Federal Circuit to University of Minnesota: No State Sovereign Immunity For You

By Eileen McDermott
June 14, 2019

“This is a bridge too far even for a Federal Circuit that has constantly been an apologist for an overreaching and horribly unfair Patent Trial and Appeal Board that has from day one had as its marching orders the destruction of patents that are supposed to be presumed valid.” – Gene Quinn

The Federal Circuit today ruled that The University of Minnesota (UMN)—an arm of the state of Minnesota—is not protected by state sovereign immunity from a number of inter partes review (IPR) petitions filed against UMN patents. Regents of the University of Minnesota v. LSI Corporation and Avago Technologies U.S. Inc (Fed. Circ., 2018-1559).

The Court, in an opinion authored by Judge Dyk, relied heavily on its 2018 decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., 896 F.3d 1322 (Fed. Cir. 2018), which found that “tribal sovereign immunity cannot be asserted in IPRs.” Despite UMN’s arguments to the contrary, the Federal Circuit answered a question left open in its decision in Saint Regis Mohawk by concluding today that “the differences between tribal and state sovereign immunity do not warrant a departure from the reasoning in Saint Regis.” The Court further concluded:

Saint Regis concluded that IPR was an agency reconsideration proceeding to which sovereign immunity does not apply in the first instance. This reasoning applies equally to states as it does to tribes…. As we held in Saint Regis, IPR is properly viewed as an agency’s reconsideration of a previous patent grant that is aided by information supplied by a third party, and state sovereign immunity does not bar these proceedings.

The Supreme Court denied Saint Regis Mohawk Tribe’s petition for certiorari in April 2019.

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In their “additional views,” all three judges on the panel added that “state sovereign immunity also does not apply to IPR proceedings because they are in substance the type of in rem proceedings to which state sovereign immunity does not apply.”

The December 2017 PTAB decision had held that, while an “IPR is an adjudicatory proceeding of a federal agency from which state entities are immune…. Patent Owner has waived its Eleventh Amendment immunity by filing an action in federal court alleging infringement of the patent being challenged in this proceeding.”

Since the Federal Circuit found that state sovereign immunity does not in fact apply to IPR proceedings, it did not address the issue of whether immunity was waived by UMN’s district court filing.

In a final note, the Court weighed in on one of the key concerns of the parties and amici even though the issue was not implicated in the facts of this case:

If sovereign immunity barred IPR proceedings against patents obtained by a sovereign, nothing would prevent a state from lending its sovereign immunity to private parties, as the tribe attempted to do in Saint Regis. Such manipulation would undo Congress’ central quality control mechanism in creating post-grant administrative proceedings.

A Bridge Too Far

“Given the sacrosanct nature of state sovereign immunity, this ruling that a State does not enjoy sovereign immunity is astonishing,” said Gene Quinn, President and CEO of IPWatchdog, Inc. He continued:

This is a bridge too far even for a Federal Circuit that has constantly been an apologist for an overreaching and horribly unfair Patent Trial and Appeal Board that has from day one had as its marching orders the destruction of patents that are supposed to be presumed valid.

The good news is, this is precisely the type of political issue the Supreme Court normally cannot resist, so we can expect this case and sovereign immunity issues generally to be decided by the Supreme Court. And if the Supreme Court gets it wrong, we can be certain States will demand Congress step in.

More on the original PTAB decision here.

The IPR cases involved are: IPR2017-01186 (re: Patent 8,774,309); IPR2017-01197  (re: Patent No. 7,252,768); IPR2017-01200 (re: Patent 8,718,185); IPR2017-01213 (re: Patent 8,588,317); IPR2017-01214 (re: Patent RE45,230) and IPR2017-01219 (re: Patent RE45,230).

 

The Author

Eileen McDermott

Eileen McDermott is the Editor-in-Chief of IPWatchdog.com. Eileen is a veteran IP and legal journalist, and no stranger to the intellectual property world, having held editorial and managerial positions at several publications and industry organizations. She has acted as editorial consultant for the International Trademark Association (INTA), chiefly overseeing the editorial process for the Association’s twice-monthly newsletter, the INTA Bulletin. Eileen has also served as a freelance editor for the World Intellectual Property Organization (WIPO); as senior consulting editor for the Intellectual Property Owners Association (IPO) from 2015 to 2017; as Managing Editor and Editor-in-Chief at INTA from 2013 to 2016; and was Americas Editor for Managing Intellectual Property magazine from 2007 to 2013.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 24 Comments comments. Join the discussion.

  1. Anon June 14, 2019 5:49 pm

    I have a real problem (as in, based on reality) with the statement of:

    would undo Congress’ central quality control mechanism in creating post-grant administrative proceedings

    I have been in the real world, and worked directly in quality control and there is NO sense of quality control in the post-grant mechanisms of the patent world.

    None.

  2. Daniel Hanson June 14, 2019 10:22 pm

    This decision is unusual in that the opinion for the court, written by Judge Dyk, is joined by Judges Wallach and Hughes… and there are also separate “Additional Views” of the same three judges, which are not a part of the opinion of the court.

    The Additional Views appear to be intended as dicta, but why? If all three members of the court are in agreement with them, why not include them in the opinion of the court? After all, it is not unusual for an opinion of a court to include dicta, nor is it unusual for a court to reach a decision upon alternate grounds. One has to wonder what dynamic led these three members of the court to write in such a fashion.

    One reasonable guess may be that further review is expected, and the three judges wanted alternate grounds to be on the record, even though some of the grounds would not officially be part of the ruling.

  3. Anon June 15, 2019 10:43 am

    Gene,

    Do you have a sucuri webstie firewall? A comment from me (with no links) was blocked with the block reason listed as “SQL injection was detected and blocked” Block ID: SQLi17.

    Attempting test post

  4. Anon June 15, 2019 10:44 am

    Test post processed without the same error message.

    Test post with “tags” of highlighting removed to follow

  5. Anon June 15, 2019 10:46 am

    Attempting in parts:

    To play the Devil’s Advocate, I will take exception to Gene’s statement of:

    “for an overreaching and horribly unfair Patent Trial and Appeal Board that has from day one had as its marching orders the destruction of patents that are supposed to be presumed valid.”

    in so far as the PTAB and the intersection with the presence and level of the validity presumption.

    Side note: Greg DeLassus ‘on that other blog’ provided a link to the oral arguments from a Celgene case in which Celgene is pursuing a Takings argument which includes (unfortunately, in a rather unelegant manner) the notion that the sticks in the bundle of property rights of a granted patent include the presence and level of the presumption of validity. The court in those oral arguments pushed back on a rather unprepared counsel, seeking to take the Takings question away from the property aspect that informs Takings law (and trying to ‘break’ the “sticks in the bundle” analogy.

    Back to the story here: I have long emphasized that the proceedings within the PTAB are critically different due in no small part that because AT the institution decision point, the stick in the bundle of property rights – the stick OF the presence and level of validity presumption – is in fact taken by the government. It is at the institution decision point, and notably prior to ANY further deliberating on the merits of whether or not the Government will rescind its grant that this Takings occurs. Once instituted, there is NO more of the presence and level of validity presumption. Gene’s comment does not distinguish the nuance of this chain of events, and makes it appear that the deliberations are set against that presence and level of validity presumption being intact, when those deliberations are AFTER a first takings, and thus, the context of those deliberations are decidedly different than a true Article III deliberations.

  6. Anon June 15, 2019 10:48 am

    Attempting in parts (part 2):

    Separately, Mr. Hanson @ 2 muses:

    “One has to wonder what dynamic led these three members of the court to write in such a fashion.”

    He raises a good point.

    There is apparently more than the instant decision on the minds of the judges here.

    As has been noted elsewhere, the judges appear to ALSO have on their minds the recent Tillis congressional hearings on patent eligibility.

    As is well known (or should be well-known to the judges of the CAFC), the AIA post grant vehicle of IPRs are NOT concerned with patent eligibility as a “battle point.” Congress was more than clear on this fact.

    And yet, Judge Dyk at page 17 of the instant decision pens:

    “During the proceeding the patent owner may also seek leave to amend the original patent claims to resolve the problem of patent eligibility, as the applicant can do in initial examination though the proposed amendments may also be challenged by the petitioner. 35 U.S.C. § 316(d).”

    Now why would the judge insert this into his decision dicta on eligibility?

  7. Litig8or June 15, 2019 12:26 pm

    I wonder if Gene also thinks that parents owned by states are immune from ex parte reexamination? Not even the States think that is the case. And as noted by the Fed Cir (citing Oil States) there were in fact analogs to IPR in England before the Constitution was ratified. Finally, in the instant case the States had asserted their patents and therefore (under well established law) waived immunity all compulsory counterclaims. If IPR is akin to a compulsory counterclaim (eg because it must be raised within 1 year of service of the Complaint or lost forever to the Defendant) then there is a waiver of any immunity that may have attached (the Fed Cir didn’t reach that issue). The decision makes good sense in that states are given federal patent rights and should have superior federal rights to anyone else that participates in the federal patent system.

  8. Chris Evans June 15, 2019 10:40 pm

    The problem is that Congress cannot create an adjudicatory body where States can be sued by private parties. By joining the union, States waived their sovereignty in Article III courts in suits brought by the Federal Government and agreed to adjudicate interstate (between states) disputes at the Supreme Court. Otherwise States retained their sovereignty, which was codified by the 11th Amendment. So Congress cannot create an Article I adjudicatory system that allows private parties to sue States, that violates our system of dual sovereignty.

  9. Greg DeLassus June 16, 2019 12:20 am

    Do the folks who think that the CAFC got this one wrong—those who think, in other words, that states should be able to escape the PTAB’s jurisdiction by asserting sovereign immunity—also think that the PTAB cannot declare an interference with a state-owned patent?

  10. Greg DeLassus June 16, 2019 12:30 am

    I notice that no one in Eli Lilly & Co. v. Univ. of Wash., 334 F.3d 1264 (Fed.Cir.2003) seemed to think that UW could have escaped the proceeding on the basis of sovereignty.

  11. Anon June 16, 2019 8:02 am

    Greg,

    You seem intent on blurring lines with your posts at 9 and 10.

    I am sure that you realize that the context of each situation is different, but that you omit that contextual difference in your post so as to make it appear that each instance is directly on point to the case at hand.

    I am also sure that you realize that this is not inte11ectually honest.

  12. Litig8or June 16, 2019 8:27 am

    To Chris at post 8, read the Supreme Court decision in Federal Maritime Commission vs South Carolina. It is incorrect that immunity does not apply against the Fed Govt only in an Article III Court.

  13. Anon June 16, 2019 9:25 am

    Litig8tor,

    Would not the “proper” takeaway here be that the present decision has overruled the Supreme Court’s Federal Maritime Commission v South Carolina case?

    Maritime is not my speciality, but at https://www.casebriefs.com/blog/law/constitutional-law/constitutional-law-keyed-to-shanor/eleventh-amendment/federal-maritime-commission-v-south-carolina-state-ports-authority/ the “discussion” section seems directly at odds with the present result:

    Discussion.

    Yes. The eleventh amendment provides immunity for states against suits filed by private citizens in other states. The purpose of the eleventh amendment is to prevent states from having to answer to private citizens in administrative proceedings just as the eleventh amendment prevents states from having to answer to private citizens in federal court.

  14. Non Sequitur II June 18, 2019 2:09 pm

    anon @5, is there some paper or blog post with an “elegant” explanation of why the presumption of validity is a stick in the bundle of property rights? Generally speaking, the bundle of sticks property rights analogy is based on the premise that individual sticks can be separated from the bundle. I’m not sure how one can separate the presumption of validity from the other sticks. Is there some other “stick” in any context that is similar to the “presumption of validity” as a stick?

  15. Litig8or June 18, 2019 2:24 pm

    At Anon re FMC case. The Univ of Minnesota doesn’t overrule FMC. The distinctions are set forth in the Federal Circuits St Regis opinion (holding that tribal immunity does not apply in IPR). In FMC cases a private party gets money damages and an injunction against a State. In IPR there’s no relief at all other than the cancellation of the patent (same as for ex parte reexaminations). Patents are granted and cancelled by the FEDERAL SOVEREIGN. States have no immunity against the Federal Sovereign.

    Minnesota (like the St Regis Mohawk tribe in the earlier case) admitted that states have no immunity in ex parte reexaminations. The remedy in IPR (cancellation or not) of the patent is exactly the same. Ergo, no immunity to IPR.

  16. Greg DeLassus June 18, 2019 3:00 pm

    “[I]s there some paper or blog post with an ‘elegant’ explanation of why the presumption of validity is a stick in the bundle of property rights?”

    Whatever answer is proffered, I doubt that the explanation is half so elegant as the (legally binding) explanation of why the presumption of validity is not a “stick in the bundle” that Judge Newman provided in Patlex Corp. v. Mossinghoff, 758 F.2d 594, 605 (Fed. Cir. 1985).

    Pertinent to Gould’s concerns about access to judge and jury for validity determination is his argument that his issued patents are cloaked in a statutory presumption of validity that is not respected in reexamination, and therefore that he has been deprived of this right which accompanied the grant of his patents.

    Although the Commissioner argued that Gould’s patents retain their section 282 presumption of validity during reexamination, 35 U.S.C. § 305 requires that both unexamined patent applications and patents in reexamination be processed by identical procedures. We share Gould’s view that the PTO rules governing reexamination show scant respect for a section 282 presumption, and agree with the district court that section 282 is not applicable in reexamination proceedings. See In re Etter, 756 F.2d 852, 855-59 (Fed.Cir.1985). Nor does it meet the statutory purpose of section 282, whose origin is the presumption of administrative correctness, to apply this presumption to a procedure whose purpose is the remedy of administrative error.

    Gould argues that if section 282 does not apply in reexamination, this presents grounds for vacating the reexamination of his preexisting patents. He argues that at the time his patent rights were granted judicial review was the only available method of review of patent validity, and this was accompanied by the benefits of the section 282 presumption; and therefore that the retroactive scope of the reexamination statute has deprived Gould of the benefits of section 282.

    We do not consider the section 282 presumption, which represents a procedure created by statute to govern litigation, to be a property right subject to the protection of the Constitution. Even accepting Gould’s argument, any adverse effect of loss of this presumption, balanced against the public purposes of the reexamination statute, would not negate the constitutional validity of this retroactive statute.

  17. Non Sequitur II June 18, 2019 6:22 pm

    Greg DeLassus @16, thank you for the citation, which addresses the issue of whether the presumption of validity is subject to a takings claim. However, I’m still trying to understand anon’s usage of the “bundle of sticks” analogy. I would think that the presumption of validity is a characteristic of the bundle as a whole, but not its own stick. While I find it unlikely to be persuasive, I would like to understand the argument.

  18. Litig8or June 18, 2019 7:04 pm

    Section 282 doesn’t apply inside the Patent Office. Other statutes say so. There’s no “taking claim”

  19. Anon June 18, 2019 10:06 pm

    Section 282 doesn’t apply inside the Patent Office. Other statutes say so.

    That entirely misses the point (and actually proves my case),

    You take a granted patent with ALL of its sticks (and one of those sticks does describe the presence and level of the legal condition of presumption of validity) and compare the entirety of what you have the moment before an institution decision and AT the moment of the institution decision.

    You clearly no longer have the same bundle.

    Mind you, this is expressly before any decision on the merits that (may) change the overall “status” of the patent.

    Greg should refresh his view of the arguments in Oil States that explain why Patlex cannot be correct (as a matter of Law).

  20. Anon June 19, 2019 6:22 am

    The notion from Greg that a court decision by virtue of it BEING a court decision somehow must be “I doubt that the explanation is half so elegant as the (legally binding) explanation of why the presumption of validity is not…” is to both bow to an unthinking genuflection that “the scoreboard cannot be wrong” AND shirks the ethical duty of sworn attorneys to place the Constitution above any of the three branches of the government.

    Greg’s mindset would have been firmly “ok” with the Supreme Court Dred Scott decision.

    More than that type of “elegance” is demanded of attorneys.

  21. Anon June 19, 2019 6:32 am

    Litig8or,

    I still struggle with your views and the Supreme Court case i reference above.

    I do not think the level of remedy is an altogether persuasive basis (even if some courts retreat to that thinking).

    In the case, as with the present case of patents, there is some hand-waving as to the Federal Government being “the decider.” Instead, the question that is more on point is: who is the petitioner?

    Contrast the dissent from Breyer in the SC case:

    Dissent.

    (Breyer, J.) Although the eleventh amendment protects against the judicial power of the United States, the eleventh amendment does not protect against the executive power of the United States. Thus, the Federal Maritime Commission is asking the federal government to exercise its executive power over a state if the state has violated federal law. If the state has violated federal law then the federal government would be the plaintiff in a federal suit against the state.

    Note that this dissent IS a dissent and not a holding. What has happened here is that the dissent NOW is the rule of law.

    The SC case has been turned upside down.

  22. Litig8or June 19, 2019 8:27 am

    At anon re FMC again. In FMC proceedings, just as in civil lawsuits, the Complaint initiated the proceedings and failure to answer results in default judgment. In IPR the Director of the USPTO (a political appointee removable at will by POTUS) institutes IPR (and that decision is not reviewable). Another big distinction and one that favors the Fed Cir’s decisions in St Regis and Univ of Minnesota. By the way the Court did not even reach the issue of waiver of immunity when the State asserts its patents.

    Even if you still think the Fed Cir got it wrong you should concede that there is no precedent directly on point that would have compelled the Fed Cir to find that immunity applies in IPR. FMC and all of the other cases cited by the University are easily distinguished.

  23. Anon June 19, 2019 8:54 am

    Litig8or,

    You overlooked a critical item.

    While it is indeed “In IPR the Director of the USPTO (a political appointee removable at will by POTUS) institutes IPR (and that decision is not reviewable). ” SUCH stems directly from an individual’s complaint.

    There is NO distinction at this point.

    You keep on wanting to point to St. Regis and this case as if they support your view. They do not. What they support is the view that the Supreme Court has been overturned by a lower court.

    By the way the Court did not even reach the issue of waiver of immunity when the State asserts its patents.

    Nice – but let’s keep focus here.

    FMC and all of the other cases cited by the University are easily distinguished.

    Absolutely not – for the reasons given (reasons that you directly overlook).

  24. Greg DeLassus June 19, 2019 12:15 pm

    @18 “Section 282 doesn’t apply inside the Patent Office. Other statutes say so. There’s no ‘taking claim’.”

    I agree with this entirely, but I think that it would benefit from a bit of unpacking.

    Pre-AIA Before the AIA, the validity of a claim in an issued patent could be attacked in the Art. III courts, and in those fora invalidity had to be proven by clear and convincing evidence. Also before the AIA, the validity of a claim in an issued patent could be attacked in the PTO (interferences), and in that forum invalidity had to be proven by a mere preponderance of evidence.

    Post-AIA After the AIA came into effect, the validity of a claim in an issued patent could still be challenged in an Art. III court, and invalidity was still required to be proven by clear and convincing evidence. However, in addition to interferences, the AIA created a new set of occasions in which the validity of a claim from a granted patent could be challenged in the PTO (IPRs, PGRs, CBMs, and derivations). Just like the pre-AIA interferences, these new PTO proceedings required only a showing of invalidity by a preponderance of the evidence.

    In other words, in terms of the evidentiary presumptions necessary to invalidate a claim, the AIA changed nothing. Before the AIA, the standard was c-&-c in Art. III courts, and preponderance-of-evidence in the PTO. After the AIA, the standard remains c-&-c in Art. III courts, and preponderance-of-evidence in the PTO.

    A patentee, in other words, loses nothing that s/he ever had. Patentees never had the right to require c-&-c when contesting validity in front of the PTO, and thus they cannot be said to have had any such right “taken” from them. Meanwhile, even now a patentee defending the claims in an Art. III court can still insist that invalidity be proven by c-&-c evidence.

    Notably, this right to insist on c-&-c evidence does not change after the PTAB institutes an IPR. That is to say, if X sues Y for patent infringement, and Y files a response to X’s complaint asserting invalidity as an affirmative defense to X’s charge of infringement, it remains the case that Y must prove that invalidity (in the Art. III trial) by c-&-c evidence. If Y also petitions for an IPR against X’s asserted patents and the PTAB institutes that IPR, Y will only have to prove invalidity by preponderance of evidence in the IPR, but Y will still have to prove invalidity by c-&-c in the parallel Art. III proceeding. Literally nothing has been taken from X. X still has all of the same rights in each forum in an AIA world as X had in a pre-AIA world.

    The only difference is that the standards for Y to petition for IPR are much less demanding than they would have been for Y to provoke an interference pre-AIA. Nothing about this is a “taking,” however, because literally nothing has been “taken” from X in this hypothetical. X has exactly the same quantity and quality of rights in the AIA circumstance as in the pre-AIA circumstance.

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