WASHINGTON, D.C. - (Mealey's) The question of whether a patent licensee bears the burden of proving that its products do not infringe in a declaratory judgment action filed pursuant to MedImmune Inc. v. Genentech Inc. (549 U.S. 118, 137 ) will be decided by the U.S. Supreme Court, which on May 20 granted certiorari in a dispute over cardiac resynchronization therapy (CRT) devices (Medtronic Inc. v. Boston Scientific Corp. et al., No. 12-1128, U.S. Sup.) (lexis.com subscribers may access Supreme Court briefs for this case).
According to Medtronic Inc.'s March 2013 petition for certiorari, the Federal Circuit U.S. Court of Appeals erred in holding that an accused infringer in a declaratory judgment action must establish noninfringement because such a ruling "is contrary to the settled principle" that infringement must "be shown by satisfactory proof" and "cannot be presumed."
"Nor does the procedural realignment of parties in a declaratory judgment action reallocate the burden of proof - a principle the Federal Circuit acknowledged. The Federal Circuit's conclusion that the presence of a patent license justified a fundamental departure from these principles is unsupported and deserves this Court's review," the petition states.
Medtronic filed the instant lawsuit before U.S. Judge Sue L. Robinson of the District of Delaware in 2007, seeking a declaration that it had not infringed respondent Mirowski Family Ventures (MFV) LLC's U.S. reissue patents RE38,119 and RE39,897 with the sale of certain Medtronic CRT products. MFV is the owner by assignment of the patents in suit, which it in turn has licensed to co-respondents Guidant Corp. and Boston Scientific Corp. (MFV, collectively). In 1991, however, Medtronic sublicensed the RE'119 patent from Eli Lilly & Co. According to the record, the agreement allowed Medtronic to challenge the RE'119 patent's validity via declaratory judgment; Medtronic did so, and the parties entered into a litigation tolling agreement (LTA) that obligated MFV to inform Medtronic of which products it believed were infringing.
"Because Medtronic remained MFV's licensee, MFV could not counterclaim for infringement of either patent," the Federal Circuit noted in its September 2012 ruling.
Judge Robinson construed claims "improving the hemodynamic efficiency of a heart" and "bi-ventricular pacemaker" as limited to the treatment of congestive heart failure. Accordingly, the judge deemed the patents in suit valid. Medtronic's accused products were deemed noninfringing, however, both literally and under the doctrine of equivalents. The parties then cross-appealed to the Federal Circuit. Reversing and remanding, the appellate panel turned to the question of which party bears the burden of proving infringement. Citing MedImmune, in which the Supreme Court found that a licensee should not be forced to cease royalty payments and risk infringement liability before challenging the scope of a license, the Federal Circuit held that the instant suit requires a determination of "the proper allocation of the burden of persuasion in the post-MedImmune world."
Siding with MFV, the Federal Circuit agreed that as a declaratory judgment plaintiff, Medtronic must demonstrate that at least one limitation of each claim of MFV's patents is not met by Medtronic's products because Medtronic is "unquestionably the party now requesting relief from the court."
"In other words, it is Medtronic and not MFV that is asking the court to disturb the status quo ante and to relieve it from a royalty obligation it believes it does not bear. Consistent with the above, for the court to disturb the status quo ante, Medtronic must present evidence showing that it is entitled to such relief. If neither party introduced any evidence regarding infringement or noninfringement there is no principled reason why Medtronic should receive the declaration of noninfringement it seeks," the Federal Circuit held.
"Because Medtronic, and ultimately the district court, did not appreciate the appropriate allocation of the burden of proof and how the burden affected the parties' conduct during discovery, it is within the district court's discretion on remand whether to limit Medtronic to its current interrogatory answer, or to allow Medtronic to amend its interrogatory answer to include any additional noninfringement contentions it may wish to assert," the appellate panel added.
Should the Federal Circuit ruling stand, it "will have numerous undesirable consequences," according to Medtronic.
"First and foremost, it dramatically undercuts the holdings in MedImmune and the remedies it provided. Under the Federal Circuit's new regime, a declaratory judgment under MedImmune comes with a significant price: the duty to prove the negative proposition that the involved products do not infringe - a formidable task where, as here, the asserted patents include hundreds of individual claims and liability could rest on any one of several infringement theories. The only way a licensee could ensure that the burden of proof remains with the patentee would be to repudiate the license and invite the patentee to sue for infringement, thereby 'risk[ing] such serious consequences' as treble damages and attorney's fees - the very outcome the Court allowed licensees to avoid in MedImmune," Medtronic asserts, citing MedImmune.
A related petition (Mirkowski Family Ventures LLC v. Medtronic Inc. [No. 12-1116]), pertaining to the Federal Circuit's holding that Judge Robinson's claim construction improperly restricted various claims of the patents in suit, was not acted upon by the Supreme Court.
Medtronic is represented by Martin R. Lueck of Robins, Kaplan, Miller & Ciresi in Minneapolis. Arthur I. Neustadt of Oblon, Spivak, McClelland, Maier & Neustadt in Alexandria, Va., represents the respondents.
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