While it might seem like an obscure topic, the issue of sovereign immunity comes up with some regularity in intellectual property disputes. When it applies, its effect may be substantial. Sovereign Immunity is the legal principle where a sovereign entity is immune from being sued for various actions unless it has waived immunity by an express statement or action. The United States is a collection of overlapping sovereign entities. One entity is the Federal Government. Each U.S. state is also considered its own sovereign entity. Under the Eleventh Amendment, states are largely immune from being sued in a Federal court. The various American Tribal Nations are also recognized as sovereign entities and enjoy sovereign immunity similar to that of the states. Most patent, trademark, and copyright law is exclusively governed by Federal law. Because violations must be addressed in Federal court, when the infringer is a government, sovereign immunity becomes issue.
Immunity extends beyond the central government body to all parts of the entity. Many are surprised to learn that a state university can assert sovereign immunity. State schools often engage in substantial commercial activities that raise potential IP issues. Sovereign immunity issues are also not confined to lawsuits in a Federal court but can also extend to various adversarial Federal administrative procedures. For example, an inter partes review (IPR) is a trial-like proceeding before an administrative court to challenge the validity of patents. If the patent is owned by a state university, immunity may block this type of challenge. Recently, some private companies have tried to leverage sovereign immunity by assigning patents to a Tribal Nation, licensing them back and then arguing that sovereign immunity barred an IPR challenge to the patents. Whether tactic will succeed is still unclear.
So can the Federal or State government be sued for infringement under Federal patent, trademark, or copyright law? The legal theories behind this involve overlapping issues of constitutional law, congressional authority, and states’ rights, among others. The answer often depends on the particular facts and specific legal issues of a dispute. That said, in most cases the answer is Yes for the U.S. Government and No for states and Tribal Nations, unless they have taken a specific action to waive immunity for that matter. A brief summary follows. If the question comes up you should consult with your IP attorney.
Sovereign Immunity & Suits Against the U.S. Government
The U.S. government has specifically waived sovereign immunity for patent and copyright infringement claims (28 U.S.C. § 1498). This waiver means that patent and copyright infringement suits can be brought against the U.S. Government. The waiver is not without some limits. First, the suit cannot be filed in a regular U.S. district court. Instead, it must be brought in the Court of Federal Claims, a special court set up to handle suits against the U.S. Government. There are no jury trials in the Court of Federal Claims. Also, if the infringement is by a government contractor (for work being done for the U.S.), the contractor has immunity and the suit must instead be brought against the U.S. government.
For patents, the waiver of immunity is not for claims of patent “infringement” but instead for claims of improper “use or manufacture” by the federal government of an invention covered by a patent. Courts have concluded that this waiver language applies to direct infringement and to importing infringing products to the U.S. However, the issue of whether the waiver extends to claims of indirect patent infringement (contributory or induced infringement and infringement by exporting unassembled parts of an invention for use elsewhere) has not been resolved.
Similar to patents and copyrights, the federal government specifically waived sovereign immunity for violations under the Lanham act, the Federal law that governs trademark rights (15 U.S.C. § 1122). All Federal trademark laws can be applied to the government. Trademark lawsuits can be filed in any appropriate court and are not restricted to the Court of Federal Claims.
Sovereign Immunity & Suits Against States
The situation involving lawsuits against the States is more complex. In general, states – including many arms of a state such as state universities — are immune from being sued for violating Federal intellectual property laws unless they affirmatively have waived the immunity. This disparity can give the state a significant advantage over other entities in IP matters.
A state can be sued for violating its own state law. There are usually some alternative state laws that can be applied in trademark and copyright matters infringement but these alternatives are often limited both in scope and the remedies available. There is often no state law that can be substituted for patent infringement. (Federal infringement suits can sometimes be brought against individuals working for the state if they are sufficiently involved in the infringing act. However, the economics and limited remedies that can be obtained often do not make these suits worthwhile.) The Federal Government has periodically tried to level the playing field by passing laws that expressly remove state sovereign immunity from IP suits. In 1990 and 1992 Congress passed the Copyright, Trademark, and Patent clarification acts that specifically eliminated state sovereign immunity from these relevant Federal laws. In 1999, addressing a patent infringement suit brought against the State of Florida (on a patent related to a college savings program), the Supreme Court held the general waiver of State immunity from patent lawsuits unconstitutional. The reasoning striking the patent law has been extended to preserve states immunity from suits under Federal trademark and copyright laws as well.
A state’s sovereign immunity does not apply if the state has waved it. One type of waver is an express “clear declaration” that the State will submit itself to Federal jurisdiction. It is not unusual for a contract between a private company and a state university to include an immunity waiver clause for certain issues. Immunity can also be waived if the State voluntarily invokes Federal jurisdiction, such as by asserting its own IP against a 3rd party or voluntarily joining a Federal lawsuit. However, the scope of the waiver is viewed very narrowly. As a result, even if the state a has waived immunity for one issue in a lawsuit, such as by suing for patent infringement, it may still claim immunity from other claims that are not very closely related, such as counterclaims alleging infringement of different patents.
State immunity may also extend to certain administrative proceedings if they are adversarial and run in a way that is similar to a regular lawsuit. Early last year the Patent Trial and Appeal Board (PTAB), an administrative court, held in several different decisions that an Inter Partes Reviews (IPR) could not be brought to challenge patents owned by state universities because of sovereign immunity. In December 2017, the PTAB weighed in on this issue again. In an order issued by an expanded board of seven judges (up from the usual three), the Board confirmed that sovereign immunity applied to state universities in IPR proceedings but in this particular case, the university had waived immunity because it previously asserted the patent in Federal court against the same party who sought the IPR. It is too soon to say whether this result will be challenged on appeal.
Sovereign Immunity & Suits Against Native American Tribal Nations
Recognized Native American tribes have the same types of sovereign immunity that states do. Absent a waiver, they too are immune from lawsuits asserting infringement of Federal patent, trademark, and copyright laws and subject to the same types of waiver considerations.
In September, 2017, the large pharmaceutical company Allergan took steps to employ tribal immunity to protect its patents on the drug Restasis. Allergan assigned its patents to the St. Regis Mohawk Tribe. The tribe then licensed the patents back for $13.5M and more than that amount in yearly royalties. Immediately afterwards, the Tribe argued that an IPR challenging those patents could not proceed because of tribal immunity. The motion has not been decided.
Many companies and organization have weighed in on the issue in this case. Those opposing immunity claim that the assignment is a sham transaction and further that this is a glaring loophole that amounts to ‘renting’ sovereign immunity and it should not be allowed to stand or it could swallow the entire IPR program. Some members of Congress have threatened to pass legislation specifically removing sovereign immunity for Tribal Nations for IP matters like this. (Because the immunity of Tribal Nations is not enshrined in the U.S. Constitution, it is easier for laws removing their immunity to pass judicial review.) The St. Regis Mohawk Tribe argues that they should be treated no differently than state universities found to be immune from IPR challenges and there is no law to support a finding that immunity does not apply. They, along with other Indian Tribes, also argue that the transaction is not a sham but instead is part of a larger plan to diversify from conventional economic activities, such as casinos, by investing in patents, technology, and research. The tribe has stated that it plans to invest the licensing and royalty revenues earned into health, safety, education and cultural programs.
However this issue is decided, this case is unlikely to be the end of the matter. A decision is likely to be appealed. Also, news reports indicate that the St. Regis tribe holds 40 patents it recently acquired from a technology company and that it is in the process of preparing to monetize them.