US Supreme Court Affirms Burden Of Proof Always On Patentee, Even When Another Party Asks For Declaratory Judgement Of Non-infringement

On January 22, 2014, the US Supreme Court issued a ruling in Medtronic Inc. v. Mirowski Family Ventures LLC sure to garner the interest of the US patent bar. A unanimous Court found that the burden of proving infringement of a patent lies with the patentee; even when the latter is a defendant in a declaratory judgement action for non-infringement initiated by another party. 

The Petitioner Medtronic designs and manufactures medical devices. The Respondent Mirowski owns certain patents relating to “implantable heart stimulators”. The Petitioner and Respondent entered into a license agreement by which the Petitioner would have the right to practice the Respondent’s patents in exchange for royalty payments. 

Image by Stuart Miles

The license contained provisions under which the Respondent could challenge whether certain products manufactured by the Petitioner embodied the patent. The Respondent did make such a challenge; the Petitioner disagreed. 

Upon the breakdown of negotiations, the Petitioner brought an action for declaratory judgement in the Federal District Court in Delaware, asking the Court to declare the disputed products as not infringing the Respondent’s patents. The Trial Judge granted the motion placing the burden of proving infringement on the Patentee, the Defendant in that proceeding. 

This holding was reversed on appeal by Court of Appeal for the Federal Circuit following its own reasoning in MedImmune, Inc.v. Genentech, Inc., 549 U. S. 118, 129. In that case, the CAFC found that specifically in the case of a license, when a licensee brings a claim under the Declaratory Judgement Act, it has the burden of proving non-infringement. 

Writing for a unanimous Court, Justice Breyer reversed the CAFC, agreeing with the Trial Judge that the burden of proving infringement should lie with the patentee in these circumstances. The Court’s ruling in this case effectively overturns the CAFC’s holding in MedImmune. 

The burden of proof in a regular infringement action lies with the patentee. Justice Breyer found that it would be consistent for that burden to remain with the patentee even when they are not responsible for initiating proceedings. 

The declaratory judgement mechanism is a procedural one. The Court made clear that the substantive law, including which party has the burden of proof and persuasion, should remain unchanged from a full-length proceeding. 

Justice Breyer pointed out another potential (and more practical) issue with forcing the Petitioner to prove non-infringement. He gives the following example:

Suppose the evidence is inconclusive, and an alleged infringer loses his declaratory judgment action because he failed to prove noninfringement [sic]. 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.

Justice Breyer therefore found that in addition to there being no legal reason to shift the burden away from the patentee, it is also in the best interest of the administration of justice to maintain consistency across long and short-form infringement proceedings. 

In oral argument back in November of 2013, Justice Kennedy asked counsel for the Petitioner, Mr. Seth P. Waxman, if his argument required that a claim of infringement be made by the licensor in the first place (as was the case here). The Court chose not to address this in its judgement. 

It would appear, however, that since Federal Courts do not have jurisdiction to hear hypothetical cases (See Muskrat v. United States, 219 U.S. 346,362 (1911)) the action would likely have been thrown out for want of jurisdiction. Article III of the US Constitution restricts the Federal Courts to hearing “cases and controversies”. The Petitioner would therefore likely have been precluded from seeking an advisory opinion had the Respondent not made allegations of infringement in the first place.

USTR disapproves of ITC decision on Apple import ban

Bellow is an excerpt from an article I published on the Canadian Intellectual Property Blog (CIPB) regarding the USTR's overturning an ITC decision to prohibit Apple Inc. from importing its phones and tablets that infringe a Samsung Electronics Co. Patent.

On June 4^th, 2013, the International Trade Commission (ITC) issued a ruling prohibiting Apple Inc. (Apple) from importing its iPhone 3G, iPhone 3Gs, iPhone 4, iPad and iPad 2 because they infringe a patent owned by Samsung Electronics Co. (Samsung). On August 3^rd, the United States Trade Representative (USTR), in a rare interventionist move, disapproved of the ITC’s ruling allowing Apple to continue its importation of the infringing products. 

Under § 1337 of the Tariff Act, the ITC may issue an exclusion order (injunctive type relief) against an entity that imports a patent infringing product. In deciding whether to grant the exclusion order, the ITC must consider the effects of the order on US trade and commerce. If the ITC believes that the public interest would not be best served by the issuance of the exclusion order, it has the discretion to refuse it. 

Samsung’s patent is what is known as a “standard-essential patent” (SEP). These patents cover inventions that must be incorporated into a given device if they are to meet some applicable technical standard. SEPs have the potential to give vertically integrated patent holders an advantage over their competitors whom, for all intents and purposes must license the technology from them. 

Please find the full article here

A look at the US Supreme Court's decision in Microsoft v. i4i

In 2009, a Canadian software development company out of Toronto named i4i Inc. won a $290 million law suit against Microsoft for wilfully infringing its patents.  The company developed a new form of document encoding known as XML (Extensible Markup Language). The versatility of the .xml extension lead to its integration into a number of software applications, including Microsoft Office. Microsoft, however, did not license the XML code.   

The Eastern District Court of Texas ruled in favor of i4i stating that a party accused of patent infringement, when asserting the invalidity of a patent, must convince the court of the invalidity by “clear and convincing evidence”.  This is a particularly high burden of proof and one not easily met.  

Photo by Darren Robertson

Microsoft fought the District Court’s interpretation in appeal but the outcome was the same.  Both the Court of Appeals for the Federal Circuit and the United States Supreme Court affirmed the trial judge’s decision and rejected Microsoft’s arguments demanding a lowering of the burden of proof and upheld the trial court’s ruling.

Justice Sotomayor wrote for a unanimous court (8-0 – Justice Thomas concurring. Chief Justice Roberts recused himself because he owns Microsoft stock) in saying that §282 of the American Patent Act of 1952 clearly states that a patent, once issued “shall be presumed valid”.  This places the burden of invalidating the patent on the other party. According to Sotomayor, it has long been settled law that the party alleging invalidity must prove it by clear and convincing evidence.  She cites a 1984 decision rendered by Judge Rich, one of the principal drafters of the 1952 Patent Act, supporting the clear and convincing standard.  In the 30 plus years since the aforementioned decision, the CAFC has never varied their opinion. 

Microsoft’s invalidity defense was twofold: First, they attempted to apply §102(b) of the Act that prohibits the issuing of patents when:

“the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States”

This provision, known as the “on-sale bar”, says that a patent that has been used or sold or has been disclosed in a publication more than one year before the patent is applied for is not patentable under the law. Microsoft claimed that the entirety of the XML patent was disclosed in a previously released i4i product called “S4”.  The Court, however, rejected this defence after hearing from two expert witnesses (the two principal inventors of the XML patent).

Microsoft’s second argument relied on the fact that when the XML patent was being examined, the United States Patent and Trademark Office (USPTO) didn’t have the S4 patent to compare it to.   Relying on a recent decision, Microsoft asserted that when it is brought to light that the PTO didn’t have all relevant information during examination, the strength of their examination is greatly diminished.  Microsoft ultimately asserted that this lowered level of deference for the PTO should concordantly lower the standard of proof incumbent on a party alleging invalidity. 

Both of these arguments were utterly rejected by the Supreme Court who said that the “hybrid” burden of proof system Microsoft proposes has no precedent and no founding in law.  

Though the decision in this case turned primarily on statutory interpretation and the intention of Congress in enacting the law, Microsoft tried as hard as possible to make it seem that the issue at hand was the prior disclosure of the patent and the incomplete analysis of the PTO. 

Many IP professionals are skeptical of the value of this decision.  Surely had the ruling gone the other way, this case would be of paramount importance as it would be reversing a 35 year old interpretation that has thus far remained unchallenged.  Though some may question the importance of this decision outright, I am of the belief that the Supreme Court’s verdict affirms at least two points.

First, that the courts still show a high degree of deference towards the USPTO and therefore should continue to exercise judicial restraint in overturning its rulings.

Second, that smaller companies are capable of defeating behemoths like Microsoft when the law is in their favor.  Doubtless Microsoft fielded an expert team of attorneys who managed to conjure up and elucidate arguments that could have overturned a solid precedent.  Add to that the fact that a long list of tech giants such as Facebook, Google, Apple, Verizon etc. rallied behind Microsoft in support and you have a true David v. Goliath victory in favour of the Canadian i4i Inc. 

In my humble opinion, I think this case is most interesting for its rallying cry effect on smaller businesses than its actual implications on the legal framework of the US Patent system. As damaging as a $290 million verdict is, one would posit that if anyone could absorb such a loss it would be a company on the scale and magnitude of Microsoft. Though this decision surely is a blow to the tech giant, I don’t think too many people are (or should be) balling their eyes out for them right now...except Chief Justice Roberts that is...