Medtronic Inc. v. Boston Scientific Corp., Nos. 2011-1313, 2011-1372, 2012 WL 4075624 (Fed. Cir. Sept. 18, 2012)

In Medtronic Inc. v. Boston Scientific Corp., Nos. 2011-1313, 2011-1372, 2012 WL 4075624 (Fed. Cir. Sept. 18, 2012), the Federal Circuit ruled that a declaratory judgment plaintiff bears the burden to prove noninfringement where the patentee/defendant cannot assert a counterclaim of infringement due to the existence of a license agreement. Defendant Mirowski Family Ventures, LLC (“MFV”) owned two patents relating to cardiac pacers. MFV, through a sublicensee, exclusively licensed one of the patents to Medtronic in 1991. Under the terms of the license, Medtronic could challenge the validity, enforceability and scope of the patent, which it did in a declaratory judgment action filed in 2003. In view of Medtronic’s continuing royalty payments (in escrow) to MFV under the license agreement (pursuant to MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007)), MFV was precluded from filing a counterclaim for infringement of the patent.

At issue during the litigation was whether the patentee (MFV) bore the burden of persuasion to prove infringement of the patent or whether that burden fell on the declaratory judgment plaintiff (Medtronic). Medtronic argued that the burden always falls on the patentee to prove infringement. MFV countered that, since Medtronic initiated the action and it did not assert a counterclaim for infringement, Medtronic bore the burden to prove noninfringement. During the litigation, MFV did not set forth any infringement contentions, and simply responded to Medtronic’s assertions regarding noninfringement. The district court, relying on longstanding precedent requiring the patentee to establish infringement, found that MFV failed to meet its burden of persuasion and ruled in favor of Medtronic on its noninfringement assertion.

On appeal, the Federal Circuit noted that MedImmune provided licensees with standing to challenge validity and noninfringement of a licensor’s patents while still making royalty payments pursuant to the license, thus providing the licensee a shield against the economic consequences of patent infringement. The question for the court was the proper allocation of the burden of persuasion post-MedImmune. In this case, Medtronic filed the action, asserting invalidity and noninfringement of the patent, and was thus the party seeking relief from the court. In contrast, MFV did not, and could not, assert a counterclaim claim of infringement, and thus simply sought an end to the suit and a continuation of its contract (license) with Medtronic. Accordingly, the Federal Circuit 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.” Medtronic, 2012 WL 4075624, at *6. The court thus reversed and remanded the case in view of the district court’s erroneous conclusion that MFV bore the burden of proving infringement.