By Andrew Williams —

"In
the modern economy, licensing of intellectual property rights is a widespread
and essential activity."  Those are
the opening lines from the amicus curiae brief
submitted by the Intellectual Property Owners Association ("IPO") for
the Medtronic Inc. v. Boston Scientific
Corp. case.  The Supreme Court is set
to hear oral arguments in that case on Tuesday, November 5, 2013.  The IPO, which represents more than 200
companies that own or have an interest in U.S. intellectual property rights,
and one of its members, Koninklijke Philips N.V ("Philips"), both
submitted briefs in support of Boston Scientific, et al.  Specifically, both
organizations argued that the Federal Circuit decision should be upheld because
to decide otherwise would disrupt the balance of power between
patentee/licensors and licensees, such that it would create disincentives for
patent holders to enter into license agreements in the first place.  Philips additionally argued that even if the
Supreme Court were to side with Medtronic and require the patent holder to
prove infringement in Medimmune-type
declaratory judgment actions, it should still expressly allow the parties to
retain the freedom to shift the burden of persuasion in the license agreement.

As
a reminder, the sole issue on appeal in that case is whether the burden of
proof shifts in a declaratory judgment action brought by a licensee under Medlmmune,
such that the licensee has the burden to prove that its products do not infringe
the patent.  The Federal Circuit had
decided this issue in the positive, thereby requiring Medtronic as the licensee
to establish non-infringement of the licensed patents.  We have previously reported on the respective
parties' positions (see "Supreme Court Grants Certiorari in Medtronic v. Boston Scientific"),
as well as the United States' amicus
curiae brief (see "United States Weighs-In on the Medtronic Case")
in which it took the position that the burden of proving infringement should
never shift from the patent holder.  Today,
we report on the amicus curiae briefs
that took the opposite position (supporting the respondent in this case) — that
the burden of proof should be on the licensee that brought the suit.  Tomorrow, we will report on both the amicus curiae brief of a collection of
legal scholars, in which they support the petitioner, Medtronic, as well as that
of Tessera Technologies, which argued that the lower court lacked
federal-question jurisdiction, and therefore that the case should be vacated and
remanded.

IPO Amicus Curiae Brief

The
IPO's position can be summarized with a single sentence from the introduction
of its brief:  "To permit a licensee to maintain the status quo, force the
licensor to prove infringement–even where the licensor cannot plead it, let alone
seek infringement remedies and suffer no negative impact even if the licensee
loses, would cause a significant imbalance between a patentee-licensor and a
license."  The IPO approached the question with the recognition that
license agreements have become essential in the modern economy, allowing
parties to "settle litigation, to gain access to technology, to generate a
revenue stream for inventors, and for myriad other reason."  In fact, the brief pointed out that the
position taken by the Solicitor General "largely ignored the primacy of
contract law in defining the relationship between the licensor and the
licensee."  The IPO also pointed out
that the Federal Circuit's decision does not conflict with the public interest
in "weeding out" invalid patents, because patent validity is not
implicated in this case.  No party has
taken the position that the burden of persuasion should shift with regard to
proving a patent is invalid, especially considering the heightened "clear
and convincing" burden-of-proof standard.

The
IPO made four main points.  The first was
to highlight that this case applies in only "the narrowly defined
circumstances" in which the declaratory judgment defendant (patentee) is
foreclosed from any infringement remedy, and instead the best to be hoped for
is the maintenance of the status quo of the previously negotiated license.  In other words, the only party with something
to gain is the licensee.  The IPO,
therefore, supported the Federal Circuit's application of the "well-established
equitable principle" that challengers should bear the burden of
proof.  To do otherwise "would
create an unintended loophole," at least from the point of view of the
patentee-licensor, which could render patent licenses "of little worth."

Contrary
to the assertions made in other amicus
curiae briefs, the IPO pointed out that the Federal Circuit's opinion was
not at odds with MedImmune and it was
not at odds with the public policy concerns expressed in the Supreme Court case
of Lear v. Adkins, 395 U.S. 653
(1969).  With regard to MedImmune, the Supreme Court was silent
as to which party had the burden of proof, and that issue was not relevant to
that decision.  Therefore, the Federal
Circuit Medtronic opinion cannot be at
conflict with it.  With regard to Lear, the Supreme Court had abolished
licensee estoppel because the public had an interest in culling invalid and
unenforceable patents.  In contrast, the MedImmune case only impacts the
interests of the parties to the license.  Therefore, again, the Federal Circuit opinion cannot be at conflict with
the Supreme Court.

Finally,
the IPO stressed the public policy in encouraging the formation of contracts,
including settling legal disputes.  If
the burden of persuasion fell to the patent holder in these types of case, it
would create disincentives to license the patent in the first place.  The benefit of certainty in entering into a
license would "obliterated" if the patent holder bared all of the risk
in the subsequent litigation.  As a
result, a potential licensor could initiate litigation prior to a license in
order to "seek a higher, enforceable and more certain recovery."  Otherwise, "licenses would be free to
challenge any patent claims resolved under an already negotiated, arms-length
contract."  In other words, the
licensee could "'have its cake and eat it too.'"  This disparity is even more pronounced in
relation to settlement agreements.  As
the IPO put it, "[a] patent owner would be foolish to agree to a
patent-settlement license under this situation."

Philips Amicus Curiae Brief

Philips
began its brief in support of Boston Scientific by pointing out that it
(Philips) has been inventing and manufacturing electronics and electrical
products for at least 120 years.  In
fact, last year it filed U.S. patent application for over 1300 inventions.  It has been both a licensor and licensee of
patents, and has an interest in having a clear and appropriate rule regarding
the issue in the present case — the burden of persuasion in declaratory
judgment non-infringement cases.  It also
pointed out that in today's marketplace, consumer products are often covered by
tens or hundreds of patents.  Licenses to
such intellectual property are often bundled, and therefore can include weak
patents along with the strong.  The
parties to such an agreement are able to assess the relative strengths of those
bundles, and negotiate appropriately.

As
a result, in addition to standing with the IPO brief detailed above, Philips
separately urged the Supreme Court that, if it should hold that the patent
holder bears the burden in such case, it should "expressly acknowledge
that sophisticated parties' retain freedom, via contract, to shift the burden
of persuasion relating to patent infringement to the licensee."  It pointed out that the Courts have otherwise
allowed parties to contractually agree to modify litigation rights, such as
waiving objections to personal jurisdiction and due process rights.  Because the parties are in the best position
to understand the particular facts of their case, and are able to negotiate and
bargain based on those fact, they should be able to allocate the burden(s)
through contract.

Philips
concluded by noting that the amicus
brief by Tessera Technologies is in agreement with the proposition that "sophisticated
parties should be free to shift the burden of persuasion as they deem
appropriate by contract."  We will
detail that brief tomorrow, as well as the final amicus brief that was filed by a coalition of legal scholars.