By Joe Sauer
The PTAB recently dismissed three IPR Petitions filed against the University of Florida Research Foundation on the basis of Eleventh Amendment sovereign immunity. See, Covidien LP v University of Florida Research Foundation Incorporated, IPR2016-01274; IPR2016-01275; IPR2016-01276, Paper 21 (“Covidien”). What remains to be seen is the extent to which this decision insulates state universities from PTAB review, and whether the Federal Circuit has jurisdiction to review the PTAB’s constitutional interpretation.
The Covidien IPRs stem from an action for breach of a licensing contract filed by the University of Florida Research Foundation (UFRF) in a Florida state court. In that suit, Covidien responded with a declaratory judgment counterclaim and successfully removed the state court action to the United States District Court for the Northern District of Florida. Separately, Covidien also filed three PTAB petitions seeking inter partes review of the patent-in-suit. UFRF raised an Eleventh Amendment defense to both the District Court and PTAB actions, arguing that it is an arm of the State of Florida and is thus immune to suit in federal courts absent consent. Both the District Court and the PTAB agreed with UFRF’s sovereign immunity defense. See, UFRF v. Medtronic, 2016 WL 3869877; Covidien, p. 39. The District Court decision is currently pending appeal to the Federal Circuit. (Appeal No. 16-2422).
The Eleventh Amendment of the United States Constitution provides that 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.” U.S. Const. Amend. XI. The Supreme Court has interpreted the Eleventh Amendment to encompass a broad principle of sovereign immunity that limits not only the judicial authority of federal courts, but also precludes certain federal adjudicative administrative proceedings against a nonconsenting State. See, Fed. Mar. Comm’n v South Carolina State Ports Auth., 535 U.S. 743, 753-761 (2002)(“FMC”). In the Covidien decision, the PTAB considered whether the Supreme Court’s decision in FMC applies to PTAB proceedings generally, and more particularly whether it applies to UFRF as an arm of the State of Florida.
In FMC the Supreme Court explained that a presumption of sovereign immunity may apply to certain federal adjudication proceedings that were “unheard of when the Constitution was adopted.” FMC, 535 U.S. at 755. To decide whether this presumption of sovereign immunity applies, the Supreme Court examined the nature of the proceedings to “determine whether they are the type of proceedings from which the Framers would have thought the States possessed immunity when they agreed to enter the Union.” Id. at 756. Applying this test to PTAB proceedings, the Covidien decision concluded that, on the whole, there are sufficient similarities between the nature of inter partes review proceedings and civil litigation such that “the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment.” See, Covidien, p. 24. The PTAB further concluded that there are sufficient connections between UFRF and the State of Florida to justify a finding that UFRF is a state instrumentality entitled to sovereign immunity. See, Id. at 27-39. Having found that Eleventh Amendment immunity applies to PTAB proceedings and UFRF is an arm of the State of Florida entitled to such immunity, the PTAB dismissed Covidien’s three petitions prior to institution. Id. at 39.
The Covidien decision expressly reserved judgment, however, on whether Eleventh Amendment sovereign immunity would apply in situations where a related federal district court patent infringement (or declaratory judgment of validity) case was brought by the state-based patent owner. See, Id. at 26, n. 4. A state entity waives its sovereign immunity when it brings suit in federal court. The PTAB found no such waiver in Covidien because UFRF filed suit for breach of contract in Florida state court, and did not voluntarily subject itself to the jurisdiction of a federal court. But it remains to be seen whether a state institution that takes advantage of a federal district court to pursue allegations of patent infringement could nonetheless insulate itself from PTAB review on the basis that it has not waived sovereign immunity within that specific federal venue.
It also remains to be seen whether Covidien will appeal the PTAB’s decision to the Federal Circuit, and, if so, whether the Federal Circuit has jurisdiction to review the PTAB’s decision not to institute an IPR proceeding on constitutional grounds. The Supreme Court in Cuozzo Speed Technologies LLC v. Lee, 136 S.Ct. 2131 (2016) has confirmed that PTAB decisions whether to institute review are “final and nonappealable.” But Cuozzo Speed allows for certain exceptions to this general rule, including PTAB decisions that “implicate a constitutional question.” Id. at 2134. Practitioners should be interested to see whether the Federal Circuit takes up this important issue of constitutional interpretation.
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