In 2007, the Supreme Court ruled in MedImmune, Inc. v. Genentech, Inc. that a patent licensee may file a declaratory judgment action seeking judgment of noninfringement, invalidity or unenforceability of the licensed patent without first terminating the license. The high court reasoned that a licensee should not be required to terminate the license or cease paying royalties under it in order to contest the patent because that could give rise to infringement liability. After MedImmune, the question remained as to the proper allocation of the burden of persuasion in a declaratory judgment case that a patent licensee brings against its licensor in which the issue is whether the licensee’s products are covered by the license and, consequently, royalty bearing.
The Federal Circuit recently answered that question on Sept. 18 in Medtronic, Inc. v. Boston Scientific Corp. In the case, Mirowski Family Ventures LLC (MFV) owned several reissue patents (RE38,119 and RE39,897) that had been exclusively licensed to Guidant Corp. In 1991, Medtronic entered into a sublicense covering the RE’119 patent with Guidant’s predecessor in interest. That agreement permitted Medtronic to challenge the validity, scope and enforceability of the patent. In 2003, Medtronic began paying royalties into escrow, as permitted by its sublicense, while it challenged the validity of the RE’119 patent. The parties then entered into a tolling agreement that tolled the litigation and required MFV to advise Medtronic as to which Medtronic products were covered by either the RE’119 patent or subsequent patents that claimed priority to the RE’119 patent (i.e., the RE’897).