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Kenya Law / Blog / Case Summary: When a licensee seeks a declaratory judgment against a patentee to establish that there was no infringement, the burden of proving infringement remains with the patentee.

When a licensee seeks a declaratory judgment against a patentee to establish that there was no infringement, the burden of proving infringement remains with the patentee.

Supreme Court of the United States

Medtronic, Inc. V. Mirowski Family Ventures, Llc

Certiorari to the United States Court Of Appeals for the Federal Circuit

Justice Breyer

January 22, 2014

Reported by Vellah Kedogo

Brief facts

The petitioner a company that designed and sold medical services entered into an agreement with the defendant who owned patents relating to implantable heart stimulators. The licensing agreement permitted the petitioner to practice certain patents in exchange for royalty payments, and that specified procedures to identify products covered by the license and to resolve disputes between the parties.

Pursuant to those procedures, the defendant notified petitioner of its belief that several of their products infringed the licensed patents. The petitioner challenged that assertion of infringement in a declaratory judgment action, while accumulating disputed royalties in an escrow account for distribution. The District Court concluded that the defendant, as the party asserting infringement, had the burden of proving infringement and had not met that burden. The Federal Circuit disagreed. It acknowledged that a patentee normally bears the burden of proof, but concluded that where the patentee is a declaratory judgment defendant and is foreclosed from asserting an infringement counterclaim by the continued existence of a licensing agreement, the party seeking the declaratory judgment has the burden of persuasion.

Issue

1. Whether the burden of proof shifts when the patentee is a defendant in a declaratory judgment action, and the plaintiff seeks a judgment that he did not infringe the patent.

Jurisdiction- jurisdiction of the Federal Circuit- whether the Federal Circuit had jurisdiction over the subject matter-whether the action was characterized as one arising under an Act of Congress relating to patents- 28 United States Constitution section 1338(a)

Evidence-burden of proof- shifting of burden of proof-whether the burden of proof shifts when the patentee is a defendant in a declaratory judgment action- that when a licensee seeks a declaratory judgment against a patentee to establish that there was no infringement, the burden of proving infringement remains with the patentee – section 1338(a) of United States Constitution

International Intellectual Property law -infringement-infringement of patents-burden of proof in proving infringement of a patent-whether burden of proof shifts in a declaratory judgment- that the burden of proving infringement of a patent remains with the patentee

28 United States Constitution section1338(a)

(a) The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights. For purposes of this subsection, the term “State” includes any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, American Samoa, Guam, and the Northern Mariana Islands.

28 United State Code sections 1295(a)

(a) The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction—

(1) of an appeal from a final decision of a district court of the United States, the District Court of Guam, the District Court of the Virgin Islands, or the District Court of the Northern Mariana Islands, in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents or plant variety protection.

HELD

1. The Declaratory Judgment Act did not extend the jurisdiction of the federal courts. However federal courts, when determining declaratory judgment jurisdiction, often looked to the character of the threatened action. That is whether a coercive action brought by declaratory judgment would necessarily present a federal question.

2. The patent licensing agreement specified that, if the petitioner stopped paying royalties, the defendant could terminate the contract and bring an ordinary patent infringement action. Such an action would arise under federal patent law because federal patent law created the cause of action.

3. The relevant question concerned the nature of the threatened action in the absence of the declaratory judgment suit. The petitioner believed and sought to establish in the declaratory judgment suit that it did not owe royalties because its products were not fringing any patent.  If the petitioner were to act on that belief the defendant could terminate the license and bring an ordinary federal patent law action for infringement.

4. The hypothetical threatened action was properly characterized as an action arising under an Act of Congress relating to patents.

5. In a licensee’s declaratory judgment action, the burden of proving infringement should remain with the patentee. To shift the burden depending upon the form of the action could create post litigation uncertainty about the scope of the patent. If the burden shifts, the patentee might lose that action because, the evidence being inconclusive, he failed to prove infringement.

6. To shift 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. A complex patent could contain many pages of claims and limitations. 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. Until he does so, however, the alleged infringer may have to work in the dark, seeking, in his declaratory judgment complaint, to negate every conceivable infringement theory.

7. The Federal Circuit’s burden shifting rule did not deprive the petitioner of the right to seek a declaratory judgment. However it did create a significant obstacle to use of that action. It made the declaratory judgment procedure disadvantageous. To that extent it recreated the dilemma that the Declaratory Judgment Act sought to avoid.

 

The judgment of the Federal Circuit was reversed.

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