U.S. Supreme Court Reverses Federal Circuit on Declaratory Judgment Burden of Proof; Comparison with Germany and the U.K.

This morning the U.S. Supreme Court handed down a unanimous opinion, authored by Justice Breyer, in Medtronic, Inc. v. Mirowski Family Ventures, LLC, available here.  As I wrote in a previous post:

In September [2012], 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.

Dennis Crouch was right.  (And I eventually did come around to the view that reversal was proper and signed off on John Golden's amicus brief to that effect, see here.)  In my view, the result also is consistent with the tenor of the oral argument, which I blogged about here.

From the opinion (with citations omitted):

Simple legal logic, resting upon settled case law, strongly supports our conclusion. It is well established that the burden of proving infringement generally rests upon the patentee.  We have long considered “the operation of the Declaratory Judgment Act” to be only “procedural,” leaving “substantive rights unchanged.” 

And we have held that “the burden of proof” is a “‘substantive’ aspect of a claim.” 

Taken together these three legal propositions indicate that, in a licensee’s declaratory judgment action, the burden of proving infringement should remain with the patentee.

Several practical considerations lead to the same conclusion. To shift the burden depending upon the form of the action could create postlitigation uncertainty about the scope of the patent. Suppose the evidence is inconclusive, and an alleged infringer loses his declaratory judgment action because he failed to prove noninfringement. The alleged infringer, or others, might continue to engage in the same allegedly infringing behavior, leaving it to the patentee to bring an infringement action. If the burden shifts, the patentee might lose that action because, the evidence being inconclusive, he failed to prove infringement. So, both sides might lose as to infringement, leaving the infringement question undecided, creating uncertainty among the parties and others who seek to know just what products and processes they are free to use. . . .

Moreover, to shift the burden can, at least on occasion, create unnecessary complexity by making it difficult for the licensee to understand upon just what theory the patentee’s infringement claim rests. A complex patent can contain many pages of claims and limitations. A patentholder is in a better position than an alleged infringer to know, and to be able to point out, just where, how, and why a product (or process) infringes a claim of that patent. Until he does so, however, the alleged infringer may have to work in the dark, seeking, in his declaratory judgment complaint, to negate every conceivable infringement theory.

Finally burden shifting here is difficult to reconcile witha basic purpose of the Declaratory Judgment Act. . . .

As I mentioned in my May 21, 2013 post, according to Wolfgang von Meibom & Christian Harmsen's article 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), in  Germany "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).  On the other hand, as I noted more recently in another post, a case from the U.K. (Generics (UK) Ltd. t/a Mylan v. Yeda Res. & Dev. Co. Ltd and Teva Pharm. Ind. Ltd [2013] EWCA Civ 925 (Ct. App. 2013)), states that "the burden of establishing non-infringement fell on [declaratory judgment plaintiff] Mylan" (para. 108).  (Hat tip to IPKat.)  I would be interested in learning if this issue has come up elsewhere.

By the way, I mentioned on January 13 that with my teaching responsibilities resuming, I would be blogging "only twice a week for the next few months--most likely Mondays and Thursdays--though I will chime in more frequently, as needed, if and when something of particular importance (e.g., an important Supreme Court case) comes down."  Well, this is an important Supreme Court case, so I'm chiming in more frequently.  I will go ahead and publish the post I was planning for tomorrow, on a recent French case on lost profits, later this week.