State Research University Immunity from PTAB Review

In a recent post, patent law guru Dennis Crouch discussed PTAB’s 11th Amendment Sovereign Immunity decision exempting state research universities and their affiliates from IPR review.

For those of us inclined to suspect PTAB’s justifiable fears of constitutional elimination (which also could nullify AIA itself which has no savings clause) one reader’s anonymous comment was intriguing …

“Believe me, PTAB considered all angles before this decision. My informed speculation would be this decision is from the solicitors office and the political branch and was given to the panel. It’s pure self preservation. To ignore the 11th as this juncture, would create a SCOTUS scenario, in which the entire framework of the IPR construct would need to be squared against a separation of powers and federalism framework implicated by the purpose behind the 11th amendment. Screwing the requestor and dismissing under the 11th, allows the IPR construct to survive another day. And the longer PTO can keep the IPR construct in place, the better chance it has to survive.”

Sovereign Immunity Excuses University of Florida from IPR Challenge by Dennis Crouch

As public universities continue to obtain more patents, issues of sovereign immunity continue to arise. In a recent decision, the Patent Trial and Appeal Board (PTAB) dismissed a trio of inter partes review proceedings against the University of Florida based upon its claim of sovereign immunity.[1]

The 11th Amendment to the US Constitution limited the “Judicial power of the United States” so that it does not “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.”[2] Although the text of the amendment appear to include several important limitations that might exclude an administrative action (“judicial power; “suit in law or equity”), the Supreme Court has broadly interpreted the statute precluding many adjudicative administrative proceedings.  For anyone who is not an American lawyer, you may need to pause here to recognize that each of the 50 American states are treated as sovereign governments and, although the Federal Government sets the “supreme law of the land,” its powers are limited by the U.S. constitution and federalist structure.

The Supreme Court has interpreted this amendment to encompass a broad principle of sovereign immunity, whereby the Eleventh Amendment limits not only the judicial authority of the federal courts to subject a state to an unconsented suit, but also precludes certain adjudicative administrative proceedings, depending on the nature of those proceedings, from adjudicating complaints filed by a private party.  Following Supreme Court precedent from other areas of law, the Federal Circuit held in Vas-Cath[3] that Missouri’s sovereign immunity allowed it to avoid an interference proceeding.

The petitioner Covidien argued that the PTAB should think of the IPR as an in rem action directed at the patent rather than at the patent owner.  However, the PTAB rejected that argument – finding that the procedural elements of inter partes reviews and estoppel provisions make it look much like contested litigation – the very thing protected by the 11thAmendment.

The Panel:

On the whole, considering the nature of inter partes review and civil litigation, we conclude that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment. Although there are distinctions, such as in the scope of discovery, we observe that there is no requirement that the two types of proceedings be identical for sovereign immunity to apply to an administrative proceeding. Further, we note that there are several similarities between civil litigation and inter partes review that are not unlike those compared in Vas-Cath for interferences.

Outcome here – Dismissed before Institution based on Sovereign Immunity of the patentee.  Moving forward it will be interesting to see whether the Federal Circuit is willing to hear an appeal or instead apply the standard law that institution decisions are not subject to appeal.

The dispute between the parties extends back to a license agreement between UFL and Medtronic/Covidien of the patent at issue. UFL exerted its right to audit the books, but was refused by Medtronic.  UFL then sued in state court on the contract.  Medtronic counterclaimed for DJ of invalidity/noninfringement and removed the case to federal court on the patent claims and on diversity grounds.  The district court however remanded back to state court on sovereign immunity grounds.  That remand is now on appeal at the Federal Circuit, although the court has just issued a show-cause – asking whether the case should be transferred to the 11th Circuit.  Under the AIA-revised statute, cases go to the Federal Circuit if either the civil action “arises under” US patent law or a “compulsory counterclaim” arises under patent law.  Here, it is clear that the counterclaim is a patent claim, but the big question is whether it is “compulsory” – normally defined as one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.”[4]

Of interest though, in the order to show cause, the court suggests that it might keep the case in the “interest of justice” rather than transfer it. [5][federalcircuitjurisdictionorder]

= = = =

[1] See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

[2] U.S. CONST. amend. XI.

[3] Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).

[4] Fed. R. Civ. P. 13(a)(1)(A).

[5] 28 U.S

 

Justice Gorsuch?

We believe it will be messy but Judge Gorsuch will be confirmed as Justice Gorsuch. Significantly his textual originalism tilts his constitutional analysis towards limiting the kind of federal agency overreach we have come to expect from USPTO’s IPR. We suspect he similarly will be suspicious of AIA’s legislative history shenanigans, some of which occurred after its passage. He thus is unlikely to support efforts by any USPTO Director to administratively bend AIA’s ambiguities in ICT tech’s direction. Continue reading Justice Gorsuch?

PTAB Elevates State University Research Values

“A very important decision has just been issued by PTAB impairing the capacity of private parties to challenge the validity of patents owned by state research universities and their TTO affiliates.”

In Covidian LLP v University of Florida Research Foundation Inc. http://www.reexamlink.com/wp-content/uploads/2017/01/Board-Dismisses-IPRs-on-Sovereign-Immunity.pdf, PTAB thoroughly examined the applicability of the Eleventh Amendment’s state sovereign immunity doctrine to IPR patent challenge proceedings. PTAB concluded that as an “arm” of the state, UF’s TTO affiliate was immune to IPR challenge absent Florida’s consent by waiver of its sovereign immunity. The decision has been appealed to the Federal Circuit but for now it clearly enhances TTO patent licensing values. Continue reading PTAB Elevates State University Research Values

Water Balloons and Commercialization’s Public Benefit Delivery

Paul Morinville is Managing Director of US Inventor, Inc and a tireless and effective Hill advocate for strong patents. With the story below Paul demonstrates the power of a memorable narrative when pro-patent universities discuss patent reform with congressional Members and Staff. Hill folks have busy schedules and short attention spans. Patent law’s arcane complexity is a time-suck buzz-kill for most. It cannot be compressed into an elevator speech. But water balloons?……now that’s a different story. Addressing a patent law conference earlier this month patent champion and STRONG ACT sponsor Senator Chris Coons diplomatically emphasized the importance of “narratives” when explaining the parlous state of today’s destabilized commercialization dynamic. We know that as patent protection become increasingly less assured, private sector investment becomes increasingly harder to attract. Because of PTAB nullifications and other investment deterring uncertainties, commercialization’s public-private partnerships are now becoming an endangered species. Continue reading Water Balloons and Commercialization’s Public Benefit Delivery

Does Apple’s Suit Against Qualcomm Signal the End of Congressional Patent Reform?

Worldwide skirmishing between Apple and Qualcomm has now erupted into a US legal battle. Apple has launched a billion dollar U.S. suit attacking Qualcomm’s licensing model. The suit’s specifics are thoroughly explained by Steve Brachman in an IPWatchdog post. Research university TTO’s generally pay little attention to such big tech combat but this suit is worth watching because Apple now seeks relief from the marketplace bargaining envisioned by our patent system through more narrowly focused judicial pricing. In an earnings conference call earlier this week, Qualcomm’s CEO put it bluntly. “Apple’s complaint contains a lot of assertions, but in the end this is a commercial dispute over the price of intellectual property,” CEO Steve Mollenkopf said. “They want to pay less than the fair value that Qualcomm has established in the marketplace for our technology even though Apple has generated billions in profits from using that technology.” See Forbes article here. Mollenkopf’s blunt assessment summarizes what the last ten years of congressional patent reform have been all about lowering the supplier cost of patented components to ICT assemblers who distribute finished products to the public in a very competitive global market governed by the exponentially accelerating pace of Moore’s Law. After fighting with each other over product market share, big ICT tech patent reformers are gladly holding Apple’s coat as it tries to suppress Qualcomm’s share of its product’s sales price by judicially attacking its licensing model.

Big tech intermediaries who market their ICT products (like smart phones) to consumers gained overwhelming bargaining leverage over their suppliers when the eBay decision effectively denied non-practicing patent holders the protection of permanent injunctive relief. Having judicially secured that bargaining edge, price negotiations with lesser-resourced component suppliers reverted to under-payment or simple avoidance. Efficient infringement had become irresistible but led to the creation of secondary market specialists who were branded ” patent trolls “by efficient infringers. For big ICT tech, which already had weaponized patents to fight for market share with big tech adversaries eBay set the stage for big tech to open up a second front they called patent reform. This new war would be waged on Capitol Hill against the patent trolls but in fact it was brought by big tech aggregators against their supply chain component originators in order to gain a greater share of final product price. In this battle the warring ICT intermediaries were allies. For lesser-resourced component suppliers’ efficient infringement and AIA eroded patent values. But well-resourced suppliers able to afford post AIA enforcement suits were impervious to efficient infringement and could manage the punitive costs of AIA. Qualcomm is such a supplier. Its size and must-use technology supplier enabled pricing that had to be attacked in court.

At congressional patent reform’s outset, efficient infringers had little to lose. If eventually they were found guilty, unauthorized use of the patented infringed technology would be “judicially priced” in the form of damages hypothetically calculated under Georgia Pacific’s royalty requirements. Royalty damages would be hypothetically calculated as if their use had been mutually agreed to in timely pre-infringement negotiations. This is retroactive compulsory licensing in effect without further imposition of other contractual limitations on the “compulsory licensee’s” conduct and use of the patented technology. “Infringe now and price later” may have been economically advisable in ICT markets propelled by Moore’s Law, but is unlawful under US patent law. Moreover, this widespread business model has clogged courts and has encouraged genuinely abusive and predatory trolling conduct. But well-resourced suppliers are not intimidated in the new post AIA environment. They must be bargained with on even terms. The courts have now been drawn into a battle to unbalance those terms. In order reduce Qualcomm’s licensing powers Big ICT tech wants to undermine Qualcomm’s licensing strength, hoping that judicially-imposed licensing restraints will lower supplier costs giving Apple a larger share of their product’s sales price.

 

 

 

 

Letter From NY Congressional Delegation to (former?) Dir. Lee

Kindness of LES’ Brian O’Shaughnessy, a letter was sent to USPTO Director Michelle Lee by the NY House congressional delegation. It outlines how IPR’s reputation for patent nullification is being leveraged by abusive hedge funds who are filing petitions for IPR review of publicly traded, patent reliant firms to reduce their stock prices. Continue reading Letter From NY Congressional Delegation to (former?) Dir. Lee

Mayo, the Judicial Equivalent of the Market’s Efficient Infringement

Gene Quinn pulls no punches in his feisty analysis (below) of Mayo. Mayo is the judicial equivalent of the market’s efficient infringement where maximizing financial return results from ignoring patents. Mayo enables their efficient judicial nullification. Mayo’s signal to patent validity tribunals has infected USPTO examiners, PTAB, the lower courts and SCOTUS itself. Like its market kin, its toxic impact has extended far beyond the judicial arena. Teamed with eBay’s blow to bedrock exclusivity our entire innovation ecosystem has been poisoned by it. Mayo provides efficiency to legal tribunals by enabling the early dismissal of IP originators’ exclusivity itself without their having to contend with prolonged disputes involving the complexities of patent law and technological progress. Continue reading Mayo, the Judicial Equivalent of the Market’s Efficient Infringement

Drug Pricing and Life Science Commercialization

Federation of American Societies for Experimental Biology (FASEB) members number 125,000 including thirty health-focused societies. It is the largest coalition of biomedical research associations in the United States. Widely considered as the policy voice of biological and biomedical researchers, FASAB annually advocates for “stable and predictable” congressionally appropriated federal funding for basic life science research. Its 2017 recommendations for added congressional funding of five federal life science grant agencies highlights recent medicinal therapies flowing from their life science grants. It also states why and by how much grant funding should be increased for each agency. here. Federal funding stability and predictability enable projects already being conducted to continue and enable formation of new commercialization partnerships leading to more promising scientific discoveries through private sector investment. Continue reading Drug Pricing and Life Science Commercialization

Bayh-Dole Commercialization Under Attack

Because TT commercialization requires prudent private sector investment, increasing uncertainty regarding post-patent and post-development patent and pricing reliability threatens Bayh-Dole TT commercialization. Patent reliability and investor pricing aegis are critical prerequisites private sector entrance into commercialization partnerships. Both are now under attack. now it appears that R&D funding for disposition by federal grant agencies also is under concerted attack. When the NY Times and the Wall Street Journal publish op-eds attacking federal funding attacking NIH and research universities, the attack is confirmed and must be met head-on. Continue reading Bayh-Dole Commercialization Under Attack

We Are Not Alone . . . .

Neal Solomon’s well-written, thoughtful IPWatchdog post (linked below) presents a patent policy agenda for President-elect Trump. It also is a policy roadmap for all pro-patent advocates in the months ahead. Already it has attracted 26 comments, many of which add other important pro-patent policy proposals. The harms it describes are especially applicable to research universities. Moreover it not only demonstrates that our pro-patent ranks have swelled , it warns us that commercialization of research universities’ basic research cannot continue if patents are insufficiently reliable to support private sector investment in commercially promising scientific research. When commercialization becomes impossible congressional R&D grants will no longer be politically justifiable. Continue reading We Are Not Alone . . . .