Wednesday, January 22, 2014

License To Patently Disagree

Today (January 22, 2014), the United States Supreme Court decided Medtronic v. Mirowski, a patent case in which the main issue was whether or not a patentee has the burden of proving patent infringement even when an allegedly-infringing licensee has sued for declaratory judgment of noninfringement.  Here is a summary of the dispute from the syllabus of the Court's decision:
Petitioner Medtronic, Inc., designs, makes, and sells medical devices. Respondent Mirowski Family Ventures, LLC, owns patents relating to implantable heart stimulators. They have a licensing agreement that permits Medtronic to practice certain Mirowski patents in exchange for royalty payments, and that specifies procedures to identify products covered by the license and to resolve disputes between the parties. Pursuant to those procedures, Mirowski notified Medtronic of its belief that several of Medtronic’s products infringed the licensed patents, and Medtronic then challenged that assertion of infringement in a declaratory judgment action, while accumulating disputed royalties in an escrow account for distribution to the prevailing party. The District Court concluded that Mirowski, as the party asserting infringement, had the burden of proving infringement and that Mirowski 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, like Mirowski, is foreclosed from asserting an infringement counterclaim by the continued existence of a licensing agreement, the party seeking the declaratory judgment, namely Medtronic, bears the burden of persuasion
The Court decided in favor of Medtronic, holding 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 Court also nodded to the public policy considerations of its decision, noting that
General considerations relating to the public interest in maintaining a well-functioning patent system are, at most [in this dispute], in balance, and do not favor changing the ordinary burden of proof rule.
In holding that the patentee has the burden of providing infringement, whether it or an allegedly-infringing licensee files suit, the Court found for consistency and against the Court of Appeals for the Federal Circuit.

Patent licensees may now breath more easily as they consider challenging patents they have licensed.  Patent owners are now likely even more carefully to weigh the consequences of alleging that their licensees infringe their patents.

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