Federal Circuit Strengthens State Protection against Patent SuitsAugust 12, 2006

The Federal Circuit recently considered two cases where legal action was brought against a state university; one action asserted that a university was infringing a patent, the other was to have a court legally declare whether or not a university’s patents were invalid and thus unenforceable against others. However, both cases were dismissed under the principle of 11th Amendment ‘soverign immunity.’ Sovereign immunity prevents citizens from bringing suit against a state in a federal court without the state’s consent. Patent law is federal law, and therefore state entities such as public universities are normally immune from being sued for patent infringement. In the past, Congress tried to amend the Patent Act to allow states to be sued, but the Supreme Court later held that Congress did not have the Constitutional authority to do so unless it could show that the State provides no remedy, or only inadequate remedies, to injured patent owners. In the case alleging patent infringement by the university, the patentees argued that the state they were in did not provide an adequate remedy for patent infringement. However, the Federal Circuit held that only Congress, not the court, can abrogate sovereign immunity in a patent case by showing that state remedies are inadequate. Here, the patentees could only claim that state remedies available were ‘uncertain’ or ‘less convenient,’ attributes insufficient to prove the remedies inadequate. Failing on their claim against the university as an entity, the patentees also sued individual officials of the university. This type of lawsuit is called an Ex parte Young case, based on the Supreme Court ruling that first recognized their validity. In this type of case, state officials can be enjoined from future violations of federal law, including patent law, but cannot be sued for monetary damages caused while acting in their official capacities, nor can they be sued where there is no causal connection between the official’s activities and the alleged patent infringement. Here, the court found that the act of overseeing and directing the University’s patent policy by the officials did not create a sufficient causal connection to a violation of federal patent law – i.e., patent infringement. Instead, the court held the state official must be connected to an actual violation, not some failure to meet a broad general obligation to prevent violations. In the other case considered, the patentee contended that the state university at issue waived its immunity against a suit to challenge the validity of its patents because the university had already sued the company’s customers in Federal Court for infringement of those patents. It based its argument on the established rule that when a state entity voluntarily brings suit in a Federal Court, it waives its immunity from any counterclaims brought by the defendant (such as patent invalidity, etc). Also, the typical rule is that when a manufacturer’s customers are sued for patent infringement instead of the manufacturer itself, a later suit by the manufacturer to declare the rights of the parties is preferred as it would resolve the underlying cases against the customers. However, the Federal Circuit held that filing the first action for infringement did not waive the university’s right to assert immunity in an action brought by a new party, in a new suit against the university, notwithstanding the fact that the new case was filed by the manufacturer of the product the university accused of infringement. These cases further strengthen the shield afforded to state-run universities and other state entities against patent infringement and validity challenges. Some find this controversial because the 11th Amendment is intended to protect purely state matters from intrusions by the Federal Government. However, as was argued by the plaintiffs in the second case above, states voluntarily use the Federal Patent System to benefit from the commercial exploitation of legal rights across the nation, arguably subjecting themselves to federal jurisdiction and Congressional control under the Commerce Clause of the Constitution. However, both the Federal Circuit and Supreme Court are yet to be convinced.To read the full-length decisions, log on to http://fedcir.gov/opinions/05-1553.pdf (first case discussed) and http://fedcir.gov/opinions/05-1440.pdf (second case discussed).