Tuesday, May 21, 2013

U.S. Supreme Court to Hear Another Declaratory Judgment Case; Comparison with German Practice

The Supreme Court granted cert yesterday in Medtronic Inc. v. Boston Scientific Corp., 695 F.3d 1266 (Fed. Cir. 2012).  In September, the Federal Circuit held that, where a licensee in good standing files an action seeking a declaratory judgment of noninfringement (permissible ever since the Supreme Court's 2007 decision in MedImmune v. Genentech. 540 U.S. 118), the licensee bears the burden of proving noninfringement--rather than the patentee bearing the burden of proving infringement.  Writing for the court, Judge Linn concluded that "A contrary result would allow licensees to use MedImmune's shield as a sword--haling licensors into court and forcing them to assert and prove what had already been resolved by license."  The question presented in the cert petition is:  "whether, in such a declaratory judgment action brought by a licensee under MedImmune, the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement."  I don't have strong feelings about this one, but Dennis Crouch predicts a 9-0 reversal.

I briefly discuss actions for declaratory judgments of noninfringement in Europe in my book at pp. 280-81.  A more detailed discussion of actions for declaratory judgments of noninfringement in Germany (and, to some degree, other European countries) is Wolfgang von Meibom & Christian Harmsen, The Rare German Negative Declaratory Action, in Patent Practice in Japan and Europe:  Liber Amicorum for Guntram Rahn 327 (Bernd Hansen & Dirk Schüssler-Langeheine eds. 2011).  According to the authors, "the patentee always has the burden of proof with regard to the infringement issue, even in negative declaratory actions.  It is thus not legitimate to arbitrarily impose this burden of proof on the owner of the IP right unless it has provided a reason to do so" (citing Higher Regional Court Cologne, NJW-RR 1997, 483, 484).  I'll see if I can get a copy of that case; I'd like to know more about the issue, in particular what the court meant by "unless it [the IP owner] has provided a reason to do so."

As further discussed in my book, my understanding is that these types of actions are not very common in the other jurisdictions I have studied (although there have been some cases in China, discussed in the sources cited in my book at p.361 n.132).  To the extent they do exist, I don't know which party bears the burden of proof, but I would be interested in hearing further from any readers who do.  

Further to the above:  I found the case cited in von Meibom & Harmsen, and it does say that the person who would have had the burden of proof in the corresponding action for enforcement of a right would still have the burden of proof in a declaratory judgment action.  It's not a patent case, though, and I'm not sure about the authors' meaning when they state "unless it has provided a reason to do so."  In any event, I'm also not sure that actions for a declaratory judgment of noninfringement, which are uncommon to begin with, would be permissible if brought by a licensee in good standing.  As discussed in my book (pp. 282-84), the law on licensee estoppel in Europe seems a bit confusing.  Perhaps the recent referral of questions relating to the Orange-Book-Standard defense to the CJEU will provide an opportunity for that court to determine whether or when licensees may be contractually obligated not to challenge patent owners.

And further yet to the above:  One area where actions for declaratory judgments of noninfringement in Europe do arise are the so-called torpedo actions, where a person who expects to be sued for infringement files a declaratory judgment action of noninfringement in a jurisdiction that has a slow docket, so that (under the Brussels Regulation) the patent owner who subsequently files an infringement actions in a faster forum will see that second action stayed (see my book pp. 253-55).  EPLAW recently posted on a February 2013 decision of Germany's Federal Supreme Court holding that a patentee cannot avoid this result simply exclusively licensing another company after the first action has been filed, and having that party file the suit for infringement in the faster forum.  This still doesn't answer the questions of whether a licensee in good standing could file an action for a declaratory judgment of noninfringement, and if so whether that party would bear the burden of proof.  I suspect the answer, at least to the second question, is no, but I would appreciate hearing others' views.       

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