In its first intellectual property ruling of the current term, the Supreme Court unanimously held on January 22, 2014 in Medtronic, Inc. v. Mirowski Family Ventures LLC that a patentee always bears the burden of proving infringement, even when the plaintiff is a licensee in a declaratory judgment action. While perhaps not a surprising conclusion, the ruling reversed a decision by the Court of Appeals for the Federal Circuit that had created a narrow exception in some circumstances involving licensees.
In this case, Medtronic (the licensee) and Mirowski (the licensor) had an existing license agreement for certain patents relating to cardiovascular medical devices. During the term of the agreement Medtronic introduced several new products Mirowski asserted were infringing, a charge Medtronic denied. In that circumstance, the license agreement permitted Medtronic to pay royalties on the new products into escrow while challenging infringement in court. Alternatively, if Medtronic elected not to pay royalties, Mirowski could terminate the license and bring an infringement action. Medtronic chose to pay royalties into escrow and filed a declaratory judgment action asking a U.S. District Court to rule the new products did not infringe the patents.
In an ordinary patent infringement action, the patentee bears the burden of proving infringement. The same ordinarily holds true in a declaratory judgment action, even though the patentee is technically the defendant. In this case, however, because Medtronic was a licensee and paying royalties into escrow, Mirowski was precluded from asserting infringement in court. As a result, the Federal Circuit made an exception on the basis that it was unfair for Mirowski to bear the burden of proof on a claim it wasn't permitted to bring.
In reversing the Federal Circuit's decision, the Supreme Court looked to three legal propositions that, taken together, supported a holding that even in this exceptional circumstance, the burden of proving infringement should remain with the patentee: (1) the burden of proving infringement generally rests on the patentee, (2) the operation of the Declaratory Judgment Act (which permits the filing of declaratory judgment actions in certain, limited circumstances) is largely procedural, and (3) the burden of proof is a substantive, not procedural, aspect of a claim.
Finally, the Supreme Court noted the potential problems that could arise with the exception created by the Federal Circuit. It observed that Medtronic or similarly situated party could lose by failing to prove a product did not infringe, while a second alleged infringer selling the exact same product could potentially win under the traditional rule if the patentee failed to prove the product did infringe. This would leave the public in doubt as to what the scope of the patent really was.
This bright line rule provides clarity for patentees, who should expect, regardless of the procedural posture of a case, that they will always bear the burden of proving infringement.