ’396 patents were valid and covered CBC’s HIV-2 test kits.