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Attorneys

Patent Holders Bear the Burden of Proof Even as a Defendant

February 25 2014

By Dale Campbell

The United States Supreme Court was presented with the question of who has the burden of proof when a licensee files an action seeking a declaration of non-infringement against the patentee. In Medtronic Inc. v. Mirowski Family Ventures, 187 L.Ed.2d 703 (Jan. 22, 2014), the Supreme Court reviewed a decision by the Federal Circuit Court, which held that the plaintiff licensee has the burden of proving non-infringement. The Federal Circuit Court, in interpreting the Declaratory Judgment Act, found that Medtronic, as the plaintiff, carried the burden of proof to prove all elements of its claim, as does any other plaintiff. The Supreme Court reversed.

The defendant, Mirowski Family Ventures (“Mirowski”), owned numerous patents relating to implantable heart stimulators. Medtronic entered into a license with Mirowski to practice certain of Mirowski’s patents in exchange for royalties. Pursuant to the terms of the license, Mirowski notified Medtronic of Mirowski’s contention that several of Medtronic’s products violated Mirowski’s patents and, therefore, additional royalties were due. Medtronic disputed the claim, filed an action for declaratory relief, and accrued the disputed unpaid royalties in an escrow account as permitted under the license.

The Supreme Court reversed the Federal District Court, finding that the patent holder, Medtronic, retains the burden of proving infringement even when a licensee initiates an action for declaratory judgment. The procedural method by which the question of infringement is presented did not determine the burden of proof.

The Supreme Court’s decision was supported by three settled legal propositions. First, the patent holder generally has the burden of proving infringement. (See Imhauser v. Buerk, 101 U.S. 647, 662.) Second, the Supreme Court has repeatedly held that the Declaratory Judgment Act is only procedural and does not change substantive rights. (Beacon Theaters, Inc. v. Westover, 359 U.S. 500, 509 (1959).) Lastly, the burden of proof is a substantive element of claim, not a mere procedural consideration. (Rollie v. Illinois Dept. of Revenue, 530 U.S. 15, 20-21 (2000).) These three well-settled legal principles dictated the ruling that the patent holder always bears the burden of proving infringement.

The Supreme Court further recognized the practical problems that would arise if the Federal District Court’s decision on burden-shifting stood. If, for example, Medtronic failed to carry a burden of proving non-infringement, the issue of actual infringement by Medtronic, or others, would remain unsettled, leaving uncertainty between the parties and possibly others. Just because a plaintiff might not carry its burden of “non-infringement” does not mean the patent holder has proven infringement. Moreover, the patentee is best-positioned to interpret its patent and its contentions with respect to infringement. The licensee should not be put into a position of guessing why the patentee thinks a product or process infringes a claim of its patent.

The entire purpose of the Declaratory Judgment Act was to remove the dilemma confronting a licensee when charged with infringement. The licensee should not have the risk of losing its rights under the license or face an infringement lawsuit. The Declaratory Judgment Act does not shift the substantive burden of proof on the licensee. Absent Medtronic’s declaratory judgment action, Mirowski would have filed an infringement action and clearly would have the burden of proving infringement. Mirowski sent Medtronic a notice of infringement and set the dispute in motion. The Court determined there is no reason why the licensee should bear the burden of proving non-infringement simply because it initiated the declaratory judgment complaint to preserve its rights.