United States: PTAB Defines Further Limitation to Sovereign Immunity Defense

Last Updated: January 24 2018
Article by Heather R. Kissling

PTABWatch Takeaway: Sovereign immunity is not available to dismiss an IPR challenge where the Patent Owner has filed an infringement action against the Petitioner. Ericsson v. Regents of the University of Minnesota, IPR2017-01186, -01197, -01200, -01213, -01214, and -01219 (Dec. 19, 2017).

The Eleventh Amendment was rarely mentioned in the same breath as patent law until last year, which began with the Board's decision in Covidien LP v. University of Florida Research Foundation Inc., IPR2016-01274, -01275, -01276 (Jan. 25, 2017), discussed here. In Covidien, the Board dismissed petitions for IPR challenging the claims of a patent owned by the University of Florida Research Foundation, determining that the university is an arm of the state and entitled to invoke sovereign immunity to bar IPR institution. Sovereign immunity does not shield against any and all challenges, however. In Reactive Surfaces Ltd., LLP v. Toyota Motor Corp., Case No. IPR2017-00572 (July 13, 2017), discussed here, the Board acknowledged that sovereign immunity may be asserted by a state university in an IPR, but held that an IPR may continue against a non-sovereign co-owner of the challenged patent.

The recent final written decision by an expanded PTAB panel in Ericsson defines a further limitation on the reach of sovereign immunity – sovereign immunity with respect to an IPR proceeding is waived when the Patent Owner files an infringement action against the Petitioner. Chief Judge Ruschke authored the majority opinion and Judge Bisk wrote a concurrence. The majority acknowledged that state entity-owned patents are generally immune from IPR; whether a state entity waives sovereign immunity by filing a patent infringement suit in federal court was an issue of first impression. The Board looked to Regents of Univ. of New Mexico v. Knight, 321 F.3d 1111 (Fed. Cir. 2003), which considered sovereign immunity in the context of compulsory counterclaims in litigation. The Federal Circuit reasoned that, because a defendant must raise compulsory counterclaims or be forever barred from doing so, it is reasonable to view the state as having anticipated and consented to the counterclaims. Similarly, petitioners must request IPR within one year of service of an infringement complaint or be forever barred from doing so. Thus, by analogy, it is reasonable to view the state as consenting to the IPR challenge by filing the suit that triggered the one year deadline. The Patent Owner unsuccessfully argued that waiver of immunity should be limited to the venue where the triggering action is filed. The Board distinguished the precedent upon which the Patent Owner relied and stated that "allowing Patent Owner to assert its Eleventh Amendment immunity in this proceeding selectively so as to bar Petitioner from obtaining the benefits of an inter partes review of the asserted patent would result in substantial unfairness and inconsistency."

The concurring opinion reached the same conclusion that sovereign immunity should not apply, but for markedly different reasons. While the majority agrees that sovereign immunity is generally available in the IPR context, Judge Bisk suggests that the purpose and nature of IPRs and litigation are sufficiently distinct to deny sovereign immunity in all IPRs. IPRs represent a mechanism by which the Patent Office exercises jurisdiction over the challenged patent, whereas litigation is a dispute between parties, requiring Article III standing and offering different relief. As Judge Bisk colorfully explained, "To my eye...inter partes review simply provides a streamlined, specialized mechanism by which the Patent Office may reconsider a patent grant and correct any mistake...because inter partes review neither 'walks, talks, [nor] squawks' like a lawsuit...I conclude that sovereign immunity does not bar the Patent Office from conducting inter partes review of patent owned by a state university."

While the Eleventh Amendment issue does not routinely apply to IPRs, recent cases have pushed the issue into the spotlight. Although not precedential, this decision may set the stage for the Board's ruling in IPR proceedings involving patents assigned by Allergan to the Saint Regis Mohawk Tribe. Mylan Pharmaceuticals Inc. et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, -01128, -01129, -01130, -01131, -01132. Similar to this case, patents challenged in the IPR are being asserted against Mylan Pharmaceuticals in district court. The parallel litigation and this decision may derail the Tribe's motion to dismiss.

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