US Supreme Court clarifies the effectiveness of Medimmune-type declaratory judgments in Medtronic v Mirowski.
The US Supreme Court has reversed the decision of the Federal Circuit inMedtronic v Mirowski, and by doing so has reinforced in the US a well-known principle of patent litigation – that the patentee has to prove infringement, regardless of which side brings the case.
As discussed in our previous article, Medtronic is a medical devices manufacturer that was in a licence agreement with Mirowski regarding a number of medical devices patents. Under the licence agreement, if was specified that if Mirowski notified Medtronic that it believed that Medtronic’s products were infringing its patents, Medtronic had the option either to pay royalties or to seek a declaration of non-infringement with regard to those patents through the courts.
When, in 2007, Mirowski notified Medtronic that it believed seven of Medtronic’s products infringed two of Mirowski’s patents, Medtronic took the latter path and brought a so-called MedImmune-type declaratory judgment action (an action where a licensee brings a claim for non-infringement, but the patentee cannot bring a counter-claim for infringement due to the presence of a license) in the Federal District Court in Delaware.
The District Court found that Mirowski had not proved infringement of the patents, and so granted a declaration of non-infringement to Medtronic. Mirowski appealed to the Federal Circuit, arguing that because Medtronic had been the party to bring the case, the burden of proof should be on Medtronic to demonstrate that their products did not infringe.
The Federal Circuit held that, although normally the patentee bears the burden of proof even in a declaratory judgment case, a different rule should apply when the existence of a licence prevents the patentee counterclaiming for infringement.
The Federal Circuit’s decision has now been overturned by the Supreme Court in a unanimous decision. The law on burden of proof of infringement was considered to be settled, and the arguments presented in support of shifting the burden of proof were found not to be persuasive.
Several practical considerations were raised. Having a different burden of proof in an action seeking a declaration of non-infringement from that required in an action for infringement could lead to two cases on the same facts coming to different decisions, depending on who brought the action. This would ‘creat[e] uncertainty among the parties and others who seek to know just what products and processes they are free to use’.
Furthermore, placing the burden of proof on the licensee to show that it is not infringing ‘create[s] unnecessary complexity by making it difficult for the licensee to understand upon just what theory the patentee’s claim rests’. If the patentee is trying to prove infringement, it will specify exactly which claims are alleged to infringe, and in what manner. In the opposite situation, the licensee would have to demonstrate non-infringement of every single claim by every single product.
Finally, the legal process of bringing a declaratory judgment action was supposed to give a licensee the ability to challenge a patent’s scope without the licensee having to take the drastic step of breaching the licence and waiting for the patentee to bring an action for infringement (in which case, under US law, they would risk paying triple damages if they lost). The shifting of the burden of proof would make a declaratory judgment action a much less viable option.
The Supreme Court’s decision clarifies the effectiveness of MedImmune-type declaratory judgments and puts power back in the hands of licensees, who are once again free to challenge the patents that they are licensing while keeping the licence agreement intact, and without facing the difficult task of proving a negative.