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April 24, 2014

A Licensee Can Sometimes Bear the Burden of Proof on Non-Infringement

The U.S. Court of Appeals for the Federal Circuit found that in the limited circumstances when an infringement counterclaim by a patentee is foreclosed by the continued existence of a license, a licensee seeking a declaratory judgment of non-infringement bears the burden of proof.  Medtronic Inc. v. Boston Scientific Corp., Case Nos. 11-1313, -1372 (Fed. Cir., Sept. 18, 2012) (Linn, J.).

Mirowski Family Ventures (MFV) licensed the reissue patent-at-issue to Medtronic.  The license agreement allowed Medtronic to challenge the patent via declaratory judgment.  Medtronic began paying royalties and at the same time sought a declaratory judgment of non-infringement.  Throughout the course of litigation the parties disagreed over whether the licensee carried the burden of proving non-infringement or the licensor carried the burden of proving infringement.  The lower court held that the licensor carried the burden of proving infringement and ruled in favor of Medtronic because of MFV’s failure to carry its burden.  MFV appealed. 

On appeal, MFV argued that because Medtronic is the party seeking relief and because MFV is foreclosed from filing a counterclaim of infringement by virtue of the license agreement between the parties, Medtronic carries the burden of proving non-infringement.  Medtronic, on the other hand, argued that the burden of proof in patent infringement cases always rests with the patentee, and such burden does not shift to the accused infringer.  The Federal Circuit agreed with MFV, and held that the party seeking relief bears the burden of proving the allegations in his complaint.

The Federal Circuit recognized that the burden of proof generally rests with the patentee to prove infringement, even in a declaratory judgment action.  However, the Federal Circuit noted that there exists an exception to this general rule—where a license agreement prevents the licensor from asserting a counterclaim of infringement in the declaratory judgment action.  In such a scenario, the licensee bears the burden of proving non-infringement. 

Here, the Federal Circuit noted that the agreement requires Medtronic to pay royalties or sue for declaratory judgment for non-infringement.  Medtronic filed such declaratory judgment and is the party seeking relief, whereas MVF is only seeking to be discharged from the suit and continue to receive payment under the agreement.  To this end, the Federal Circuit determined that Medtronic is asking the Court for relief or change of status quo, and therefore Medtronic should set forth the necessary evidence showing it is entitled to such relief.  As a result, the Federal Circuit vacated and remanded the case to the lower court. 

© 2014 McDermott Will & Emery

About the Author

Babak Akhlaghi, McDermott Will Emery law Firm, Intellectual Property Attorney
Partner

Babak Akhlaghi is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  Babak focuses his practice on patent prosecution, reexamination, freedom-to-operate investigation, opinion work, and licensing.

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