PTAB Finds New State Immunity
Using one of the least-understood amendments to the United States Constitution, the Patent Trial and Appeal Board (PTAB) recently found a new immunity for States and their instrumentalities. It is the latest resurrection of a doctrine I have been involved with over most of my career as a lawyer.
Many, including the non-lawyers, will be familiar with the first ten amendments to the Constitution, the so-called “Bill of Rights” that put the Constitution into an acceptable condition to the thirteen erstwhile States. The Eleventh Amendment was introduced about four years after the passage of the Constitution, to overrule the US Supreme Court’s holding in Chisholm v Georgia, 2 US 419 (1793), which held that federal courts have diversity jurisdiction over a suit against a state by a private citizen of another state. It was ratified by the States and became law within four years. Through a series of subsequent cases, including Hans v Louisiana, 134 US 1 (1890), Ex parte Young, 209 US 123 (1908) and Alden v Maine, 527 US 706 (1999), the doctrine has developed further judicially-created aspects. As a result, its scope goes far beyond its original language and it is unfamiliar to many lawyers, much less lay persons.
My first experience with the Eleventh Amendment came in Chew v California, 893 F.2d 331 (Fed. Cir.1989) (J Nies opinion). An Ohio inventor, Marian F. Chew, owned US Patent 3,472,067, related to testing automobile exhaust emissions. She sued California for patent infringement in the Eastern District of California. Her complaint was dismissed, based on the Eleventh Amendment. In a similar timeframe, a copyright infringement suit was filed in federal court by a copyright owner against the University of California – Los Angeles (UCLA). That suit was also dismissed. The UCLA suit dismissal was ultimately affirmed by the 9th Circuit Court of Appeals and the Chew suit dismissal was affirmed by the Federal Circuit Court of Appeals. I was involved in preparing a petition for certiorari to the US Supreme Court, which was denied.
Congress became interested in the two cases and, as a part of the Patent Remedy Act, Pub.L. 102-560 (1992), 35 USC 271(h) was amended so that States, their instrumentalities, officers and employees were included as parties subject to suit for patent infringement.
The abrogation of State immunity was short-lived, as the US Supreme Court, in Florida Prepaid Post-Secondary Education Expense Board v College Savings Bank, 527 US 627 (1999) (CJ Rehnquist opinion), held that Congressional power, including the Patent Clause, Art. I, Section 8, clause 8, does not include the ability to abrogate the Eleventh Amendment immunity.
It is unquestioned that the States, and especially their instrumentalities, including State universities, are actively involved in obtaining US patents and copyrights and enforcing those intellectual property rights in the federal courts, which have exclusive jurisdiction over those rights. It has been consistently held by the courts that this involvement is not a waiver of the Eleventh Amendment immunity.
And so, we move to 2017. Under the America Invents Act of 2012 (AIA), the methods of contesting an issued US patent were changed. An inter partes re-examination procedure, conducted in a specially-created examination unit of the US Patent Office, was eliminated. In its place, an inter partes review (IPR) procedure was instituted, with the PTAB conducting the procedure. There are other PTAB post-grant procedures established under AIA. It is presumed that the current holding extends to them.
In three separate IPR proceedings, Covidien LP sought to invalidate claims in US Patent 7,062,251, issued to the University of Florida Research Foundation Incorporated (UFRF). Before Covidien’s filing in the PTAB, UFRF had sued Medtronic (now Covidien) in the state courts of Florida, for breach of contract in a license agreement. Covidien made a counterclaim of non-infringement and had the case removed to a federal court sitting in Florida, where UFRF asserted its immunity and the case was sent back to the state court. That decision is currently on appeal to the Federal Circuit.
Covidien then brought the IPR actions in the PTAB, where UFRF asserted sovereign immunity, based on Supreme Court holdings that extend the immunity beyond the courts themselves to reach agency adjudications.
In at least one instance, Vas-Cath, Inc. v Curators of the University of Missouri, 473 F.3d 1376 (2007), the Federal Circuit has held that when Missouri had initiated the underlying patent interference in the former Board of Patent Appeals and Interferences (BPAI, now the PTAB), it waived its opportunity to shield the agency decision (in its favor) from an appeal by Vas-Cath.
Covidien argued to the PTAB that the rights held by UFRF are public rights, granted by submitting to federal agency authority. It is in the public interest that the post grant reviews were established, to correct or cancel patents that have been improperly issued. Unless the Patent Office conveys public rights (instead of private rights), the Patent Office lacks authority to revoke, or even correct, a patent, once issued.
However, after an extensive review of exactly how UFRF qualifies as a proper recipient of State sovereign immunity, the PTAB concluded that UFRF is eligible for immunity. It dismissed the actions.
Based on the Federal Circuit’s January, 2017, holding in Phygenix, Inc. v ImmunoGen, Inc., it is unclear whether Covidien will have standing to obtain Federal Circuit review of this decision. This may explain the somewhat surprising decision of the PTAB, as a non-Article III adjudicatory body, to make a decision implicating Constitutional law.
As it stands, this case provides a strong protection to a patent issued to a State entity, and presumably, to their licensees. The PTAB carefully steps around (in footnote 4 of the Slip Opinion) whether the same result would obtain if UFRF had sued Covidien for patent infringement before Covidien made its challenge in the PTAB.
An inter partes re-examination is an expensive procedure, and the statutory shortened time period for reaching decision, while admirable, can put a real burden on each party.
The broad ability of a party, especially a large corporation, to bring an IPR against a university (or a private individual for that matter) could have a chilling effect on the patent system. While the Constitution may not provide immunity for the private individual, it provides one for a State. Florida has to be commended for taking this approach at the PTAB.
Since the Covidien case, the PTAB has made a consistent ruling in Neochord, Inc. v University of Maryland, Baltimore, IPR2016-00208, although slightly different facts were presented (UMB had granted an exclusive license to a corporation). In this later decision, the PTAB cited Federal Maritime Commission v South Carolina Ports Authority, where the Supreme Court held that if an agency proceeding “walks, talks and squawks” like a court proceeding, Eleventh Amendment immunity can be provided. 535 US 751, 757-759 (2002).
I’ve seen both sides of this issue over almost 30 years. So far, the courts seem to be balancing the interests of the parties.
If you have any questions about State immunity relating to patent matters, contact your patent attorney to seek advice.
