Burden of Proof in a Declaratory Judgment Action by a Licensee in Good Standing

Burden of Proof in a Declaratory Judgment Action by a Licensee in Good Standing

 Excerpt:

In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) [an enhanced version of this opinion is available to lexis.com subscribers], the Supreme Court held 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. Boston Scientific Corp., 695 F.3d 1266 (Fed. Cir. 2012) [enhanced version], cert granted, 133 S.Ct. 2393 (May 20, 2013), the Court will decide which party bears the burden of proof in such a proceeding. In other words, must the patentee prove that the licensee's products are within the scope of the patent, or must the licensee prove the contrary? The decision in this case will have a significant impact on patent licensing and litigation strategies.

Proceedings Below

MFV, the owner of the patents at issue, 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 still a licensee, MFV did not counterclaim for infringement.

The district court held that the defendant/patentee failed to meet its burden to demonstrate that Medtronic's products infringed the patents, and accordingly granted a declaratory judgment of non-infringement.

The Federal Circuit reversed, reasoning that, as the party seeking relief, Medtronic should bear the burden of proof. Because there was no infringement counterclaim (such a claim being foreclosed by Medtronic's status as a licensee in good standing), only one party – Medtronic – was seeking relief. 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. Medtronic, 695 F.3d at 1273. 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 noninfringement 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.

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