Patent Baristas

In Biomedical Patent Management v. State Of California, the U.S. Court of Appeals for the Federal Circuit held that a state’s initial waiver of Eleventh Amendment sovereign immunity – when it intervened in an earlier, related action that was dismissed for improper venue — doesn’t mean that it waived sovereign immunity under the Eleventh Amendment in a later case.

Biomedical Patent Management sued the state’s Department of Health Services claiming the state was infringing U.S. Pat. No. 4,874,693, which claims a method for screening birth defects in pregnant women. BPMC alleges that DHS performs laboratory services, and induces others to perform services, that infringe the ‘693 patent.

At the district court, Judge Marilyn Hall Patel dismissed the lawsuit but expressed concern over the fact that California could sue for patent infringement on one hand while using sovereign immunity to keep from being sued for patent infringement itself:

“The court is indeed troubled by the University of California’s ability to reap the benefits of a patent system without being exposed to liability for infringement,” she wrote. “Similarly situated private universities enjoy no such advantage.”

The Federal Circuit held that, where a waiver of immunity occurs in an earlier action that is dismissed, or an entirely separate action, the waiver does not extend to the separate lawsuit:

By distinguishing Lapides, Gunter, Vas-Cath, and Ramsey, on one hand, and City of S. Pasadena and Tegic, on the other, we do not mean to draw a bright-line rule whereby a State’s waiver of sovereign immunity can never extend to a re-filed or separate lawsuit.

After considering the general unfairness of the issue, the Federal Circuit held:

In sum, we conclude that any unfairness or inconsistency that would arise from permitting DHS to assert sovereign immunity in the present case is not so substantial as to cause us to diverge from the general principles of waiver that we have laid out in this opinion: that a waiver generally does not extend to a separate lawsuit, and that any waiver, including one effected by litigation conduct, must be “clear.”

Many of the largest universities and research institutions are state-owned and their inventions are often patented. In recent years, states have increasingly used the federal courts to enforce these patents.

While they use federal jurisdiction when it helps them to enhance their patent revenue streams, states simultaneously avoid federal jurisdiction when they themselves are faced with claims of patent infringement; in those circumstances, they assert sovereign immunity under the Eleventh Amendment.

The Eleventh Amendment to the United States Constitution provides:

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.

Although state officials acknowledge that this asymmetry is unfair — and although it distorts the market for inventions — they contend that the jurisprudence of sovereign immunity entitles them to the risk-free windfall of suing without being sued.

Biomedical Patent Management has now filed a Petition for a Writ of Certiorari to the U.S. Supreme Court. They have asked the high court to weigh in on the inconsistencies.

Questions Presented:

1. Whether a state’s waiver of Eleventh Amendment immunity in one action extends to a subsequent action involving the same parties and the same underlying transaction or occurrence

2. Whether a state waives its Eleventh Amendment immunity in patent actions by regularly and voluntarily invoking federal jurisdiction to enforce its own patent rights.

When a state voluntarily invokes federal jurisdiction, it is settled that the state’s Eleventh Amendment immunity is waived. However, the scope of the state’s waiver is not settled. The courts of appeals have taken different approaches and so there is no uniform principle governing the scope of a state’s waiver of Eleventh Amendment immunity

This petition looks at whether a waiver is confined to the case in which it is initially made or instead extends to other cases involving the same parties and the same underlying transaction or occurrence; and, whether a state’s repeated invocation of federal jurisdiction to resolve issues of patent infringement effects a waiver that extends to suits in which the state is sued by a party seeking to resolve a patent dispute.

The the rule governing voluntary invocations of federal jurisdiction has created problems of inconsistency and unfairness when a state waives its immunity in one case and then attempts to assert immunity in a case involving the same parties and the same underlying transaction or occurrence.

It’s hard to feel sorry for the University of California. The university has generated about $500 million in revenue in the past five years. As a plaintiff in patent infringement suits, the university settled a claim against Genentech Inc. for $200 million, secured a payment of $185 million from Monsanto Co., and won a $30 million settlement from Microsoft Corp.

Not a bad haul even by today’s patent award standards.

See the petition here: Biomedical Petition for Cert