“Sovereign Immunity Prevents AIA Trial Against University-Owned Patent”

January 27, 2017
Marshall Gerstein Alert

In its decision this week in Covidien LP v. University of Florida Res. Found. Inc., IPR2016-01274, -01275, -01276 (PTAB Jan. 25, 2017), the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office dismissed three petitions challenging the claims of a patent owned by the University of Florida Research Foundation (UFRF) because, as an arm of the State of Florida through the University of Florida, UFRF is entitled to a sovereign immunity defense to the institution of an inter partes review of the challenged patent. 

 Related Background to this PTAB Case

  • UFRF and Covidien have a patent license agreement.
  • When Covidien refused UFRF’s audit request for an accounting of royalties due under its license, UFRF filed suit in Florida state court for breach of contract. 
  • Covidien counterclaimed seeking a declaratory judgment that it did not infringe the patent and successfully moved the Florida state court to transfer the action to federal court because the non-infringement counterclaim invoked the Patent Act.
  • Covidien also filed three IPR petitions challenging the patentability of UFRF’s patent. 
  • The U.S. District Court for the Northern District of Florida received the transferred action but then transferred, at UFRF’s request, the action back to state court. In doing so, the District Court determined that UFRF was an arm of the State of Florida and thus entitled to sovereign immunity.

Sovereign Immunity

The Eleventh Amendment of the U.S. Constitution says, “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” 

In Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743, 753–761 (2002) ("FMC"), the U.S. Supreme Court determined that the Eleventh Amendment limits the judicial authority of the federal courts to subject a state to an unconsented suit, and precludes certain adjudicative administrative proceedings from adjudicating complaints filed by a private party against a non-consenting state.

The PTAB’s Decision

The PTAB determined that FMC provides the framework for determining whether an administrative proceeding is subject to the limits of sovereign immunity. In a lengthy analysis, the PTAB decided that inter partes review is the type of proceeding from which the Framers of the U.S. Constitution would have thought the states possessed immunity.

The PTAB found unpersuasive arguments that: (i) invalid patents would stand simply because they are assigned to a state entity; (ii) a patent owned by a monetization foundation affiliated with a state university would be insulated from the inter partes review process; and (iii) determining whether an entity is entitled to sovereign immunity is a fact-intensive inquiry that the Patent Office is not designed to adjudicate.

Whether a university may assert a sovereign immunity defense, however, remains a fact-intensive determination that may well include consideration of state law provisions defining the university’s character. Here, the PTAB reached its conclusion that UFRF is an arm of the State of Florida after assessing such provisions in accordance with relevant regional judicial authority. Following this determination, the PTAB dismissed Covidien’s IPR petitions.

Based on the facts presented, the PTAB did not need to decide whether a state waives its sovereign immunity defense by filing a related action in federal court for patent infringement or seeking declaratory judgment of patent validity. The PTAB also did not address whether UFRF’s filing of a state court action to enforce the license agreement was a waiver of its sovereign immunity. 

It appears that the PTAB’s dismissal of these petitions may not be appealed in view of the developing case law suggesting that such a dismissal is not subject to judicial review.  For more on cases from the PTAB, please visit www.ptabwatch.com

For more information, please contact Pamela L. Cox or another attorney at the Firm. 

The information contained in this alert is for informational purposes only and is not legal advice or a substitute for obtaining legal advice. Under applicable rules of professional conduct, this communication may constitute Attorney Advertising. © 2017 MARSHALL, GERSTEIN & BORUN LLP, Chicago, Illinois. All rights reserved.

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