IP Law Daily State university research foundation immune from inter partes review proceeding
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Monday, January 30, 2017

State university research foundation immune from inter partes review proceeding

By Thomas Long, J.D.

The University of Florida Research Foundation, as an arm of the State of Florida, was entitled to a sovereign immunity defense to the institution of an inter partes review (IPR) of a patent for a method of managing critical care physiologic data using data synthesis technology, the Patent Trial and Appeal Board has decided. IPR proceedings, the Board decided, were sufficiently similar to civil litigation for the Eleventh Amendment’s restrictions on private actions against a state to apply. Three IPR petitions filed by medical device maker Covidien LP were dismissed (Covidien LP v. University of Florida Research Foundation Inc., January 25, 2017, Ippolito, F.).

The University of Florida Research Foundation (UFRF) filed suit in a Florida state court against Covidien for allegedly breaching a license agreement relating to UFRF’s U.S. Patent No. 7,062,251 B2 ("the ’251 patent"), and Covidien counterclaimed for a declaratory judgment of noninfringement. That suit was removed to a federal district court. Separately, Covidien filed three petitions requesting IPR of the ’251 patent. In the district court suit, UFRF argued that it was an arm of the State of Florida through the University of Florida and therefore was entitled to Eleventh Amendment immunity from Covidien’s counterclaim. The district court agreed with UFRF and remanded the case to state court; that decision was the subject of a pending appeal. In the USPTO proceeding, UFRF then moved to dismiss the IPR petitions on the same ground of sovereign immunity.

The Eleventh Amendment limits not only the judicial authority of the federal courts to subject a state to an unconsented suit, but also precludes certain administrative proceedings from adjudicating complaints filed by a private party against a nonconsenting state. The U.S. Supreme Court in Federal Maritime Commission v South Carolina State Ports Authority, 535 U.S. 743, 753–761 (2002) ("FMC"), held that an administrative proceeding resembling a lawsuit was subject to the limitations of the Eleventh Amendment immunity. FMC was later applied by the Federal Circuit to contested interference proceedings in the USPTO, in Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376, 1383 (Fed. Cir. 2007), in which the Federal Circuit observed that such proceedings bore "strong similarities" to civil litigation and could be characterized as lawsuits. Interferences, the Federal Circuit noted, like civil lawsuits, involved adverse parties, examination and cross-examination by deposition of witnesses, production of documentary evidence, findings by an impartial federal adjudicator, and power to implement the decision.

Covidien argued that FMC did not apply to IPRs because those proceedings provided a mechanism for the USPTO to take a "second look" at an administrative grant of a patent—a federally issued property right that would not exist but for the statutory provisions of the Patent Act. Because a patent grant conferred a public right rather than a private right, Covidien contended, the patent’s validity was susceptible to administrative agency review. The Board was not persuaded by Covidien’s argument. No authority supported the position that a state’s Eleventh Amendment immunity may be limited or abrogated by a public rights exception.

Covidien also argued that sovereign immunity was irrelevant to IPRs because those proceedings were directed to the patent itself, and were not suits or adjudications of a private claim against the state by another party. According to Covidien, the USPTO did not exercise jurisdiction over a patent owner, and the identity of the patent owner was irrelevant to a USPTO proceeding. The Board disagreed with the proposition that an IPR was an in rem action directed only to the patent and not against the patent owner. The term "inter partes" meant "between the parties," which in itself captured the notion that the proceeding was directed to both parties over whom the Board exercised jurisdiction. The statute and rules governing IPR required service of the petition on the patent owner, the Board observed. In addition, the America Invents Act included procedural safeguards against the harassment of patent owners through successive petitions by the same or related parties. The USPTO did not bring IPR proceedings itself; rather, IPRs could be brought by any person other than the patentee. The Board acted as an adjudicative body, ruling on the merits of the parties’ arguments.

The Board agreed with UFRF’s contention that an IPR was an adjudicatory agency proceeding that met the requirements evaluated in FMC for sovereign immunity to apply. IPRs had many features common to judicial proceedings, including discovery, depositions, protective orders, the imposition of sanctions, and an oral hearing. IPRs were adversarial contested cases between a patent owner and a petitioner, and they were decided by panels of administrative law judges who served a role functionally comparable to that of Article III judges. Furthermore, IPRs were governed by pleadings similar to those in civil litigation. The availability of monetary relief was not required for sovereign immunity to apply, the Board noted.

Turning to the case at hand, the Board determined that UFRF was an arm of the State of Florida. Its relevant function was the licensing of patents and the collection of royalties from those license agreements on behalf of the University of Florida, a state university. The university defined UFRF as one of its direct-support organizations. UFRF was controlled by the university in terms of its operating budget, its leadership, its activities, and its use of university facilities and resources. UFRF officers were employees of the university and did not receive an additional salary for their UFRF functions. Accordingly, UFRF was entitled to assert sovereign immunity against Covidien’s IPR petitions, the Board concluded.

The case is Nos. IPR2016-01274, IPR2016-01275, and IPR2016-01276.

Attorneys: Mary Sooter, David Cavanaugh, and Natalie Pous (Wilmer, Cutler, Pickering, Hale And Dorr, LLP) for Covidien LP. Richard Giunta, Gerald Hrycyszyn, Elisabeth Hunt (Wolf, Greenfield & Sacks, P.C.) for University of Florida Research Foundation Inc.

Companies: Covidien LP; University of Florida Research Foundation Inc.

MainStory: TopStory Patent USPTO

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