Wednesday, January 22, 2014

Medtronic Inc. v. Mirowski Family Ventures, LLC - A Patent Owner Must Prove Infringement in Declaratory Judgment Action

Today, in Medtronic, Inc. v. Mirowski Family Ventures, LLC, the Supreme Court held when a licensee files a declaratory judgment action that products don't infringe a licensed patent, the patent owner must prove infringement.

Justice Breyer delivered the opinion for the Court and framed the question: "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 non-infringement?

The Court asserted legal logic supports "the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit." He stated it is well established that the burden of proving infringement rests upon the patent owner. The Declaratory Judgment Act is only procedural while the burden of proof is a rule of substantive law.

The Court also noted shifting the burden to the licensee could create uncertainty about the scope of the patent. Suppose an alleged infringer lost the declaratory judgment action because the evidence was inconclusive on non-infringement, the alleged infringer might continue in the same conduct, forcing the patent owner to file an infringement action. If the burden shifted, the patent owner might fail to prove infringement if the evidence was inconclusive. As a result nobody would know what products infringe. Thus, the declaratory judgment suit would not provide "an immediate and definitive determination of the legal rights of the parties."

The Court stated to shift the burden would make it difficult for the licensee to understand the patent owner's infringement claim, which the patent owner would be in a better position to know, while the alleged infringer would have to argue against every infringement theory.

The Court emphasized that burden shifting to the licensee is difficult to reconcile with the purpose of the Declaratory Judgment Act to ameliorate the dilemma posed by putting one who challenges a patent's scope to the choice between abandoning his rights or risking suit.

The Court was not persuaded by contrary arguments. It noted the Federal Circuit's lacked support in Schaffer v. Weast, 546 U.S. 49 (2005), since it was not a declaratory judgment case. It said the Federal Circuit's position that the holding applied only in the limited circumstances did not change the fact those circumstances are often present. The Court noted the patent owner started the dispute in response to the concern a licensee could force a patent owner into patent litigation.

The Court concluded the public interest didn't favor imposing the burden of proving infringement upon the licensee, since the public interest has a "paramount interest in seeing that patent monopolies are kept within their legitimate scope."

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