Addressing the issue of whether a state is entitled to assert its sovereign immunity under the Eleventh Amendment when the state intervened in an earlier action that was dismissed for improper venue, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s holding that a state is entitled to assert its 11th Amendment immunity under such circumstances. Biomedical Patent Management Corp. v. State of California, Case No. 06-1515 (Fed. Cir., Oct. 23, 2007) (O’Malley, J., sitting by designation).
Biomedical Patent Management Corp. (BPMC) is the owner of a patent directed to methods for assessing placental dysfunction. BPMC alleges that the California Department of Health Services (DHS) infringed the patent.
Kaiser Foundation, a subcontractor of DHS, filed a declaratory judgment action against BPMC seeking a declaratory judgment of non-infringement and invalidity. DHS intervened in this action. Ultimately, this action was dismissed without prejudice. Soon thereafter BPMC initiated a new action, this time against DHS. DHS asserted the defense of sovereign immunity, but did not assert a counterclaim. The district court dismissed the case without prejudice.
Later, BPMC again filed suit against DHS, and DHS again moved to dismiss this case based on a sovereign immunity defense. Again, the district court dismissed the case. This time BPMC appealed.
BPMC argued that by intervening in the earlier lawsuit, DHS had effectively waived its immunity. The U.S. Supreme Court has indicated that there are two circumstances in which a state may be sued; when Congress validly authorizes such a suit and when a state has waived its sovereign immunity by consenting to a particular suit (Coll. Sav. Bank v. Fla. Prepaid). The Court went on to state, "we will find a waiver if the State voluntarily invokes our jurisdiction, or else if the State makes a clear declaration that it intends to submit itself to our jurisdiction."
The Federal Circuit agreed that when DHS intervened against BPMC in the early lawsuit, it voluntarily invoked the district court’s jurisdiction and, thus, waived its immunity for the purposes of that particular action, citing the 2002 Supreme Court decision in Lapides v. Bd. of Regents of the Univ. Sys. of Georgia (a "State’s voluntary appearance in federal court as an intervenor avoids Eleventh Amendment inquiry.").
However, BPMC argued that the earlier waiver went further, specifically that it carried over to the present suit as it involved the same subject matter and the same parties. BPMC also argued that DHS should be judicially stopped from asserting immunity because in the earlier case the district court accepted DHS’ jurisdictional arguments when allowing it to intervene. Finally, BPMC argued that the conduct of the State of California, as an active participant in the patent system, operates as a general waiver, citing the 2006 Supreme Court decision in Central Virginia Community Coll. v. Katz.
As to the "carry-over" waiver argument, the Court cited the Ninth Circuit case of S. Pasadena v. Mineta, finding that a waiver of immunity in an earlier action that was voluntarily dismissed does not carry over to a re-filed action involving the same dispute, noting that the voluntary dismissal left "the situation as if the action had never been filed" and that a case filed after a voluntary dismissal is an entirely new action.
The Federal Circuit also rejected the argument that the Supreme Court’s use of the term "matter" in Lapides signals the importance of subject matter (rather than the specific case) in considering whether waiver is carried over into a later action. The Court found little significance in the use of the term "matter" in Lapides, citing other passages in Lapides (indicating the Supreme Court was focusing on waiver in "the same case") and suggesting that BPMC was playing a semantic word game. Rather, the Federal Circuit cited its own precedent for the proposition that in situations in which a waiver existed in an earlier dismissed action or in an entirely separate action, the waiver does not extend to a subsequent, separate lawsuit.
As for BPMC’s judicial estoppel argument, the Federal Circuit looked to the three factors articulated by the Supreme Court in the 2001 decision of New Hamp. v. Maine: whether a party’s later position is "clearly inconsistent" with its earlier position; whether the party succeeded in persuading a court to accept that party’s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create "the perception that either the first or second court was misled"; whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not stopped. The Federal Circuit agreed with the district court that the second and third factors favored the state here and that the first factor was applicable.
Finally, the Federal Circuit rejected the argument that California’s participation in the patent system effectively waived its immunity, citing Vas-Cath, ("it is established that a state’s participation in the federal patent system does not of itself waive immunity in federal court with respect to patent infringement by the state")
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