State entities, such a public universities, typically enjoy immunity from lawsuits brought by private parties in federal courts. As a result, state universities are generally immune from patent infringement lawsuits, see Florida Prepaid Postsecondary Education Expense Board vs. College Savings Bank, 527 U.S. 627, 647-648 (1999), and declaratory judgment suits seeking to declare a patent invalid, see Tegic Communications Corporation v. Board of Regents of the University of Texas System, 458 F.3d 1335, 1342 (Fed. Cir. 2006). This past year, the Court of Appeals for the Federal Circuit (“CAFC”) has ruled on several sovereign immunity cases involving university-owned patents. Although some issues related to sovereign immunity remain unresolved, the general upshot of the CAFC’s recent decisions is that sovereign immunity can be used by a state entity as a shield against patent-related lawsuits, but it is not meant to be used as a sword. That is, a state can invoke sovereign immunity when named as a defendant in patent litigation, but cannot do so as a plaintiff when enforcing a patent.
- State sovereign immunity does not apply to inter partes review (“IPR”) proceedings
- A state waives its sovereign immunity by bringing a claim of patent infringement not only as to the cause of action, but also as to any relevant defenses
- Sovereign immunity cannot be asserted to challenge venue in a patent infringement case where a State acts solely as a plaintiff
- A foreign university cannot claim sovereign immunity when it participates in commercial activity, including obtaining a U.S. patent and then licensing and enforcing the patent
Courts generally have found that state sovereign immunity, also referred to as Eleventh Amendment immunity, applies not only to lawsuits brought by a private party in an Article III forum, e.g., patent infringement suits in a federal court, but it also can apply to agency adjudications brought by private parties that are similar to court proceedings. In the recent decisions discussed here, the CAFC clarified to what extent a state entity can rely on sovereign immunity in patent infringement suits brought in federal court and proceedings before the U.S. Patent and Trademark Office (“USPTO”).
State Sovereign Immunity Does Not Apply To Inter Partes Review (“IPR”) Proceedings
Inter partes review (IPR) is a proceeding conducted at the Patent Trial and Appeal Board (PTAB) of the USPTO to determine the patentability of one or more claims in an issued patent on grounds that could be raised under 35 U.S.C. §102 (novelty) or §103 (obviousness) on the basis of prior art consisting of patents or printed publications. The IPR process begins with a third party filing a petition with the USPTO to challenge the validity of the patent. The patent owner has an opportunity to respond to the petition and also has an opportunity to amend the claims during the proceeding. The PTAB then decides whether to institute the IPR and, if so, then makes a final determination as to the validity of the patent in question. The PTAB had previously found that states were immune to patent challenges in IPR proceedings. See, e.g., Covidien LP v. Univ. of Florida Research Found. Inc., IPR2016-01274, Paper 21 (PTAB 25 Jan 2017); NeoChord, Inc. v. Univ. of Md. Baltimore, IPR2016- 00208, Paper 28 (PTAB, 23 May 2017).
In Regents of the University of Minnesota, v. LSI Corp., No. 18-1559 (Fed. Cir. 2019), the CAFC addressed whether state sovereign immunity applies to IPR proceedings. This case involves five patents, U.S. Patent Nos. 5,859,601 (’601 patent), 7,251,768 (’768 patent), 7,292,647 (RE45,230 patent), 8,588,317 (’317 patent), 8,718,185 (’185 patent), and 8,774,309 (’309 patent). The patents in suit are each assigned to the University of Minnesota (“UMN”) and relate generally to digital storage systems, transmitters and receivers, and carrier frequency offset and channel estimation in wireless communication systems.
LSI Corp. designs and supplies semiconductors and allegedly infringed the ’601 patent, which claims particular types of “read channel” chips. Ericsson Inc. is a telecommunications company and its customers’ use of Ericsson’s products was alleged to infringe the ’768, RE45,230, ’317, ’185, and ’309 patents, which claim technology used for 4G LTE networks. UMN sued LSI and Ericsson’s customers in district court. Ericsson intervened in the customer suits. After commencement of the suits for patent infringement, LSI and Ericsson separately petitioned for IPR seeking a determination of unpatentability of the challenged claims on grounds of anticipation and obviousness.
After the petitions for IPR were filed, but before the USPTO decided whether to institute the IPR, UMN filed a motion to dismiss in each IPR proceeding based on state sovereign immunity. The USPTO convened an expanded panel and in each proceeding the PTAB concluded that state sovereign immunity applied to IPR proceedings, but that UMN waived its sovereign immunity by filing the patent infringement suits in district court. UMN appealed to the CAFC.
A key issue in this case is how an IPR proceeding should be characterized. That is, is an IPR proceeding similar to an Article III forum, e.g., patent litigation in a federal court, to which a state entity is immune; an administrative proceeding that closely resembles Article III litigation, to which a state entity also could be immune; or a specialized agency proceeding, in which sovereign immunity would not apply.
While UMN’s appeal was pending, the CAFC decided Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., 896 F.3d 1322 (Fed. Cir. 2018), cert. denied, 139 S. Ct. 1547 (U.S. April 15, 2019), which addressed the related question of whether tribal sovereign immunity applies in IPR proceedings. In Saint Regis, Allergan, a pharmaceutical company, assigned its rights in patents related to Restasis® for treating dry eye to the Saint Regis Mohawk Tribe in return for a license. At the time of the assignment, the patents were the subject of ongoing IPR proceedings. The Saint Regis Mohawk Tribe invoked tribal sovereign immunity as a bar to the IPR proceedings.
The CAFC noted in Saint Regis that immunity generally does not apply when the federal government acts through an agency and engages in an investigative action or pursues an adjudicatory agency action, but there is no blanket rule that immunity does not apply in federal agency proceedings. Fed. Maritime Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 754–56 (2002) (“FMC”). In FMC, the Court considered whether state sovereign immunity precluded the Federal Maritime Commission from adjudicating a private party’s complaint that a state-run port had violated the Shipping Act of 1984. The Court determined that the state had immunity from the Commission’s proceedings, in part, because the proceedings had overwhelming similarities with civil litigation in federal courts.
The CAFC acknowledged in Saint Regis that an IPR is neither clearly a judicial proceeding initiated by a private party nor an enforcement action brought by the federal government. Quoting Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016), the CAFC characterized an IPR as a “hybrid proceeding” with “adjudicatory characteristics” similar to court proceedings, but in other respects it “is less like a judicial proceeding and more like a specialized agency.” The CAFC noted that recent Supreme Court decisions did not resolve this tension.
For example, in Oil States Energy Services v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018), the Court emphasized the government’s central role in IPR proceedings and the role of the USPTO in protecting the public interest. The Court in Oil States held that IPR proceedings are a matter that arises between the Government and persons subject to its authority and further recognized that an IPR is simply a reconsideration of the USPTO’s original grant of a patent. In contrast, in a case decided the same day, the Court in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018) emphasized the adjudicatory aspects of IPR and the way in which an IPR proceeding mimics civil litigation and noted that the petitioner, and not the USPTO Director (i.e., the PTAB), defines the contours of the proceeding.
In Saint Regis, the CAFC relied on several factors in determining that an IPR is more like an agency enforcement action than a civil suit brought by a private party and that tribal immunity is not implicated. First, the Director of the USPTO has broad discretion in deciding whether to institute review. Second, the role of the parties in IPR suggests immunity does not apply in these proceedings. More particularly, once the IPR has been instituted by the Director, the PTAB can choose to continue review even if the petitioner chooses not to participate. Third, although there are certain similarities, IPR procedures do not mirror those used in federal court, including the rules of civil procedure, discovery, and live testimony.
Accordingly, the CAFC concluded in Saint Regis that tribal sovereign immunity did not apply to IPR proceedings in which the USPTO was essentially reconsidering a prior administrative grant of a patent. The CAFC, however, left open the question of whether to treat state sovereign immunity differently than tribal immunity. A petition for certiorari to the U.S. Supreme Court was filed in Saint Regis, but the petition was denied earlier this year. Saint Regis, 139 S. Ct. 1547 (U.S. April 15, 2019).
UMN argued that the reasoning in Saint Regis was not applicable to its appeal because there are salient differences between tribal and state sovereign immunity, a point that the CAFC at least acknowledged in Saint Regis. The CAFC concluded, however, that the differences between tribal and state sovereign immunity did not warrant a departure from the reasoning in Saint Regis. After a lengthy discussion of post-issuance administrative proceedings in the USPTO, the CAFC held that state sovereign immunity does not apply to IPR proceedings. In reaching this decision, the CAFC did not address the issue of whether the state waived sovereign immunity by asserting patent claims in district court that were later challenged in a petition for IPR.
Further complicating this case, Judges Dyk, Wallach, and Hughes offered additional views (which interesting were not written as a concurring opinion) that state sovereign immunity also does not apply to IPR proceedings because they are a type of in rem proceeding to which state sovereign immunity does not apply.
UMN recently filed a petition for certiorari in the U.S. Supreme Court. Although the Court previously declined to take up Saint Regis, many commentators predict that the Court will decide to hear the University of Minnesota case. The University of Minnesota and its amici curiae the Association of Public and Land-Grant Universities, the State of Indiana, et al., and Twelve State Universities and State University Systems have filed Briefs in this case (they can be found here: https://www.scotusblog.com/case-files/cases/regents-of-the-university-of-minnesota-v-lsi-corporation/). We will provide a more detailed update on this case once all parties have filed their Briefs.
A State Waives Its Sovereign Immunity By Bringing A Claim Of Patent Infringement Not Only As To The Cause Of Action, But Also As To Any Relevant Defenses
In University of Florida Research Foundation, Inc., v. General Electric Co., No. 18-1284 (Fed. Cir. 2019), the CAFC addressed whether a state waives its sovereign immunity by bringing a claim of patent infringement not only as to the cause of action, but also as to any relevant defenses. This case is related to U.S. Patent No. 7,062,251 (“the ‘251 patent”), which is directed to managing critical care physiologic data using data synthesis technology. Interestingly, this is the same patent that was challenged in Covidien, noted above, in which the PTAB found that the IPR proceeding was barred due to sovereign immunity.
The University of Florida Research Foundation (UFRF) sued General Electric Company, GE Medical Systems Information Technologies, Inc., and GE Medical Systems, Inc. (collectively “GE”) in the United States District Court for the Northern District of Florida, alleging infringement of the ’251 patent. GE moved to dismiss the lawsuit asserting that the claims of the ’251 patent were directed to ineligible subject matter under 35 U.S.C. § 101. The district court granted GE’s motion determining that the claims of the ’251 patent are directed to an abstract idea and do not recite an inventive concept. UFRF appealed to the CAFC.
Before addressing the merits of GE’s § 101 eligibility challenge, the CAFC addressed whether the district court had subject-matter jurisdiction. According to UFRF, as an arm of the State of Florida, it enjoys sovereign immunity under the Eleventh Amendment and did not waive that immunity as to GE’s § 101 eligibility challenge. The CAFC disagreed.
The CAFC has held in several cases that a state waives its Eleventh Amendment immunity when it consents, as UFRF did in this case, to federal court jurisdiction by voluntarily appearing in federal court. See, e.g., Regents of the Univ. of N.M. v. Knight, 321 F.3d 1111, 1124 (Fed. Cir. 2003); Regents of the Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559, 1564–65 (Fed. Cir. 1997). The waiver extends not only to the cause of action, but also to any relevant defenses and counterclaims. Vas-Cath, Inc. v. Curators of Univ. of Mo., 473 F.3d 1376, 1381 (Fed. Cir. 2007). In this case, the parties agreed that there were no counterclaims. At issue was whether GE’s § 101 eligibility challenge qualified as a defense to UFRF’s claim of infringement.
After determining that § 101 is a condition for patentability, the CAFC held that GE’s § 101 eligibility challenge constitutes a defense to patent infringement. As a result, by bringing its claim of infringement, UFRF waived its sovereign immunity, not only as to the cause of action, but also as to GE’s § 101 eligibility challenge. Thus, the CAFC concluded that the district court had subject-matter jurisdiction in this case.
Sovereign Immunity Cannot Be Asserted To Challenge Venue In A Patent Infringement Case Where A State Acts Solely As A Plaintiff
In Board of Regents of the University of Texas System, TissueGen, Inc., v. Boston Scientific Corp., No. 18-1700 (Fed. Cir. 2019), the CAFC addressed whether state sovereign immunity can be asserted to challenge venue in a patent infringement case where a state acts solely as a plaintiff. This case involves U.S. Patent Nos. 6,596,296 and 7,033,603, which are directed to implantable drug-releasing biodegradable fibers developed at the University of Texas at Arlington and exclusively licensed to a faculty start-up, TissueGen Inc. TissueGen commercialized its ELUTE® fiber product, which is intended to replace standard fibers in medical devices, such as implantable stents, and is capable of delivering therapeutic agents directly to the site of implantation.
The University of Texas (UT) and TissueGen sued Boston Scientific for patent infringement in the Western District of Texas, alleging that Boston Scientific’s stent products infringed the UT patents. Although UT conceded that Boston Scientific is a Delaware corporation with a principal place of business in Massachusetts, it asserted that venue was proper in the Western District of Texas because UT has sovereign immunity and the court had personal jurisdiction over Boston Scientific. Boston Scientific filed a motion to dismiss for improper venue and requested that the case be dismissed or, in the alternative, transferred to the District of Delaware. In its motion, Boston Scientific noted that it did not own or lease any property or maintain a business address in the Western District of Texas, and, although it had approximately forty-six employees in the Western District of Texas, all of its employees in that district maintained home offices and did not work in spaces that were owned, leased, or controlled by Boston Scientific.
The district court granted Boston Scientific’s motion and transferred the case to the District of Delaware. It rejected UT’s sovereign immunity arguments, explaining that “[s]overeign immunity is a shield; it is not meant to be used as a sword . . . There is no claim or counterclaim against The Board of Regents that places it in the position of a defendant.” The CAFC affirmed, holding that the state sovereignty principles asserted by UT do not grant it the right to bring a patent infringement suit in an improper venue.
In reaching this decision, the CAFC noted that the patent venue statute, 28 U.S.C. § 1400(b) controls venue in patent infringement actions. Further, venue is proper under § 1400(b) only where a defendant resides or has a regular and established place of business. UT did not dispute the District Court’s finding that Boston Scientific neither resided in nor had a regular and established place of business in the Western District of Texas. Further, neither party disputed that UT is an arm of the State of Texas and entitled to the same sovereign rights as the State of Texas.
UT argued that the Eleventh Amendment allows a State to control where it litigates against a private party. The CAFC, however, previously held in Eli Lilly 119 F.3d at 1565 that the Eleventh Amendment applies to suits against a state, not suits by a state. The CAFC explained in Eli Lilly that Eleventh Amendment immunity applies only in situations where a state is a defendant. Maintaining that its decision in Eli Lilly was controlling, the CAFC held that sovereign immunity cannot be asserted to challenge a venue transfer in a patent infringement case where a state acts solely as a plaintiff.
A Foreign University Cannot Claim Sovereign Immunity When It Participates In Commercial Activity, Including Obtaining A U.S. Patent And Then Licensing And Enforcing The Patent
In a twist relative to the other cases decided by the CAFC involving state sovereign immunity, the CAFC also decided a case involving a foreign university technology transfer office. Genetic Veterinary Sciences, Inc., DBA Paw Prints Genetics v. LABOKLIN GmbH & Co. KG, The University of Bern, No. 18-2056 (Fed. Cir. 2019), is related to U.S. Patent No. 9,157,114 (“the ‘114 patent”), which is directed to an in vitro test for genotyping Labrador Retrievers to determine if a particular dog is a carrier of Hereditary Nasal Parakeratosis (HNPK), a disease that causes crusts and fissures to appear on the nose of an otherwise healthy dog.
Genetic Veterinary Sciences, Inc., doing business as Paw Prints Genetics (“PPG”) is a corporation headquartered in the State of Washington who offers laboratory services for testing for genetic variations and mutations known to cause diseases in dogs, including a test for detecting the presence or absence of a genetic variation in the SUV39H2 gene, which is indicative of HNPK. PPG receives and processes requests for such genetic testing from around the world.
The ‘114 patent is owned by the University of Bern (the “University”), an instrumentality of the Swiss Confederation, who granted an exclusive license in the ‘114 patent to LABOKLIN GmbH & Co. KG (“LABOKLIN”), a German company. As a condition of the license agreement, LANOKLIN was required to commercialize the invention in North America. LABOKLIN had entered into two sublicenses in the U.S., one in Michigan and one in California. The license agreement also required the University and LABOKLIN to obtain each other’s consent prior to sending a cease-and-desist letter to a potential infringer. The license agreement further specified that if the alleged infringing activity did not abate within a certain period of time and the University gave LABOKLIN written notice of its election not to bring suit, LABOKLIN had a right to sue for infringement.
After obtaining the University’s consent, LABOKLIN sent a cease-and-desist letter to PPG accusing PPG of infringing the ‘114 patent. After receiving the cease-and-desist letter, PPG brought suit in the Eastern District of Virginia against both LABOKLIN and the University, requesting declaratory judgment that the asserted claims of the ’114 patent were ineligible under § 101 for failing to claim patent-eligible subject matter. LABOKLIN and the University moved to dismiss PPG’s suit for lack of subject-matter jurisdiction and lack of personal jurisdiction. The district court found that it had jurisdiction over both LABOKLIN and the University and that the asserted claims were patent ineligible under § 101.
LABOKLIN and the University appealed to the CAFC, asserting that the district court: (1) lacked personal jurisdiction over LABOKLIN because it lacked sufficient contacts with the forum; and (2) lacked personal and subject-matter jurisdiction over the University because the University enjoys sovereign immunity. In regard to LABOKLIN, the CAFC found that the district court had personal jurisdiction over LABOKLIN because LABOKLIN sent the cease-and-desist letter to PPG and LABOKLIN conducted business in the U.S. by entering into sublicenses in California and Michigan. The CAFC concluded that such activities met the “minimal contacts” requirement to establish personal jurisdiction over LABOKLIN.
With regard to personal jurisdiction and subject-matter jurisdiction over the University, the Foreign Sovereign Immunities Act (“FSIA”) provides the sole basis for obtaining jurisdiction over a foreign sovereign in the United States. Pursuant to the FSIA, a foreign state is presumptively immune from the jurisdiction of United States courts unless a specified exception applies. Engaging in commercial activity in the U.S., however, gives rise to an exception to sovereign immunity. The CAFC had previously determined in Intel Corp. v. Commonwealth Sci. & Indus. Research Org., 455 F.3d 1364, 1369 (Fed. Cir. 2006) that a defendant’s acts of obtaining a U.S. patent and then enforcing its patent, whether by threatening litigation or by offering licenses to putative infringers, are commercial activity.
In the instant case, the district court held that subject-matter jurisdiction existed over the University because the University is an agent or instrumentality of a foreign state that engaged in commercial activity sufficient to trigger an exception to sovereign immunity because it had obtained a U.S. patent and then threatened PPG by proxy (i.e., through LABOKLIN) with a patent infringement suit.
The CAFC acknowledged that the presumption of sovereign immunity applied to the University, but the activities of the University gave rise to the commercial activity exception under FISA. Such activities included obtaining a U.S. patent, consenting to LABOKLIN sending the cease-and-desist letter to PPG, and having an option in deciding whether to proceed with litigation. Further, LABOKLIN, acting on behalf of the University, admitted that it sought for PPG to either cease its conduct or enter into a sublicense agreement with LABOKLIN. Although LABOKLIN, and not the University, sent the cease-and-desist letter to PPG, the University, as the patent owner ultimately controlled enforcement of the ’114 patent.
Accordingly, the CAFC concluded that the University cannot claim sovereign immunity because it obtained a U.S. patent and then participated in licensing and enforcing the ’114 patent, which constitutes “commercial activity” under FSIA. Thus, the CAFC concluded that the district court had subject-matter jurisdiction over the University.
Conclusions and Practice Tips
As a general rule, the CAFC has consistently held that a state can invoke sovereign immunity as a defendant in patent-related proceedings in federal court, but not as a plaintiff when bringing, for example, a patent infringement suit. To this end, a state waives its sovereign immunity by bringing a claim of patent infringement not only as to the cause of action, but also as to any relevant defenses. This line of reasoning also applies to procedural issues in federal court, such as those involving venue. Further, a foreign university cannot claim sovereign immunity when it participates in commercial activity, including obtaining a U.S. patent and then licensing and enforcing the patent.
Regarding whether sovereign immunity applies in IPR proceedings, it will be important to watch whether the U.S. Supreme Court agrees to hear the University of Minnesota case. Hopefully, the Court will take up the case to resolve the tension between the PTAB and CAFC and the inconsistencies in its previous decisions in Oil States and SAS as to the nature of IPR proceedings and to address the unanswered question of whether a state waives its sovereign immunity in an IPR proceeding when it brings a suits for patent infringement in a federal court. The Court has an opportunity to provide clarity on these issues and to provide states and their technology transfer offices with a higher degree of certainty as to their intellectual property rights. Unless there is a shift in the current state of the law, however, state universities should be counseled that they cannot avail themselves to sovereign immunity in cases in which they are asserting patent rights and in IPR proceedings initiated by a third party petitioner.
- Note that sovereign immunity applies to state universities and generally would not apply to technology transfer offices of private institutions.
- Although the terms are often used interchangeably, Eleventh Amendment immunity is somewhat of a misnomer in that the States’ immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution. See Alden v. Maine, 527 U.S. 706 (1999).
- An in rem proceeding is one in which a court may exercise jurisdiction over a thing, e.g., property (either real or personal), as opposed to having jurisdiction over a person, e.g., a party to the suit.
- The CAFC found that the asserted claims do no more than simply instruct the practitioner to implement the abstract idea on a generic computer and held that they are not patent eligible under § 101.
- The CAFC affirmed the district court’s determination that the asserted claims of the ‘114 patent were not patent eligible under § 101.
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