On January 22, 2014, the United States Supreme Court, in Medtronic, Inc., v. Mirowski Family Ventures, LLC, addressed whether the defendant-patentee retains the burden of persuasion in a declaratory judgment action, even when a license forecloses an infringement counterclaim. This case also clarifies the jurisdictional basis of declaratory judgment actions that arise under federal patent law.
Medtronic, a company that designs, manufactures and sells medical devices, entered into a licensing agreement with Mirowski, the owner of several patents relating to implantable heart stimulators. The licensing agreement permits Medtronic to practice several Mirowski patents in exchange for royalty payments. Also featured in the agreement were specific procedures aimed at resolving disputes between parties over non-covered products. Pursuant to these procedures, Mirowski notified Medtronic that several of its products allegedly infringed Mirowski patents. Medtronic brought the declaratory judgment action to challenge the assertion of infringement.
The issue of which party bears the burden of proving infringement in a declaratory judgment action brought by a licensee was central to the Medtronic decision. The district court concluded that Mirowski, as patentee, has the burden of proving infringement; however, the Federal Circuit disagreed. The court created an exception to the well-established rule that the patentee bears the burden of proving patent infringement. The Federal Circuit concluded that in declaratory judgment actions where the patentee is the defendant and is foreclosed from bringing an infringement counterclaim by an existing license, the burden of persuasion shifts to the party seeking the declaratory judgment, namely Medtronic.
The Supreme Court found the Federal Circuit’s conclusion unpersuasive based on simple legal logic, resting on settled case law. First, it is well-established that the burden of proving infringement generally rests upon the patentee; second, the operation of the Declaratory Judgment Act is only procedural, leaving substantive rights unchanged; and third, the burden of proof is a substantive aspect of a claim. The Court also drew upon policy considerations in drawing its conclusion. Most notably, the Court determined that burden shifting based on the form of the action would create significant “postlitigation uncertainty” about the patent’s scope. Also, the Federal Circuit’s burden shifting rule would make the declaratory judgment action “disadvantageous.”
This Court also addressed the ancillary issue of whether the Federal Circuit lacked subject-matter jurisdiction. Section 1338(a) gives exclusive jurisdiction to federal district courts over “any civil action arising under any Act of Congress relating to patents.”28.U.S.C. §1338(a). However, an amicus claimed that the action Mirowski could have brought, in the absence of a declaratory judgment, is an action for breach of contract, not patent infringement. The Supreme Court disagreed with this characterization of the threatened action in this case. Instead, the Supreme Court reasoned that if Medtronic were to act on its belief and stop payment of royalties and pursue a declaratory judgment action, then Mirowski could terminate the license and sue for patent infringement. The Court concluded the threatened action Medtronic seeks to avoid, patent infringement, arises under federal law and jurisdiction was proper.