Argument preview: Federal Circuit tees one up for Justices in patent procedural dispute.
on Oct 29, 2013 at 10:42 am
The Federal Circuit may be in for another hard day at the Court when the Justices hear argument next week in Medtronic v. Boston Scientific Corp. At issue in the case is who bears the burden of persuasion when a user of technology files suit against a patent-holder, seeking a declaratory judgment that its actions do not infringe a particular patent.
The case follows directly from the Court’s 2007 reversal of the Federal Circuit in MedImmune, Inc. v. Genentech. In that case, a licensee of a patent sought a declaratory judgment that the patent was invalid (so that it would have no further obligation to pay royalties). Under the law of the Federal Circuit, those suits were impermissible, on the theory that there can be no real controversy about possible infringement when the plaintiff already has a license. The Court reversed eight to one, concluding that such a controversy is sufficiently concrete to satisfy Article III requirements.
Now that the Federal Circuit is hearing MedImmune declaratory judgment actions, the natural question is who bears the burden of persuasion. Ordinarily, of course, when a patent-holder sues for infringement, it bears the burden of persuasion as the plaintiff. In declaratory judgment actions, though, the plaintiff normally does not bear the burden of persuasion. Rather, the burden is placed on the party that would have been the plaintiff in the hypothetical coercive action about which a declaration is sought. In this case, that would have meant that patent-holder Boston Scientific bore the burden of demonstrating that Medtronic’s devices infringed patents held by Boston Scientific.
The Federal Circuit took a different path, though, offering reasoning eerily reminiscent of its analysis in MedImmune. Specifically, the court of appeals concluded that when the declaratory judgment is brought by a licensee, the licensee bears the burden as the party seeking to change the status quo under the license.
The brief from Seth Waxman and Paul Wolfson on behalf of Medtronic is devastating, and it certainly doesn’t hurt that the Solicitor General appears as an amicus in its support. Not only does it make the familiar point that procedural questions in declaratory judgment actions mirror the treatment in the hypothetical coercive action – because the Federal Declaratory Judgment Act (“FDJA”) is “procedural” not “substantive” – but it also shows unequivocally that providing certainty to a potential infringer was one of the specific examples at the heart of the drafters of the FDJA. Given the ordinary practice in allocating burdens under the FDJA, and the unquestioned pedigree of the allocation of burdens in infringement actions, that would seem to be enough.
The brief goes on, however, to emphasize a number of practical problems with implementing the Federal Circuit decision on the ground. The most devastating of these relates to preclusion. Because the burden of proof in the FDJA action would be different from the burden of proof in a subsequent action for infringement, the ruling on that action would not preclude subsequent litigation of that question by the licensee. So if the licensee lost in the FDJA action (in which it would bear the burden under the existing Federal Circuit rule), and the patent-holder subsequently sued for infringement, then under traditional rules of preclusion the licensee would not be precluded from introducing its defense again, in a case in which the patent-holder bore the burden. The key to this point is that it is reasonable to expect that in a close case the licensee might lose in the first case (when it bore the burden of persuasion), but win in the second case (when the patentee bore the burden of persuasion). The Justices will not readily swallow – or command – the almost comical lack of finality and consequent waste of judicial resources inherent in that process.
The brief of the patent-holder (Mirowski) does little to deflect the licensee’s presentation. The principal argument on the main issue emphasizes the traditional baseline rule that the plaintiff should bear the burden. Acknowledging that the coercive-action plaintiff often bears the burden in FDJA actions, Mirowski argues that this rule applies only when the FDJA defendant files a counterclaim for infringement. But aside from the assertion, Mirowski offers no sensible reason for making the burden that the plaintiff bears depend on the defendant’s decision to file a counterclaim. Nor does Mirowski have much of an answer to the licensee’s arguments about the practicalities of the procedure – indeed, it does not even address the devastating preclusion argument emphasized above.
But the biggest problem Mirowski faces is not one that easily can be remedied by strategy or skilled argumentation. This is one of those cases where the reasoning of the decision below might make sense within the milieu of the court of appeals, but which has little or nothing to appeal to the Justices. All agree that burdens of proof are largely a matter of the informed exercise of discretion. And the Justices, following MedImmune, almost certainly are viewing this case as just another effort of the Federal Circuit to tilt the scales of ordinary judicial procedure in favor of the patent-holder and against alleged infringers. So, just as in eBay Inc. v. MercExchange, the chances of affirmance look pretty bleak.
The only winning strategy for the respondent in a case like this one is to change the terrain entirely, trying to repackage the case so that it presents to the Justices a different set of issues than it presented below. It is not obvious to the outsider how that could have been done here. But if the Justices decide the case on the questions debated in the briefs, the outcome seems almost foreordained to be reversal.