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            In Baum Research and Development Company, Inc. v. Univ. of Mass. at Lowell (Fed. Cir. Oct. 10, 2007), the University of Massachusetts at Lowell took a license from Baum under two patents relating to a device for testing baseball bats.  The license agreement between the parties included the following provision:

Governing Law.  This Agreement will be construed interpreted and applied according to the laws of the State of Michigan and all parties agree to proper venue and hereby submit to the jurisdiction in the appropriate State or Federal Courts of Record sitting in the State of Michigan.

            A dispute arose and Baum sued the University in federal district court for breach of contract and patent infringement.  The University moved to dismiss the complaint on the grounds that it was immune from suit based on the Eleventh Amendment of the U.S. Constitution.  The district court denied the University’s motion and ruled that any immunity was waived by the jurisdiction provision of the license agreement reproduced above.

            On appeal, the Federal Circuit affirmed the district court’s judgment.  It first noted the rule reaffirmed by the Supreme Court in College Savings Bank v. Florida Prepaid Postsecondary Educ. Expense Bd. (1999) that a state waives it sovereign immunity when it clearly declares its intention to submit to federal jurisdiction, provided that such intention is “unequivocally expressed.”  The Federal Circuit agreed with the district court that the jurisdiction provision of the license was clear and unambiguous and, that by agreeing to the provision, the University expressly agreed to resolve disputes in federal court, thereby waiving its sovereign immunity in accordance with College Savings Bank and other precedent.

            In so ruling, the Federal Circuit rejected the University’s arguments that the jurisdiction provision was too vague to constitute a waiver, merely constituted an acceptance of venue in Michigan if the University’s immunity could be overcome, and was overridden by a separate provision of the license that made the entire agreement subject to all laws, including the Constitution and its amendments.  The court also did not find persuasive the University’s argument that because the University is an arm of the State of Massachusetts, only the Massachusetts legislature could waive the University’s sovereign immunity, and thus neither the University nor its signatory (an Associate Director) had the authority to do so under the contract. 

***State institutions should avoid language agreeing to resolution of disputes in federal court.***