The Burden of Proof Remains With the Patentee in a Licensee’s Declaratory Judgment Action

The Supreme Court held in a recent unanimous decision that “when a licensee seeks a declaratory judgment against a patentee to establish that there is no infringement, the burden of proving infringement remains with the patentee.” Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S. Ct. 843 (2014)‎. 

Through a license agreement with Eli Lilly & Co., Mirowski sublicensed certain patents to Medtronic in exchange for royalty payments. Dating back to 1991, this agreement provided for procedures in the event of a patent challenge. Mirowski could give notice to Medtronic that a new Medtronic product infringed a patent, at which point Medtronic could either “cure the nonpayment of royalties” or pay the royalties into an escrow account and simultaneously challenge the “assertion of infringement of any of the Mirowski patents through a declaratory judgment action.”  If Medtronic simply refused to pay, Mirowski would have the right to terminate the license and file an infringement action. 

In 2007, Medtronic brought a declaratory judgment action in Federal District Court. The district court recognized that Mirowski was the defendant, but nevertheless believed that Mirowski was required to bear the burden of proof since by the terms of the agreement between Medtronic and Mirowski, it would always be the party asserting infringement. On appeal, the Federal Circuit came to the opposite conclusion, holding that Medtronic bore the burden of proof because Mirowski was the declaratory judgment defendant and was foreclosed from asserting an infringement counterclaim by the continued existence of a license. Medtronic sought certiorari concerning the burden of proof.

The Supreme Court offered three reasons why in a licensee’s declaratory judgment action, the burden of proof remains with the patentee:

1. the burden of proving infringement generally rests upon the patentee;
2. a declaratory judgment is considered procedural and leaves substantive rights unchanged; and
3. the burden of proof is a substantive part of the claim. 

The court delved into a hypothetical illustration in which both parties could lose an infringement action should the burden of proof shift, which would leave the core infringement question open.  Ultimately, making a burden-shifting rule dependent upon the form of action could create “postlitigation uncertainty.” Additionally, the court determined that the burden should remain with the patentee because the “patent holder is in a better position than an alleged infringer to know, and be able to point out, just where, how, and why a product (or process) infringes a claim of that product.”