PTAB Decides Patent Infringement Lawsuit Waives Eleventh Amendment Sovereign Immunity to Inter Partes Review

By Kevin E. Noonan --

The Patent Trial and Appeal Board was seemingly sufficiently vexed over the question of whether the St. Mohawk Indian Tribe was entitled to have the Board dismiss, on grounds of sovereign immunity, inter partes reviews on patents the Tribe licensed from Allergan (see "Mohawk Nation Exercises Sovereign Immunity in Inter Partes Review") to solicit amicus curiae briefs on the issue from "interested parties."  But today, an expanded panel of the Board, including Chief Judge David Ruschke, issued an order dismissing a sovereign immunity challenge by the State of Minnesota in Ericsson Inc. and Telefonaktiebolaget LM Ericsson v. Regents of the University of Minnesota.  The coincidence of these two decisions is curious, particularly because while the scope of sovereign immunity enjoyed by the various recognized Tribes of Native Americans is both uncertain and subject to Congressional abrogation (albeit only when express), a State's sovereignty is acknowledged and protected by the Eleventh Amendment.  Notwithstanding these considerations, the Board rendered its decision, and the legal rationale set forth in its Order provides some insight into not only how the Board may rule on the Tribe's motion but on how the Board (and the Patent Office) perceives its role and authority to make such decisions.

The Director granted Ericsson's IPR petitions involving U.S. Patents Nos. 7,251,768; 8,718,185; 8,588,317; 8,774,309; and RE45,230.  In response to institution, the State of Minnesota filed a motion to dismiss based on its Eleventh Amendment sovereign immunity.  The unresolved question before the Board was whether this immunity was available to enable Minnesota to avoid inter partes review.  Despite earlier decisions by the Board that states could assert sovereign immunity in IPRs (see Covidien LP v. Univ. of Fla. Research Found., Inc., Case IPR2016-01274 (PTAB Jan. 25, 2017); NeoChord, Inc. v. Univ. of Md., Balt., Case IPR2016-00208 (PTAB May 23, 2017); and Reactive Surfaces Ltd., LLP v. Toyota Motor Corp., Case IPR2016-01914 (PTAB July 13, 2017)), and the panel's agreement that "IPR is an adjudicatory proceeding of a federal agency from which state entities are immune," the expanded panel decided that Minnesota had waived sovereign immunity because it had asserted the IPR-challenged patents in a patent infringement lawsuit in district court.

The expanded panel, which comprised Deputy Chief Administrative Patent Judge Scott R. Boalick, Vice Chief Patent Judges Jacqueline Wright Bonilla and Scott C. Weidenfeller, and Administrative Patent Judges Jennifer S. Bisk, Robert J. Weinschenk, and Charles J. Boudreau in addition to the Chief Administrative Patent Judge, expressly set forth its reliance on the Chief Judge's authority under 35 U.S.C. § 6 to expand panels when issues before the Board are of exceptional importance or are "necessary to secure and maintain uniformity of the Board's decisions" (despite skepticism from reviewing courts, including the Federal Circuit and Supreme Court, about these practices, for example in Oil States Energy Services, LLC v. Greene's Energy Group, LLC).  The expanded panel's decision did not overturn or otherwise disturb the Board's earlier decisions that a State could assert its Eleventh Amendment sovereign immunity to have the Board dismiss an IPR proceeding against patents assigned to a state University as an arm of the state.  This is consistent with the Supreme Court's decision in Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743 (2002), that administrative agency adjudications can be sufficiently similar to district court litigation for a State to assert sovereign immunity as applied to the Patent Office by the Federal Circuit in Vas-Cath, Inc. v. Curators of Univ. of Mo., 473 F.3d 1376 (Fed. Cir. 2007).  And in a footnote, the expanded panel states that the differences between civil litigation and IPR proceedings are not enough to evince a Congressional intent to "compel states to surrender their sovereign immunity" consistent with Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627 (1999).

Nevertheless, the expanded panel decided that these determinations were not the end of the question before the Board.  Here, the State of Minnesota had filed a complaint against the Ericsson Petitioners, and this was enough for the Board to conclude that this action by the State in one forum (the Article III District Court) had waived its sovereign immunity before the Article I PTAB, a different forum both in kind and Constitutional origins.  The expanded panel acknowledged that "[a] State's waiver of Eleventh Amendment immunity in one action does not necessarily extend to a separate action, even if the separate action involves the same parties and the same subject matter," citing Biomedical Patent Mgmt. Corp. v. Cal., Dep't of Health Servs., 505 F.3d 1328, 1339 (Fed. Cir. 2007).  But the Board did not recognize this Federal Circuit decision to lay out a "bright-line rule" precluding waiver of sovereign immunity in one forum by actions in another forum on the same patents.  The expanded panel relied on Lapides v. Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613 (2002), for the principle that waiver depends on "the need to avoid unfairness and inconsistency, and to prevent a State from selectively using its immunity to achieve a litigation advantage" (illustrating the continuing conflation, when it serves their purpose, for the Board to analogize its proceedings with litigation).  The closest case on its facts to the waiver question before the expanded panel in its view is Regents of Univ. of New Mexico v. Knight, 321 F.3d 1111 (Fed. Cir. 2003), where the Federal Circuit found waiver of sovereign immunity by a State asserting its patents in district court with regard to compulsory counterclaims.  The grounds for this analogy is the nature of compulsory counterclaims in litigation (which must be asserted "or be forever barred from doing so"; emphasis in opinion) and the provisions of 35 U.S.C. § 315(b) that require a patent infringement defendant to file an IPR petition within one year of being sued "or be forever barred from doing so" (emphasis in opinion).  In each case, it is the State's affirmative filing of a patent infringement complaint that imposes the requirement for a defendant to react and this is enough, in the Board's view, for the State to have waived sovereign immunity in this case.

With regard to Minnesota's argument that "any waiver of Eleventh Amendment immunity should be limited to the venue where Patent Owner filed its action," the expanded panel acknowledges that "waiver is generally limited in this way" in district court litigation; once again the Board does not understand this to be a "bright-line rule."  And the Board cites its opinion that recognizing a State's sovereign immunity under these circumstances "would result in substantial unfairness and inconsistency."

One member of the expanded panel, APJ Bisk, wrote separately to enunciate her view that "a state university, having availed itself of Patent Office procedures to secure patent rights from the public, may not subsequently invoke sovereign immunity as a shield against reconsideration by the Patent Office in an inter partes review proceeding of whether the agency improvidently granted a patent monopoly in the first instance," her diction plainly reciting her prejudices in these matters.  Substantively, she notes the differences between district court litigation and the administrative nature of an IPR, and the factual and procedural distinctions between IPRs and the administrative activities in the Supreme Court's FMC precedent.  Citing MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284, 1293 (Fed. Cir. 2015), the APJ also improvidently characterizes patent rights as "public rights" in advance of the Supreme Court's impending decision in Oil States on precisely that question, in a portion of her concurring opinion focused on the importance of IPR proceedings to protect the public from improperly granted patents.  No doubt aware of similar arguments by amici curiae solicited by the Board in the St. Regis Mohawk Tribe IPRs, the APJ also characterizes IPRs as being actions in rem to defeat claims of sovereign immunity, and cites the (until recently ephemeral) right for a patent owner to amend claims as another distinction between IPRs and litigation.

The decision provides the avenue for the Board's judicial overseers to opine on the extent to which and under what circumstances the Eleventh Amendment shields a State from inter partes review.  However it raises the question of whether the Board, as the adjudicatory arm of an administrative agency, is empowered to render such a decision or whether the proper position would have been for the Board (expanded panel or not) to have recognized Minnesota's sovereign immunity and left it to the Federal Circuit (and, likely and ultimately, the Supreme Court) to make the determination that sovereign immunity does not apply or has been waived and on what basis.

Before Chief Administrative Patent Judge David P. Ruschke, Deputy Chief Administrative Patent Judge Scott R. Boalick, Vice Chief Asministrative Patent Judges Jacqueline Wright Bonilla and Scott C. Weidenfeller, and Administrative Patent Judges Jennifer S. Bisk, Robert J. Weinschenk, and Charles J. Boudreau
Order Denying Patent Ownwer's Motion to Dismiss by Chief Administrative Patent Judge Ruschke, concurring opinion by Administrative Patent Judge Bisk

Comments

[EG]

Hey Kevin,

I would say that the Knight case isn’t dispositive on the issue of “waiver” of sovereign immunity, as it relates to the separate filing of an IPR which is a different forum from that of federal district court. Here’s the key statement of relevant holding in Knight:

“We thus hold that when a state files suit in federal court to enforce its claims to certain patents, the state shall be considered to have consented to have litigated in the same forum all compulsory counterclaims.”

Note the phrase (“in the same forum”). An IPR is not the “same forum,” therefore there is no “waiver.” The argument by PTAB that the accused infringer would be barred from filing the IPR if they don’t do so within a year of the filing the infringement action is specious-the accused infringer can still assert invalidity in the court infringement proceeding. But given PTAB’s penchant for playing “fast and loose” with the case law, I’m not surprised that they have ruled (incorrectly in my view) that “waiver” has occurred.

As far as the concurring view by APJ Bisk that there's waiver from having obtained the patent at the USPTO, that view is absurd on its face-even the Knight case says that.

[Greg DeLassus]

Good for the Board. The CAFC has no jurisdiction to review institution denials, so the previous crop of sovereign immunity decisions at the PTAB have evaded judicial review. By instituting this petition in the teeth of an assertion of sovereign immunity, the PTAB sets up a straightforward presentation of the issue to the CAFC, so that we can get some legal clarity on this so-far murky issue.

[Paul F. Morgan]

The PTAB expanded panel here was properly following what it considered the most relevant immunity waiver decision* of its supervisory appellate court for defensive IPR situations in which where the party asserting immunity has sued in Federal Court on the same patent [i.e., the patent owner is the plaintiff]. But that does not affect state or tribal IPR immunity in other situations, and of course presumably this PTAB decision will be appealed.
*Regents of Univ. of New Mexico v. Knight, 321 F.3d 1111 (Fed. Cir. 2003),

[B. Tarmy]

There's no way to reconcile the Federal Circuit caselaw (which will soon be affirmed by the Supreme Court) holding that IPRs do not offend the Seventh Amendment or Article III with the University's argument that it is even entitled to immunity in an administrative IPR proceeding.

[B. Tarmy]

Stated another way, if a state University is entitled to raise rights under the Eleventh Amendment, then all patent owners are entitled to raise the right to a jury trial under the Seventh Amendment. Why is it that the Eleventh applies but the Seventh does not?

[Atari Man]

I think Greg may be giving the members of the PTAB too much credit, although he is careful not to say one way or the other.

Certainly, the decision sets up the question of sovereign immunity squarely for review by a court not of the marsupial variety. And by doing so in a case involving a state rather than a tribe as patentee, there is no question that, but for waiver, sovereign immunity exists. No doubt the members of board were aware of that.

But I think that at least some of the PTAB decision-renderers (I hesitate to use the term "judges", because that lends to confusion with judges of the Article III variety) rendered this decision not in order to set the table for the Federal Circuit and SCOTUS (assuming the latter doesn't dismantle IPR/PGR proceedings later this term), but because they really think that no patent should be beyond their grasp.

[skeptical]

Atari Man,

I tend to agree with you.

Greg's statement of "so that we can get some legal clarity on this so-far murky issue." begs the question as to WHY (and WHO) has made this murky.

It only appears murky because those who do not like the application of a very well established legal position WANT it to be "murky."

That's called dust-kicking. I "get" that it is a legal tactic. I also "get" that is should NOT be respected. Sovereign Immunity law remains clear - it just remains to be applied.

[Greg DeLassus]

"I think that at least some of the PTAB... rendered this decision... because they really think that no patent should be beyond their grasp."

I am inclined to agree. I certainly did not mean to suggest that the PTAB *wants* CAFC review of their decision. I expect that they would rather that *their* precedent (not the CAFC's) would stand as the last word on this point.

I merely mean to say that we have not even had the *chance* for the CAFC to weigh in yet, because their has not been a decision over which the CAFC could exercise jurisdiction. It is a good thing that we are finally getting a chance for real, proper, Art. III review on this point.

"Greg may be giving the members of the PTAB too much credit, although he is careful not to say one way or the other."

The reason I do not say one way or the other is that I am indifferent in this case. I do not have a dog in *this* fight. I just want a clear, binding precedent to control the issue, so that we all know what the *law* is on this point.

[Greg DeLassus]

"because their has not been..."

Er, "because there has not been..."