A State University’s Patents May be Immune From PTAB Review

Nancy C. Wilker, Ph.D., J.D.
W. John Keyes, Ph.D., J.D.

By Nancy Wilker, Ph.D and W. John Keyes, Ph.D..

Members of our Patent Practice Group

February 2017 IP Update

Since its introduction in 2012, inter partes review (IPR) has provided a relatively efficient means of challenging an issued patent on the basis of lack of novelty or obviousness.  Instead of challenging the patent in a court of law, a party can now petition the Patent Trial and Appeal Board (PTAB) to initiate an IPR.

IPR proceedings are heard by a panel of administrative law judges from the PTAB who decide whether to institute a review.  If one is instituted, they eventually issue a final decision on patentability of the challenged patent.

This powerful tool has become so popular that it is almost universally employed by parties defending against patent-based lawsuits. Consumer electronics giants have enthusiastically embraced IPRs as a means for challenging patents. Apple alone has filed more than 200 IPR petitions.  The automotive and pharmaceutical industries also have leveraged this tool extensively.

It appears now there are limits.  In its January decision in Covidien LP v. University of Florida Research Foundation Inc., the PTAB ruled that patents held by certain state-affiliated institutions are immune from challenges in IPR proceedings because of the protection afforded by the Eleventh Amendment of the US Constitution.

That amendment provides that the “Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”

The Eleventh Amendment has been interpreted broadly.  For example, in Federal Maritime Commission v. South Carolina State Ports Authority, the Supreme Court determined that it precludes certain adjudicative administrative agencies organized under Article I of the Constitution, such as the Federal Maritime Commission (“FMC”), from adjudicating complaints filed by a private party against a non-consenting state.

In so holding, the Court noted that the similarities between the proceedings before the FMC and civil litigation were overwhelming.  It said that, although the FMC is organized under Article I of the Constitution, “the affront to a State’s dignity does not lessen when an adjudication takes place in an administrative tribunal as opposed to an Article III court. In both instances, a State is required to defend itself in an adversarial proceeding against a private party before an impartial federal officer.”

In Covidien, the PTAB reviewed similarities between an IPR and civil ligation.  It noted their adversarial nature, their adjudication before impartial judge(s) and the similar rules and procedures governing both, and concluded that the similarities are sufficient to trigger Eleventh Amendment immunity.  Thus, in Covidien, the PTAB included itself among the administrative agencies whose adjudicative proceedings are precluded by the Eleventh Amendment.

Given the reasoning of Covidien, the Eleventh Amendment will likely shield state actors from all proceedings before the PTAB, including post-grant reviews and interferences.  State actors should note, however, that the protection of the Eleventh Amendment has its limits.   The PTAB was careful to distinguish the 2007 Federal Circuit decision in Vas-Cath, Inc. v. Curators of the University of Missouri, which allowed a PTAB interference proceeding to proceed despite an Eleventh Amendment claim of immunity.

In Vas-Cath, the University of Missouri was the party that initiated the interference.  The Federal Circuit concluded that the university could not claim immunity under the Eleventh Amendment because, by initiating the proceeding, it had consented to the jurisdiction of the PTAB.

After Covidien, while a state actor may be able to raise the Eleventh Amendment as a defense of its patents against an IPR and other proceedings before the PTAB, it should be mindful of being perceived as an instigator (and therefore consenter) in such proceedings.  For example, if a state actor files an IPR against a third party patent and relies upon its own patent as a prior art document, it is worth considering whether by doing so the state actor has consented to the third party’s reciprocal IPR challenge of its proffered patent.

In Covidien, the PTAB expressly left open the question of whether the Eleventh Amendment would insulate the university from an IPR proceeding if it had commenced an infringement or declaratory judgment lawsuit in federal court involving the same patent.  Supreme Court jurisprudence clearly holds that when a state initiates a lawsuit in federal court it waives sovereign immunity with respect to that case.  But whether that waiver also extends to an administrative proceeding involving the patent at issue in the litigation is an as-yet unanswered question.