We posted about this case in May 2013, and on January 22, 2014, the Supreme Court decided this matter.
First, the Supreme Court held that the Federal Circuit did not lack subject-matter jurisdiction. Because federal courts determining declaratory judgment jurisdiction often look to the “character” of the declaratory judgment defendant’s “threatened action,” which in this case, the threatened hypothetical action would constitute the licensor terminating a license and bringing suit for infringement under federal patent laws, the declaratory judgment action would arise under federal patent laws.
Second, the Supreme Court held that when a licensee seeks a declaratory judgment against a patentee that its products do not infringe the licensed patent, the patentee bears the burden of persuasion on the issue of infringement. The Supreme Court based this ruling on three settled legal propositions: (1) a patentee ordinarily bears the burden of proving infringement; (2) the operation of the Declaratory Judgment Act is only procedural leaving substantive rights unchanged; and (3) the burden of proof is a substantive aspect of a claim.
By way of background, the United States Supreme Court granted cert. to hear argument on whether, in a declaratory judgment action brought by a licensee, the licensee has the burden to prove that its products do not infringe the patent, or whether the patentee must prove infringement. Medtronic Inc. (licensee) licensed a patent from Mirowski Family Ventures LLC (patentee / licensor) relating to a device used to stop imminent heart failure. Medtronic subsequently created new products and then filed a declaratory judgment action claiming that its new products do not infringe the patent. The Federal Circuit Court of Appeals held that Medtronic bears the burden of proving that its products do not infringe Mirowski’s patent. Medtronic argued that the U.S. Supreme Court should overturn the Federal Circuit’s ruling, which Medtronic argued is inconsistent with the Supreme Court’s decision in MedImmune, Inc. v. Genetech, Inc., 549 U.S. 118 (2007). In MedImmune, the Supreme Court ruled that a patent licensee that believes that its products do not infringe the patent is “not required . . . to break or terminate its . . . license agreement before seeking a declaratory judgment in federal court that the underlying patent is . . . not infringed.” According to Medtronic, the Federal Circuit’s opinion undercut the MedImmune decision because it caused a licensee to take on the significant burden and cost of a presumption that its products infringe. In turn, Mirowski argued that this case is distinguishable from MedImmune because the licensing agreement at issue specifically required Medtronic to file a declaratory judgment action if a dispute arose. Mirowski submitted that the Federal Circuit correctly decided that, based specifically on the contract terms between the parties, Medtronic should bear the burden of proving that it should be let out of the contract for the new products.