Medtronic, Inc. v. Mirowski Family Ventures, LLC.

A patentee ordinarily bears the burden of proving infringement. Agawam Co. v. Jordan, 7 Wall. 583 , 609, 19 L.Ed. 177 (1869). This case asks us to decide whether the burden of proof shifts when the patentee is a defendant in a declaratory judgment action, and the plaintiff (the potential infringer) seeks

A

We set forth a simplified version of the facts. The parties are Medtronic, Inc., a firm that (among other things) designs, makes, and sells medical devices, and Mirowski Family Ventures, LLC, a firm that owns patents relating to implantable heart stimulators. In 1991 Medtronic and Mirowski entered into an agreement permitting Medtronic to practice certain Mirowski patents in exchange for royalty payments.

In less simplified form: Mirowski entered into a license agreement with Eli Lilly & Co., which then sublicensed the Mirowski patents to Medtronic. Guidant Corp. is Eli Lilly's successor in interest. For present purposes we shall ignore Eli Lilly, Guidant, and other parties on Mirowski's side, using "Mirowski" to refer to any and all of them.

The 1991 agreement also provided that, if Mirowski gave notice to Medtronic that a new Medtronic product "infringe[d]" a

In 2007 the parties found themselves in the midst of an "infringement" dispute. Mirowski gave Medtronic notice that it believed seven new Medtronic products violated various claims contained in two of its patents (related to devices that cause the heart's ventricles to contract simultaneously as the heart beats). Medtronic thought that its products did not infringe Mirowski's patents, either because the products fell outside the scope of the patent claims or because the patents were invalid.

B

In 2007 Medtronic brought this declaratory judgment action in Federal District Court in Delaware. It sought a declaration that its products did not infringe Mirowski's patents and that the patents were invalid. But, as its agreement with Mirowski provided, Medtronic paid all the relevant royalties into an escrow account.

The District Court recognized that Mirowski was the defendant in the action. But it nonetheless believed that Mirowski, "[a]s the part[y] asserting infringement," bore the burden of proving infringement. Medtronic, Inc. v. Boston Scientific Corp., 777 F.Supp.2d 750 , 766 (Del.2011) ; see Under Sea Industries, Inc. v. Dacor Corp., 833 F.2d 1551 , 1557 (C.A.Fed.1987) ("The burden always is on the patentee to show infringement"). After a bench trial, the court found that Mirowski had not proved infringement, either directly or under the doctrine of equivalents. And since Mirowski, the patentee, bore the burden of proof, it lost. 777 F.Supp.2d, at 767-770 .

The Court of Appeals for the Federal Circuit considered the burden of proof question, and it came to the opposite conclusion. It held that Medtronic, the declaratory judgment

Medtronic sought certiorari, asking us to review the Federal Circuit's burden of proof rule. In light of the importance of burdens of proof in patent litigation, we granted the petition.

We agree with amicus that the Declaratory Judgment Act does not "extend" the "jurisdiction" of the federal courts. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 , 671, 70 S.Ct. 876 , 94 L.Ed. 1194 (1950). We also agree that federal courts, when determining declaratory judgment jurisdiction, often look to the "character of the threatened action." Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237 , 248, 73 S.Ct. 236 , 97 L.Ed. 291 (1952). That is to say, they ask whether "a coercive action" brought by "the declaratory judgment defendant" (here Mirowski) "would necessarily present a federal question." Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1 , 19, 103 S.Ct. 2841 , 77 L.Ed.2d 420 (1983).

But we do not agree with amicus ' characterization of the "threatened" or "coercive" action that Mirowski might have brought. The patent licensing agreement specifies that, if Medtronic stops paying royalties, Mirowski can terminate the contract and bring an ordinary patent infringement action. Such an action would arise under federal patent law because "federal patent law creates the cause of action." Christianson v. Colt Industries Operating Corp., 486 U.S. 800 , 809, 108 S.Ct. 2166 , 100 L.Ed.2d 811 (1988).

Amicus says that an infringement suit would be unlikely. But that is not the relevant question. The relevant question concerns the nature of the threatened action in the absence of the declaratory judgment suit. Medtronic believes-and seeks to establish in this declaratory judgment suit-that it does not owe royalties because its products are noninfringing. If Medtronic were to act on that belief (by not paying royalties and not bringing a declaratory judgment action), Mirowski could terminate the license and bring an ordinary federal patent law action for infringement. See Brief for

We have long considered "the operation of the Declaratory Judgment Act" to be only "procedural," Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 , 240, 57 S.Ct. 461 , 81 L.Ed. 617 (1937), leaving "substantive rights unchanged," Beacon Theatres, Inc. v. Westover, 359 U.S. 500 , 509, 79 S.Ct. 948 , 3 L.Ed.2d 988 (1959). See also Vaden v. Discover Bank, 556 U.S. 49 , 70, n. 19, 129 S.Ct. 1262 , 173 L.Ed.2d 206 (2009) ; Skelly Oil Co., 339 U.S., at 674 , 70 S.Ct. 876 (noting the "limited procedural purpose of the Declaratory Judgment Act").

And we have held that "the burden of proof" is a " 'substantive' aspect of a claim." Raleigh v. Illinois Dept. of Revenue, 530 U.S. 15 , 20-21, 120 S.Ct. 1951 , 147 L.Ed.2d 13 (2000) ; Director, Office of Workers' Compensation Programs v. Greenwich Collieries, 512 U.S. 267 , 271, 114 S.Ct. 2251 , 129 L.Ed.2d 221 (1994) ("[T]he assignment of the burden of proof is a rule of substantive law ..."); Garrett v. Moore-McCormack Co., 317 U.S. 239 , 249, 63 S.Ct. 246 , 87 L.Ed. 239 (1942) ("[T]he burden of proof ... [is] part of the very substance of [the plaintiff's] claim and cannot be considered a mere incident of a form of procedure").

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

The example is not fanciful. The Restatement (Second) of Judgments says that relitigation of an issue (say, infringement) decided in one suit "is not precluded" in a subsequent suit where the burden of persuasion "has shifted" from the "party against whom preclusion is sought ... to his adversary." Restatement (Second) of Judgments § 28(4) (1980). Rather, the

"[f]ailure of one party to carry the burden of persuasion on an issue should not establish the issue in favor of an adversary who otherwise would have the burden of persuasion on that issue in later litigation." 18 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4422, p. 592 (2d ed. 2002).

Thus the declaratory judgment suit in the example above would have failed to achieve its object: to provide "an immediate and definitive determination of the legal rights of the parties." Aetna, supra, at 241, 57 S.Ct. 461 .

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 patent holder 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,

Finally burden shifting here is difficult to reconcile with a basic purpose of the Declaratory Judgment Act. In MedImmune, Inc. v. Genentech, Inc., a case that similarly concerned a patent licensee that brought a declaratory judgment action after the patentee accused it of infringement, we wrote that the " 'very purpose' " of that Act is to " 'ameliorate' " the "dilemma" posed by "putting" one who challenges a patent's scope "to the choice between abandoning his rights or risking" suit. 549 U.S., at 129 , 127 S.Ct. 764 (quoting Abbott Laboratories v. Gardner, 387 U.S. 136 , 152, 87 S.Ct. 1507 , 18 L.Ed.2d 681 (1967) ). In the absence of the declaratory judgment procedure, Medtronic would face the precise dilemma that MedImmune describes. Either Medtronic would have to abandon its right to challenge the scope of Mirowski's patents, or it would have to stop paying royalties, risk losing an ordinary patent infringement lawsuit, and thereby risk liability for treble damages and attorney's fees as well as injunctive relief. See 35 U.S.C. §§ 283 - 285 (providing for injunctive relief, treble damages, and-in "exceptional cases"-attorney's fees as remedies for patent infringement). As in MedImmune, the declaratory judgment action rescues Medtronic from this dilemma.

The Federal Circuit's burden shifting rule does not deprive Medtronic of the right to seek a declaratory judgment. But it does create a significant obstacle to use of that action. It makes the declaratory judgment procedure-compared to, say,

Schaffer, however, was not a declaratory judgment case. And Schaffer described exceptions to its basic burden of proof rule. E.g., id., at 57 , 126 S.Ct. 528 (when an element of a claim "can fairly be characterized as [an] affirmative defens[e]," the burden of proof "may be shifted to [the] defendants"); id., at 60 , 126 S.Ct. 528 (" '[T]he ordinary rule, based on considerations of fairness, does not place the burden upon a litigant of establishing facts peculiarly within the knowledge of his adversary' " (quoting United States v. New York, N.H. & H.R. Co., 355 U.S. 253 , 256, n. 5, 78 S.Ct. 212 , 2 L.Ed.2d 247 (1957) )). For the reasons we have set forth in Part III-A, supra, declaratory judgment suits like the one at issue here constitute a further exception to the basic rule Schaffer described.

Second, the Federal Circuit emphasized that its holding applied only in "the limited circumstance when an infringement counterclaim by a patentee is foreclosed by the continued existence of a license." 695 F.3d, at 1274 . The fact that the Federal Circuit's opinion is limited, however, does not support its conclusion. The "limited circumstance" it described is often present when a patent licensee faces an ordinary but disputed claim of infringement. And that "circumstance" is virtually identical to MedImmune, where we found a declaratory judgment action constitutionally permissible. In any event, the fact that a rule's scope is limited cannot, by itself, show that the rule is legally justified.

Third, an amicus supporting Mirowski fears that our holding, unlike the Federal Circuit's rule, will "burden ... patent owners" by permitting "a licensee ...-at its sole discretion-[to] force the patentee into full-blown patent-infringement litigation." Brief for Intellectual Property

The public interest, of course, favors the maintenance of a well-functioning patent system. But the "public" also has a "paramount interest in seeing that patent monopolies ... are kept within their legitimate scope." Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 , 816, 65 S.Ct. 993 , 89 L.Ed. 1381 (1945). A patentee

In 2006 the parties entered into a further agreement that slightly modified the procedure for resolving disputes. If Medtronic, having received "timely written notice of infringement," chose to pursue a declaratory judgment action "challenging infringement

For this reason we believe that the hypothetical threatened action is properly characterized as an action "arising under an Act of Congress relating to patents." 28 U.S.C. § 1338 (a).

We now turn to the question presented. A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.

A

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. See, e.g., Imhaeuser v. Buerk, 101 U.S. 647 , 662, 25 L.Ed. 945 (1880) ("[T]he burden to prove infringement never shifts [to

B

We are not convinced by the arguments raised to the contrary. First, the Federal Circuit thought it had found support in a recent case of this Court,

For these reasons the judgment of the Federal Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.