U.S. Supreme Court to Review Burden of Proof to Apply in Patent Licensee Challenges

by Ropes & Gray LLP
Contact

In 2007, the United States Supreme Court ruled that patent licensees could challenge their obligation to pay patent license royalties under a license agreement without first breaching the license agreement by halting royalty payments. MedImmune Inc. v. Genentech Inc., 549 U.S. 118. Following MedImmune, the Federal Circuit held that the challenging licensee had the burden to prove that, absent the license, the patents would not be infringed and, thus, no license royalty owed, in Medtronic Inc. v. Boston Scientific Corp. (U.S., No. 12-1128, review granted 5/20/13). Normally, the patent holder has the burden to prove infringement.

On May 20, the United States Supreme Court granted a writ of certiorari in the Federal Circuit’s holding in Medtronic. The Supreme Court is scheduled to hear this case next term, and its ruling could have a significant impact on the balance of power between patent licensors and licensees.

The Medtronic action traces its roots to 1991, when Medtronic entered into a sublicensing agreement for two patents owned by Mirowski Family Ventures, LLC (“MFV”). In 2006, MFV and Medtronic entered into a Litigation Tolling Agreement (“LTA”), which required MFV to inform Medtronic of any Medtronic products MFV deemed were covered by these patents or any subsequent reissue patents. If Medtronic disagreed, the LTA gave Medtronic the right to retain its license and obligated Medtronic to seek a declaratory judgment of noninfringement. Pursuant to this agreement, MFV identified several products and, in 2007, Medtronic filled a complaint asking for a declaratory judgment on the question of whether these products would, absent the license, infringe MFV patents. Because Medtronic remained MFV’s licensee, MFV could not counterclaim for infringement of either patent.

A key question in the case was who – Medtronic, as the plaintiff and licensee, or MVF, as the defendant and patent holder – had the burden of proof. The district court relied on Under Sea Industries, Inc. v. Dacor Corp., 833 F.2d 1551, 1557 (Fed. Cir. 1987), for the proposition that “the burden always is on the patentee to show infringement,” and held that MFV had the burden of showing infringement of its patents. In this instance, MFV failed to do so, and the district court entered a judgment of noninfringement in favor of Medtronic and a judgment of validity and enforceability in favor of MFV.

Both parties appealed. On the issue of who bears the burden of proof, the Federal Circuit acknowledged the general rule that the patent owner cannot prevail without providing all the elements of infringement, but the court also noted that, generally, the party seeking relief must prove the allegations in their complaint. Furthermore, the court was concerned about requiring the patent owner to bear the burden of proof given the position of the parties and the Supreme Court’s holding in MedImmune. If the burden rested on the patent owner, the Federal Circuit reasoned, licensees – who were protected from an infringement claim by MedImmune’s holding that allows licensees to bring a declaratory judgment suit without breaching their license – could challenge underlying licensed patents with few penalties.

Instead, in a situation like the one before it in Medtronic, where the licensee was free to challenge the patent under MedImmune but the patent holder was barred from a counterclaim of infringement, the Federal Circuit held that the burden of proof should fall on the party seeking relief – the licensee. Here, this was Medtronic, which was “asking the court to disturb the status quo ante and to relieve it from a royalty obligation it believes it does not bear.” Shifting the burden to the licensee led the Federal Circuit to reverse the district court and hold that “in the limited circumstance when an infringement counterclaim by a patentee is foreclosed by the continued existence of a license, a licensee seeking a declaratory judgment of noninfringement and of no consequent liability under the license bears the burden of persuasion.”

Medtronic sought further review in the Supreme Court and, on May 20, 2013, the Supreme Court granted a writ of certiorari for its next term on the question of “whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.”

The Supreme Court’s review sets the stage for a potential shift in power between patent licensors and licensees. To discuss these potential consequences, and other concerns that may arise under your patent license agreements, please contact your regular Ropes & Gray contact.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ropes & Gray LLP | Attorney Advertising

Written by:

Ropes & Gray LLP
Contact
more
less

Ropes & Gray LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.