Supreme Court Will Examine Patent Licensee’s Burden of Proof for Declaratory Judgment of Noninfringement

The Supreme Court on May 20, 2013, agreed to review a Federal Circuit decision that a patent licensee bears the burden of proof in its action for a declaratory judgment of noninfringement where the license remains in effect to preclude the defendant patentee’s infringement counterclaim.  Medtronic Inc. v. Boston Scientific Corp., U.S., No. 12-1128, 5/20/2013.

The question presented in the petition for certiorari is as follows:

In Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007), this Court ruled that a patent licensee that believes that its products do not infringe the patent and accordingly are not subject to royalty payments is “not required … to break or terminate its … license agreement before seeking a declaratory judgment in federal court that the underlying patent is … not infringed.”

The question presented is whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.

Federal Circuit Decision

Medtronic is the sublicensee for patents related to a cardiac resynchronization therapy device, owned by Mirowski Family Ventures, LLC (MFV) and exclusively licensed to Guidant Corp. Medtronic’s 1991 agreement permitted it to challenge patent validity, enforceability, or scope in a declaratory judgment action without breaching its license.

Medtronic brought such a challenge in 2003, paying royalties into an escrow account while doing so. That dispute was settled with an agreement requiring MFV to identify the products covered by the patents, and permitting Medtronic to sue for a declaratory judgment of noninfringement without breaching the patent license. When Medtronic disputed MFV’s notice of covered products, it filed the declaratory judgment action.  Because the license remained in force, MFV had no opportunity to counterclaim for infringement.

[AIPLA]

The district court decided that MFV, as the patent owner, bore the burden of proving infringement, explaining that the patentee always carries this burden, whether as a plaintiff or counterclaim defendant. It concluded that MFV failed to prove infringement.

The Federal Circuit reversed. It is well settled, Senior Judge Linn acknowledged, that a patentee who files a complaint or counterclaim alleging patent infringement bears the burden of proving infringement. The substantive burden of proof normally does not shift simply because the party seeking relief is a counter-claiming defendant in a declaratory judgment action, he added.

However, this case is different, the Court pointed out.

In this case, as sanctioned by MedImmune, the continued existence of the license precludes the very infringement counterclaim that normally would impose the burden of proving infringement on the patentee. Here, Medtronic is shielded from any liability for infringement by its license. And MFV has not asserted a claim of infringement, nor could it because of the license. Thus, while Medtronic’s suit for declaratory judgment undoubtedly rests upon the infringement provisions laid out in [35 U.S.C. §271], the relief it seeks relates directly to its obligations under the license. * * *

As noted, neither party here seeks money damages or an injunction based on patent infringement, which are the sorts of relief generally sought when a party seeks relief for patent infringement. Instead, the one claim for relief sought in this case is the claim Medtronic asserts to be relieved from liability under the license by having a court declare the products in question to be noninfringing. Medtronic is the party seeking this relief and Medtronic must bear the burden of proving it is entitled to such relief. A contrary result would allow licensees to use MedImmune’s shield as a sword—haling licensors into court and forcing them to assert and prove what had already been resolved by license. Because the declaratory judgment plaintiff is the only party seeking the aid of the court in the circumstances presented here, that party must bear the burden of persuasion. Therefore, this court holds that in the limited circumstance when an infringement counterclaim by a patentee is foreclosed by the continued existence of a license, a licensee seeking a declaratory judgment of noninfringement and of no consequent liability under the license bears the burden of persuasion.

To read the Federal Circuit opinion in this case, click here. Click the following to read the petition for certiorari, the respondent’s opposition, and the petitioner’s reply.