A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? The Supreme Court has held that the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.
A patent-holder ordinarily bears the burden of proving that someone else is infringing his patent. In Medtronic, Inc. v. Mirowski Family Ventures, LLC, No. 12–1128 (U.S. January 22, 2014), the Supreme Court considered whether the burden of proof shifts when the patentee is a defendant in a declaratory judgment action, and the plaintiff (the potential infringer) seeks a judgment that he does not infringe the patent. The court hold that, when a licensee seeks a declaratory judgment against a patentee to establish that there is no infringement, the burden of proving infringement remains with the patentee. The court reversed the Federal Circuit’s determination to the contrary.
The case involved Medtronic, Inc., a firm that designs, makes, and sells medical devices, and Mirowski Family Ventures, LLC, a firm that owns patents relating to implantable heart stimulators. Pursuant to a 1991 agreement, Medtronic was permitted to use certain Mirowski patents in exchange for making royalty payments to Mirowski. The agreement also provided that if Mirowski gave notice to Medtronic that a new Medtronic product “infringe[d]” a Mirowski patent, Medtronic had a choice. Medtronic could “cure” by paying royalties for the new product or it could “challenge the assertion of infringement of any of the Mirowski patents through a Declaratory Judgment action.”
In 2007, the parties found themselves in the midst of an “infringement” dispute. Mirowski gave Medtronic notice that it believed seven new Medtronic products violated various claims contained in two of its patents (related to devices that cause the heart’s ventricles to contract simultaneously as the heart beats). Medtronic thought that its products did not infringe Mirowski’s patents, either because the products fell outside the scope of the patent claims or because the patents were invalid.
Medtronic filed a declaratory judgment action in Federal District Court in Delaware. It sought a declaration that its products did not infringe Mirowski’s patents and that the patents were invalid. The District Court recognized that Mirowski was the defendant in the action. But it nonetheless believed that Mirowski, as the party asserting infringement, bore the burden of proving infringement. After a bench trial, the court found that Mirowski had not proved infringement, either directly or under the doctrine of equivalents. And since Mirowski, the patentee, bore the burden of proof, it lost.
The Court of Appeals for the Federal Circuit reversed. It held that Medtronic bore the burden of proof because it was the declaratory judgment plaintiff. However, essentially agreeing with the District Court, the Supreme Court has now reversed the Federal Circuit.
The Supreme Court held that the patent holder bears the burden of persuasion on the issue of infringement even when a licensee seeks a declaratory judgment against the patent holder that its products do not infringe the licensed patent. This Supreme Court noted that this conclusion was strongly supported by three settled legal propositions: First, a patentee ordinarily bears the burden of proving infringement. Second, the Declaratory Judgment Act is only “procedural,” leaving “substantive rights unchanged.” Third, “the burden of proof” is a “‘substantive’ aspect of a claim.” Taken together these three legal propositions indicated that, in a licensee’s declaratory judgment action, the burden of proving infringement should remain with the patentee.
The court found that practical considerations led to the same conclusion. For example, it noted that shifting the burden based on the form of the action creates unnecessary complexity by compelling a licensee to prove a negative. The court also noted that it could create postlitigation uncertainty about the scope of the patent. The court gave the following example:
Suppose the evidence is inconclusive, and an alleged infringer loses his declaratory judgment action because he failed to prove noninfringement. The alleged infringer, or others, might continue to engage in the same allegedly infringing behavior, leaving it to the patentee to bring an infringement action. If the burden shifts, the patentee might lose that action because, the evidence being inconclusive, he failed to prove infringement. So, both sides might lose as to infringement, leaving the infringement question undecided, creating uncertainty among the parties and others who seek to know just what products and processes they are free to use.
The case was remanded to the district court which, as noted, had already determined that Mirowski (the patentee) failed to proved infringement, either directly or under the doctrine of equivalents.
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