The Supreme Court heard oral arguments in Medtronic (MDT) vs. Boston Scientific (BSX) in a patent litigation lawsuit Tuesday. Chances are the Minnesota-based medical device company will win this one. Luckily for Boston Scientific, logic doesn’t always play into legal interpretation.
In 1991, Boston Scientific made a licensing agreement with Medtronic for its CRT medical device technology and its related patents (i.e., Medtronic would need to pay licensing fees to use that technology).
Here’s why:
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This all began when Medtronic made a smart (read: somewhat diabolical) move. Boston Scientific, they probably said while twirling their waxed mustaches, you imply and say we infringe the patents of our 1991 licensing agreement. Fine, we will sue you saying we don’t, then you’ll have to prove we do in court.
Because, the burden of persuasion is on the party claiming infringement (BSX), not the party claiming non-infringement (MDT).
But!
Boston Scientific, not to be outdone by its rival and licensee, cited the Declaratory Judgment Act, saying that since Medtronic brought the suit, the burden of proof is on it. The Federal Circuit Court sided with BSX.
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“So Medtronic’s saying to the court, ‘No, no. Really it’s your patent, you say I infringe it. The fact I’m here as a plaintiff doesn’t change it,'” Felicia Boyd, a Minneapolis-based IP litigator and partner at Barnes & Thornburg LLP, said. If the Federal Circuit Court’s decision isn’t overturned, “in the first case, the court has just decided there’s no infringement, then the infringed upon can go now sue you for infringement,” she said. It basically causes opportunity for two cases where one is a negative, mirror-image of the first. “That’s kind of a waste of judicial resources.”
The DJA “wasn’t intended to shift the burden of persuasion,” she said.
According to Patent Docs (a great blog if you don’t read it already):
The scholarly collective (filing in favor of Medtronic) also pointed out the practical consideration that such a shift in the burden of proof would prove difficult with efficient and predictable case management. Patent litigations are apparently more time consuming than all federal cases except death penalty Habeas Corpus cases, environmental matters, and civil RICO cases. In fact, many district courts have developed local patent rules or standing orders, which do not contemplate the shift of burden in these cases. Until the lower courts can adjust, there will be “uncertainty, controversy and waste” if the Federal Circuit opinion is not overturned.
However, Tessera filed in Boston Scientific’s favor, arguing the judgment should be vacated, as it’s a state law issue (and basically licensees shouldn’t be able to coerce this sort of action). From Patent Docs:
Tessera described itself as “a leading provider of miniaturization technologies for the electronics industry,” and that as a frequent licensor, it has an obvious interest in the burden of persuasion question at issue. In its amicus curiae brief, Tessera began by looking at the license itself, noting that the lower courts should not have had subject-matter jurisdiction over this case in the first place. Because the license included a “comprehensive contractual royalty dispute resolution procedure,” whereby the licensee was permitted to file a “nested” DJ action, there was no chance that the licensee was going to abandon the contract, and as such, a coercive patent infringement action by the licensor cannot have been reasonably anticipated. Therefore, following the logic of the Gunn v. Minton Supreme Court case of last year, the Federal Circuit’s judgment should be vacated. Alternatively, Tessera argued that the case should be remanded to determine if the question at issue was better determined as a matter of state law.
This is a smart and very interesting argument, but at the end of the day, unlikely to be effective.
While no one can be sure where the Supreme Court will land on any case, based on her review of the briefs, Boyd said she “fully expect(s)” the Supreme Court to overturn the federal court’s decision and have the case sent back down to the district court. That decision could be made in as short a time as three months, she said. “And Medtronic will be able to sit back and wait for Boston Scientific to prove their device has been infringed.” Then, they will probably settle out of court, she said.
“If I’m a betting person, I think I’ve got a good end of the bet,” Boyd said.
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