On June 14, 2019, the Court of Appeals for the Federal Circuit delivered its long-awaited opinion on state sovereign immunity in post-grant proceedings in Regents of the Univ. of Minnesota v. LSI Corporation.[1] Like it ruled in the sister case last year, Saint Regis Mohawk Tribe v. Mylan Pharms. Inc.,[2] dealing with tribal sovereign immunity, the Fed Circuit held that state sovereign immunity is not applicable to inter partes review (IPR) proceedings.
The University of Minnesota (UMN) is the public university system in the State of Minnesota. It owns U.S. Patent Nos. 5,859,601 (‘601), 7,251,768 (RE45,230) (‘230), 7,292,647 (‘647), 8,588,317 (‘317), 8,718,185 (‘185), and 8,774,309 (‘309).
UMN sued LSI Corp.in district court for patent infringement of the ‘601 patent, directed to “read channel” semiconductor chips. UMN separately sued Ericsson in district court for patent infringement of the ‘768, ‘230, ‘317, ‘185, and ‘309 patents, directed generally to wireless communications network methods and systems, and specifically directed to 4G LTE networks. Further, and separately, LSI and Ericsson filed petitions for IPR against UMN’s patents asserting unpatentability based on anticipation and obviousness. Prior to a decision on institution, UMN filed a motion to dismiss based state sovereign immunity. The PTAB, in an expanded panel, ruled that state sovereign immunity did not apply to IPRs because UMN had waived immunity when it filed suit in district court. UMN appealed, and the cases were consolidated.
The Fed Circuit panel, consisting of Judges Dyk, Wallach, and Hughes, in which Judge Dyk wrote for a unanimous court, with each judge filing separate “additional views” opinions. Judge Dyk first began with a lengthy history on adversarial proceedings before the USPTO, Congressional intent, and the new AIA and its effect on expanding post-grant proceedings, including IPRs. He continues to discuss generally the history of state sovereign immunity, which is premised in the 11th Amendment to the U.S. Constitution, although, he noted, state sovereign immunity “neither derives from nor is limited by, the terms of the Eleventh Amendment.”[3]
The preeminent purpose of state sovereign immunity is to accord States the dignity that is consistent with their status as sovereign entities, which collaterally “serving the important function of shielding state treasuries.”[4]
Judge Dyk observed the precedence which held immunity attached in Article III fora, including both judicial venues and court-like administrative proceedings.[5] However, he further observed that immunity does not attach when the United States brings suit, including in agency proceedings.[6] UMN tried to argue that its case was more akin to the former, that the IPR proceeding was more like an Article III proceeding where immunity attaches. However, Judge Dyk disagreed, citing Saint Regis.
We concluded that tribal sovereign immunity did not apply to IPR because the “USPTO was acting as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies ‘within their legitimate scope.’”
He then noted that while there are some shared similarities with Article III courts, like discovery and hearings, the fundamental purpose of the AIA post-grant proceeding regime, which includes IPRs, is to create a third-party initiated, agency-led, inquisitorial system for reconsidering patents originally issued by that agency. This fundamental purpose is different than an Article III court, because the primary purpose is an adversarial system between two parties. While distinguishing tribal sovereign immunity, which is subject to Congressional oversight, and state sovereign immunity, which can be abrogated only by constitutional authority, he noted that:
[S]uits brought be the United States have long been recognized as not being impeded by either tribal or state sovereign immunity, and when Congress intends to abrogate either tribal or state sovereign immunity for suits brought by private parties, it must do so with clear language.
The additional views opinion, signed by all three judges on the panel, focused on the differentiation between in rem proceedings and in personam proceedings. In rem proceedings focus on the property (e.g., patent itself), while in personam proceedings focus on the person (e.g., patent owner).[7] This distinction, and the foundation of the analysis itself, is important because the state non-real, personal property goes to the heart of power of sovereign (i.e., Government):
With state-owned personal property, the Court has considered whether the disputed property was “owned by a state and used and employed solely for its governmental uses and purposes,” because for an ostensibly in rem proceeding against the state’s property, “to permit a creditor to seize and sell the property to collect his debt would be to permit him in some degree to destroy the government itself.”[8]
IPR is distinguishable from these in rem proceedings where the Court has held that sovereign immunity applies. Unlike Coeur d’Alene, IPR does not implicate ownership of real property or the state’s ability to regulate within its own domain. Patents are creations of federal statutory law and are regulated by that law, which includes the ability of the executive to consider whether a previous grant was erroneous.
Univ. of Minnesota brings full circle the issue of sovereign immunity, both trial and state, and its applicability in post-grant proceedings. Fed Circuit case law is now consistent that neither applies. Of course, this ruling will not sit well with constitutional or States Rights adherents; expect a petition for rehearing en banc, and certainly a petition for writ of certiorari before the U.S. Supreme Court. We will update the blog with any further developments.
[1] ___F.3d___ (Fed. Cir. 2019) (slip op.), aff’g LSI Corp. v. Regents of the Univ. of Minn., Case No. IPR2017-01068 (P.T.A.B. Mar. 10, 2017), Ericsson Inc. v. Regents of the Univ. of MInn., Case Nos. IPR2017-01186 (P.T.A.B. Mar. 28, 2017), IPR 2017-01197 (P.T.A.B. Mar. 29, 2017), IPR2017-1200 (P.T.A.B. Mar. 30, 2017), IPR2017-0123 (P.T.A.B. Mar. 30, 2017), IPR2017-0124 (P.T.A.B. Mar. 30, 2017), and IPR2017-01219 (P.T.A.B. Mar. 30, 2017).
[2] 896 F.3d 1322 (Fed. Cir. 2018), cert. denied, 139 S. Ct. 1547 (2019).
[3] See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54 (1996).
[4] See Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 760, 765 (2002) (FMC).
[5] See FMC at 760.
[6] See FMC at 752; Alden v. Maine, 527 U.S. 706, 755 (1999).
[7] See generally, R. Michaels, Jurisdiction, Foundations (Oct. 7, 2016), in Elgar Encyclopedia of Private International Law (Jürgen Basedow et al. eds.); Duke Law School Public Law & Legal Theory Series No. 2016-53. Available at SSRN.
[8] See In re New York, 256 U.S. 503, 510 (1921).