In Medtronic, Inc. v. Mirowski Family Ventures, LLC, a unanimous Supreme Court held that the patent holder bears the burden of proving infringement, even in a declaratory judgment action brought by a licensee. In reaching its decision, the Court dismissed concerns that it would skew the balance of power between patent holder and licensee, noting that, at least in this case, the patent holder instigated the dispute by asserting that new products were covered by the license. The Court justified its decision as striking the right "balance" between patent holder rights and the public interest in limiting patents to their legitimate scope.
The Backstory
The case arose from a dispute between Medtronic, the licensee of the patents at issue, and Mirowski, the ultimate licensor. When Mirowski asserted that several new Medtronic products fell under the license (and thus should be royalty-bearing), Medtronic brought a declaratory judgment action seeking a declaration of non-infringement. In accordance with terms of the license agreement, Medtronic paid royalties on the disputed products into an escrow account, to be dispersed in accordance with the outcome of the litigation.
Even though Mirowski was the defendant in the declaratory judgment action, the district court determined that it bore the burden of proof as the patent owner, hewing to the principle that "The burden always is on the patentee to show infringement." The district court found that Mirowski did not meet this burden, and so ruled in favor of Medtronic.
On appeal, the Federal Circuit determined that because Medtronic was the declaratory judgment plaintiff, it bore the burden of proof.
Medtronic petitioned for certiorari, which the Supreme Court granted "[i]n light of the importance of burdens of proof in patent litigation.
Federal Circuit Jurisdiction
Justice Breyer authored the unanimous Supreme Court opinion. The opinion first addressed whether the Federal Circuit had jurisdiction over the appeal, an issue which apparently was raised by an amicus, Tessera Technologies, Inc.
According to the Supreme Court:
The Supreme Court agreed with some, but not all, of Tessera's line of argument:
Accordingly, the Supreme Court confirmed that the Federal Circuit had jurisdiction over the appeal in the declaratory judgment action.
Burden of Proof
The Supreme Court framed the issue before it and it's resolution as follows:
Justice Breyer cited "three legal propositions" in support of laying the burden of proof on the patent holder:
- "[T]he burden of proving infringement generally rests upon the patentee."
- We have long considered 'the operation of the Declaratory Judgment Act' to be only 'procedural,' ... leaving 'substantive rights unchanged.'
- "[W]e have held that 'the burden of proof' is a "substantive" aspect of a claim.'"
Justice Breyer also cited three "practical considerations" in support of laying the burden of proof on the patent holder.
First, the Court cited The Restatement (Second) of Judgments for the principle that "relitigation of an issue (say, infringement) decided in one suit 'is not precluded' in a subsequent suit where the burden of persuasion 'has shifted' from the 'party against whom preclusion is sought . . . to his adversary.'" Thus, permitting the burden to shift "depending upon the form of the action could create post litigation uncertainty about the scope of the patent." Justice Breyer gave this example:
The Court also noted that "the patent holder is in a better position than an alleged infringer to know, and to be able to point out, just where, how, and why a product (or process) infringes a claim of that patent." Placing the burden of proof on the alleged infringer would require the alleged infringer "to work in the dark, seeking, in his declaratory judgment complaint, to negate every conceivable infringement theory."
The Court also found that "burden shifting here is difficult to reconcile with a basic purpose of the Declaratory Judgment Act," which it characterized as being to "rescue" licensees like Medtronic from the dilemma of having to choose between "abandon[ing] its right to challenge the scope of Mirowski's patents, or ... risk losing an ordinary patent infringement lawsuit, and thereby risk liability for treble damages and attorney's fees as well as injunctive relief."
Because "[t]he Federal Circuit's burden shifting rule ...create[s] a significant obstacle to use of [a declaratory judgment] action," and because the Court could not identify "any strong reason for creating that obstacle," the Court reversed the Federal Circuit.
Impact on Patent Holders
In its amicus brief, Intellectual Property Owners Association raised concerns that a reversal of the Federal Circuit decision would "'burden . . . patent owners' by permitting 'a licensee . . . —at its sole discretion—[to] force the patentee into full-blown patent infringement litigation.'" The Court's response to this concern is less than satisfactory:
The Court also noted that, in this case, "it was Mirowski that set the present dispute in motion by accusing Medtronic of infringement," but the Court's rule would seem to apply even if a licensee spontaneously and unilaterally decided to challenge the scope or validity of a licensed patent.
Striking a Balance?
Justive Breyer closed the opinion with what is becoming a recurring theme in Supreme Court patent decisions:
The Court expressed similar concerns for "balancing" the rights of patent holders and the incentives provided by the patent system against"the public interest" in limiting the reach of patents in Prometheus, Myriad, and Actavis.
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