LaFrance on Placing the Burden of Proof Where it Belongs in a Patent Licensee's Action for Declaratory Judgment of Non-Infringement: Medtronic, Inc. v. Mirowski Family Ventures

LaFrance on Placing the Burden of Proof Where it Belongs in a Patent Licensee's Action for Declaratory Judgment of Non-Infringement: Medtronic, Inc. v. Mirowski Family Ventures

 Excerpt:

In an action for patent infringement, it is well settled that the patentee bears the burden of proving infringement. In Medtronic, Inc. v. Mirowski Family Ventures, LLC, 2014 U.S. Lexis 788 (Jan. 22, 2014), the Supreme Court unanimously held that the patentee also bears this burden when it is the defendant in an action for a declaratory judgment of non-infringement, even if the plaintiff is a licensee in good standing. As a result of this decision, patentees – including patent assertion entities – will have to evaluate the strength of their infringement claims more carefully before approaching potential licensees. Otherwise, the licensees may call their bluff, and the result could be costly.

Background

Actions for declaratory judgments of non-infringement and/or invalidity have become increasingly common since the Supreme Court held, in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) [an enhanced version of this opinion is available to lexis.com subscribers], that a patent licensee does not have to breach or terminate its licensing agreement in order to bring an action for a declaratory judgment that it is not infringing the licensed patent.

In Medtronic, Inc. v. Mirowski Family Ventures [enhanced version], patent owner MFV granted an exclusive license to Eli Lilly & Co., which then sublicensed the patents to Medtronic. In 2003, Medtronic decided to challenge the validity, scope, and enforceability of the patents. Pursuant to a Litigation Tolling Agreement (LTA) between the parties, MFV identified which Medtronic products it believed were infringing, and permitted Medtronic to retain its license while seeking a declaratory judgment of non-infringement with respect to those products. Because Medtronic was a licensee in good standing, MFV did not counterclaim for infringement.

The district court held that MFV failed to meet its burden of proving that Medtronic's products infringed the patents, and accordingly granted Medtronic a declaratory judgment of non-infringement. However, the Federal Circuit reversed. Because Medtronic was a licensee in good standing, the patentee could not have asserted an infringement counterclaim, since there can be no infringement unless the licensee is in breach of the licensing agreement. Medtronic, 695 F.3d at 1273. Because the patentee could not assert infringement, the Federal Circuit concluded that the licensee, as the sole party seeking relief, should bear the burden of proof. Id. Under these circumstances, if neither party chose to present any evidence at all, the court observed, there would be "no principled reason" to give Medtronic a judgment of non-infringement. Id. Accordingly, the court held 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 non-infringement and of no consequent liability under the license bears the burden of persuasion." Id. at 1274. The court noted that a contrary rule "would allow licensees to use MedImmune's shield as a sword – haling licensors into court and forcing them to assert and prove what had already been resolved by license." Id. Accordingly, the court held that the licensee bore the burden of proving non-infringement.

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