January 22, 2014

Supreme Court Decides Medtronic, Inc. v. Mirowski Family Ventures, LLC

On January 22, 2014, the U.S. Supreme Court decided Medtronic, Inc. v. Mirowski Family Ventures, LLC, No. 12-1128, holding that the patentee bears the burden of persuasion on the issue of patent infringement when a patent licensee seeks a declaratory judgment against the patentee that its products do not infringe the licensed patent.

Mirowski Family Ventures, LLC licensed certain of its patents to Eli Lilly & Co., which then sublicensed the patents to Medtronic, Inc. The agreement provided that Medtronic could practice certain Mirowski patents in exchange for royalty fees and established procedures for resolving patent infringement disputes. Medtronic and Mirowski later entered into another agreement that modified the procedure for resolving infringement disputes: if Medtronic received notice of infringement, it could initiate a declaratory judgment action challenging infringement and accumulate disputed royalties in an escrow account, which would be distributed to the prevailing party in the declaratory judgment action.

A year later, Mirowski notified Medtronic that seven Medtronic products violated various claims in two of its implantable heart stimulator patents. Medtronic disagreed and brought a declaratory judgment action, asserting that its products did not infringe Mirowski's patents and that Mirowski's patents were invalid. The district court held that even though Mirowski was the defendant in the action, Mirowski, as the patent owner, bore the burden of proving infringement, and the court concluded after a bench trial that Mirowski had not proved infringement directly or under the doctrine of equivalents. The Court of Appeals for the Federal Circuit reversed, holding that Medtronic, the declaratory judgment plaintiff, bore the burden of proving non-infringement.

The Supreme Court reversed. In rejecting an amicus's argument, the Court first held that the Federal Circuit had subject-matter jurisdiction over the case. The Court explained that the declaratory judgment action "avoids" Mirowski's threatened action of patent infringement and therefore "arises under" federal patent law.

On the merits, the Court held that "the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit." The Court cited three legal propositions supporting this conclusion. First, "[i]t is well established that the burden of proving infringement generally rests upon the patentee." Second, "[w]e have long considered ‘the operation of the Declaratory Judgment Act' to be only ‘procedural,' leaving ‘substantive rights unchanged.'" And third, "‘the burden of proof' is a ‘substantive aspect of a claim.'" Accordingly, the Court explained, "[t]aken together these three legal propositions indicate that, in a licensee's declaratory judgment action, the burden of proving infringement should remain with the patentee."

The Court also noted three practical considerations that lead to the same result. First, shifting "the burden depending upon the form of the action could create post-litigation uncertainty about the scope of the patent." The Court, for example, indicated that rules of preclusion may not apply to a subsequent suit brought by the patentee, because in the subsequent suit the burden of persuasion would have "shifted." Second, shifting the burden could "create unnecessary complexity by making it difficult for the licensee to understand upon just what theory the patentee's infringement claim rests." The Court explained that a "patent holder is in a better position than an alleged infringer to know, and to be able to point out, just where, how, and why a product (or process) infringes a claim of that patent." And third, "burden shifting here is difficult to reconcile with a basic purpose of the Declaratory Judgment Act": "to ‘ameliorate' the ‘dilemma' posed by ‘putting' one who challenges a patent's scope ‘to the choice between abandoning his rights or risking suit.'" The Court reasoned that the "Federal Circuit's burden shifting rule does not deprive Medtronic of the right to seek a declaratory judgment. But it does create a significant obstacle to use of that action. It makes the declaratory judgment procedure—compared to, say, just refusing to pay royalties—disadvantageous."

Finally, the Court rejected three arguments in favor of the Federal Circuit's holding. First, the Court held that declaratory judgment actions are an exception to the "ordinary default rule" under which plaintiffs "are normally the parties ‘seeking relief'" and bear "the risk of failing to prove their claims." Second, the Court rejected the Federal Circuit's reliance on the limited nature of the rule it adopted, noting "the fact that a rule's scope is limited cannot, by itself, show that the rule is legally justified." Finally, the Court rejected the public policy argument that the Court's holding would permit a licensee "at its sole discretion—[to] force a patentee into full-blown patent infringement litigation." The Court explained that such litigation "can occur only in the presence of a genuine dispute, ‘of sufficient immediacy and reality,' about the patent's validity or its application." In fact, the Court noted, in this case it was the patent owner—Mirowski—that "set the present dispute in motion by accusing Medtronic of infringement." Under such circumstances, "we see no convincing reason why burden of proof law should favor the patentee."

Justice Breyer delivered the unanimous opinion of the Court.

Download the Opinion of the Court

The Faegre Baker Daniels website uses cookies to make your browsing experience as useful as possible. In order to have the full site experience, keep cookies enabled on your web browser. By browsing our site with cookies enabled, you are agreeing to their use. Review Faegre Baker Daniels' cookies information for more details.