The Supreme Court has unanimously ruled that a patent owner always has the burden of proving infringement, even if the case is brought by a licensee asking for a declaration that the licensed patents were not invalid. A copy of the opinion, written by Justice Breyer, is available here.
In the case, Medtronic, Inc. licensed implantable heart stimulator patents from Mirowski Family Ventures, LLC.
The licensing agreement allowed Medtronic to practice certain Mirowski patents in exchange for royalty payments and specified procedures to identify products covered by the license and to resolve disputes between the parties. Pursuant to those procedures, Mirowski notified Medtronic of its belief that several new Medtronic products designed to detect when the heart beats out of sync and emit tiny shocks of electricity to correct its rhythm, infringed the licensed patents. Medtronic then filed a declaratory judgment action seeking a declaration that those products did not infringe the patents and that no royalties were owed. While the case was pending Medtronic paid royalties to an escrow account for distribution to the prevailing party.
The Delaware District Court concluded that Mirowski, as the party asserting infringement, had the burden of proving infringement and that Mirowski had not met that burden. The Federal Circuit, however, disagreed. It ruled that while a patent owner normally bears the burden of proof, where the patent owner is a declaratory judgment defendant and, like Mirowski, is foreclosed from asserting an infringement counterclaim by the continued existence of a licensing agreement, the party seeking the declaratory judgment, here Medtronic, bears the burden of proof.
After first finding that the court had subject matter jurisdiction, the Supreme Court reversed the Federal Circuit and held that when a licensee seeks a declaratory judgment against a patent owner that its products do not infringe the licensed patent, the patent owner bears the burden of persuasion on the issue of infringement. The Court reasoned that a patent owner ordinarily bears the burden of proving infringement and the operation of the Declaratory Judgment Act” is only “procedural,” leaving “substantive rights unchanged.” The burden of proof is a “substantive” aspect of a claim and should remain on the party asserting that a patent is infringed. The Court said that shifting the burden based on the form of the action could create post-litigation uncertainty about a patent’s scope. It may also create unnecessary complexity by compelling a licensee to prove a negative. Burden shifting would also improperly discourage use of the declaratory judgment procedure.
The Court wrote that Mirowski set the dispute in motion by accusing Medtronic of infringement, and there was no convincing reason why burden of proof law should favor the patent owner. The public interest in maintaining a well-functioning patent system does not favor changing the ordinary burden of proof rule. Thus, “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,”
There are four more patent cases still to be argued this term: Alice v. CLS Bank, concerning whether computer software is patentable; Limelight v. Akamai, regarding “joint infringement” issues; Nautilus v. Biosig, dealing with issues of indefinite patents; and two cases, Highmark v. Allcare and Octane Fitness v. Icon Health, which will determine when attorney’s fees can be awarded.