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IP Alert: PTAB Holds Sovereign Immunity Applicable to IPR Proceedings

February 2, 2017

On January 25, 2017, in Covidien LP v. University of Florida Research Foundation, Inc., the Patent Trial and Appeal Board (PTAB) granted the motion of the University of Florida Research Foundation (UFRF) to dismiss inter partes review (IPR) proceedings. The PTAB concluded that the “UFRF, as an arm of the State of Florida, is entitled to a sovereign immunity defense in the institution of an inter partes review.” This decision is significant where state-owned patents are concerned.

The Eleventh Amendment prevents federal courts from exercising their jurisdiction over states in suits brought by private citizens or subjects of a foreign state. In Hans v. Louisiana, an 1890 Supreme Court case, the Court held that the states’ sovereign immunity is expansive and that a state must consent to being sued in order for federal courts to exercise jurisdiction in suits brought by any citizen. Subsequently, in Federal Maritime Commission v. South Carolina State Ports Authority, a 2002 case, the Supreme Court affirmed an agency dismissal of a complaint filed against a South Carolina state entity. The Court analogized the function and purpose of the agency action to an action in the federal courts, observing that the complaint sought to initiate proceedings that were overwhelmingly similar to civil litigation, and that the role of the administrative law judge at the Federal Maritime Commission was similar to that of a federal Article III judge. These similarities led the Court to hold that sovereign immunity barred the agency adjudication of a claim against the nonconsenting state entity.

Subsequently, however, in Vas-Cath, Inc. v. Curators of the University of Missouri, the Federal Circuit denied the University of Missouri’s motion to dismiss an appeal from an interference proceeding before the Board of Patent Appeals and Interference based on Eleventh Amendment sovereign immunity. The court reasoned that the university had consented to federal jurisdiction when it initiated and participated the interference proceedings, and therefore could not avail itself of Eleventh Amendment protections.

In Covidien, UFRF brought an Eleventh Amendment motion to dismiss. The PTAB considered both the Supreme Court’s reasoning in Federal Maritime Commission and the Federal Circuit’s Vas-Cath decision in its analysis. Observing that there exist some differences between pleadings, discovery, relief, standards, and jurisdictional and standing requirements in inter partes review and civil litigation, the PTAB nonetheless concluded that the UFRF retained sovereign immunity. The PTAB determined that the agency procedure sought by Covidien was analogous to the agency relief sought in South Carolina State Ports Auth., such that the “considerable resemblance” between an IPR and civil litigation was sufficient to implicate Eleventh Amendment immunity. Also, the PTAB rejected Covidien’s argument that the UFRF had consented to participation in the IPR merely by virtue of having obtained patent rights.

The PTAB did not address whether a third party may request ex parte reexamination of a state-owned patent. Ex parte proceedings are by their nature very different from contested litigation proceedings, and on initial review it seems that the PTAB’s Eleventh Amendment analysis would not apply to such proceedings.

This case is likely to have a significant impact on state universities and other state entities in contemplation of patent enforcement or litigation. Universities have become increasingly interested in patent enforcement in recent years. Subject to any appeal, the Covidien decision seems to have removed at least some of the tools that are available to an accused infringer facing a state-owned patent. For more information, please contact Fitch Even partner Joseph H. Herron.

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