Justices take up patent burden of proof

 Decision expected later this term

By Kimberly Atkins
The Daily Record Newswire

In a case that could have a significant impact on patent litigation, the justices of the U.S. Supreme Court seemed disinclined to shift the burden of proof onto patent licensees to prove non-infringement in declaratory judgment actions.

During recent oral arguments in Medtronic Inc. v. Boston Scientific Corp., several justices indicated a desire to require patent holders to prove infringement, just as in non-declaratory judgment infringement actions.

The case stems from a licensing agreement between Minneapolis-based Medtronic Inc. and Guidant Corp., an Indianapolis subsidiary of Natick, Mass.-based Boston Scientific Corp. The agreement allowed Medtronic the use of certain implantable cardiac devices whose patents were owned by Mirowski Family Ventures LLC in Bethesda, Md.

Medtronic was allowed to license the patented devices, and MFV was required to give notice if the company thought any of Medtronic’s own devices used technology patented in the products that it licensed.

The agreement also provided that Medtronic could seek a declaratory judgment challenging an infringement claim without breaking the licensing agreement so long as it continued to pay royalties — an arrangement that the Supreme Court authorized in the 2007 case MedImmune Inc. v. Genentech Inc.

MVF claimed that Medtronic was infringing its patents. Medtronic then filed an action against MFV challenging the validity of the patents covered by the license.

The parties disagreed over who bore the burden of proof in the declaratory judgment action.

The District Court ruled that the patent holder, MFV, had the burden of proving infringement. But a panel of the Federal U.S. Circuit Court of Appeals reversed, holding that Medtronic had to prove non-infringement.

The court reasoned that the MedImmune decision shifted the burden because under a licensing agreement, only the alleged infringer has the ability to seek relief from the court without breaking the contract.

The Supreme Court granted Medtronic’s petition for certiorari to decide where the proof burden lies.

Although Guidant and Boston Scientific were named parties in the initial action, they are not parties to the appeal.

Seth P. Waxman, who represents Medtronic, argued that the burden in declaratory judgment actions should be no different than in traditional infringement claims.

“The Declaratory Judgment Act is procedural only and does not change substantive rights,” said Waxman, a partner at WilmerHale in Washington, D.C.

Justice Samuel A. Alito Jr. wondered if the decision would have much of an impact, since the issue involves the burden of persuasion and not the burden of production.

But Waxman called the difference “surpassingly important” in many cases.

“Where the burden of persuasion rests is very often outcome-determinative,” he said. “And that is certainly true in patent cases.”

Curtis E. Gannon, assistant to the U.S. solicitor general, argued as amicus in support of Medtronic that “the best way to think of a declaratory judgment action like this is that it is the mirror image of the underlying coercive hypothetical action that could have been brought against Medtronic” by the patent holder.

And because the issues are the same, the burden of proof should be as well.

“The issues that were going to be resolved in the declaratory judgment action … were going to involve questions of patent validity, patent enforceability, scope of coverage [and] patent infringement, which is exactly what we have here,” he said.

While neither Waxman nor Gannon faced aggressive questioning, Arthur I. Neustadt, an Alexandria, Va., lawyer who argued on behalf of MFV, was peppered with questions by the justices.

When Neustadt asserted that “one of the most fundamental tenets of our jurisprudence [is] that if a party files a complaint and seeks relief, it has the responsibility to prove that it is entitled to that relief,” Justice Antonin Scalia disagreed.

“But you could say that about any declaratory judgment action,” he said. “If we follow what you said, then the burden shifts in every declaratory judgment action. And it clearly doesn’t.”

A decision is expected later this term.