Sovereign Immunity Begins to Unravel at PTAB
Infringement Action Waives PTAB Immunity
State-affiliated entities enjoy immunity from suit in federal courts under the 11th amendment. To date, a handful of such entities have successfully leveraged the same immunity theory to avoid review of their patents before the Patent Trial & Appeal Board (PTAB). While still other patentees have aligned themselves with Native American Tribes in an effort to gain their sovereign status for avoiding PTAB review.
Sovereign immunity strategies started unraveling yesterday in Ericsson v. Regents of the University of Minnesota.
In Ericsson, the University of Minnesota alleged 11th amendment immunity from a series of Inter Partes Review (IPR) filings in responsive Motions to Dismiss. The Board denied the motions on the ground that the University had waived any such immunity when it filed its infringement suit against petitioner Ericsson (intervenor in the suit).
In an expanded panel decision (here) that included the PTAB Chief Judge, the Board explained that much like a compulsory counterclaim,
". . . a party served with a patent infringement complaint in federal court must request an inter partes review of the asserted patent within one year of service of that complaint or be forever barred from doing so. See 35 U.S.C. § 315(b). Thus, it is reasonable to view a State that files a patent infringement action as having consented to an inter partes review of the asserted patent. . . .
And that, allowing immunity in this circumstance would be unfair.
" Further, when a State files a patent infringement action in federal court, it is the State’s litigation conduct that triggers the one-year statutory bar for an inter partes review. See 35 U.S.C. § 315(b). It would be unfair and inconsistent to allow a State to avail itself of the federal government’s authority by filing a patent infringement action in federal court, but then selectively invoke its sovereign immunity to ensure that a defendant is barred from requesting an inter partes review of the asserted patent from a different branch of that same federal government.
Given the practical need to litigate patents in today’s monetization environment, this waiver decision effectively unravels any value in such PTAB immunity. But, whether or not one agrees with the waiver reasoning may be purely academic. This dispute is almost certain to be taken up to the Federal Circuit on mandamus, where the applicability of sovereign immunity to AIA trial proceedings will be considered in the first instance.
A concurring opinion by Judge Bisk points out various infirmities with the application of sovereign immunity to PTAB review proceedings. The concurrence correctly notes that the Supreme Court has already distinguished AIA trial proceedings from Article III lawsuits in Cuozzo. Thus, the argument that an IPR is a “lawsuit” for sovereign immunity purposes is unfounded. Judge Bisk also points out that in any event, an AIA trial is an in rem proceeding. Some of these same points were echoed in the recent amicus filings in the Allergan/St Regis Mohawk Tribe dispute.
My expectation is that the Federal Circuit will sidestep the waiver issue and endorse the views of the concurrence. As I have pointed out previously, the Court has gone out of its way in some instances to point out that PTAB proceedings are not trials. Likewise, much of the 7th amendment argument in Oil States is tied to the same basic, threshold premise — IPR is a trial proceeding akin to an Article III lawsuit. That argument, already shot-down in Cuozzo, fell flat again on its second go-round last month.
On a more fundamental level, it would be especially lopsided for a patent applicant such as the one here to avail itself of a federal statutory framework to secure patent rights; pay maintenance fees to the government to maintain such rights; go back to the government and reissue patents (two of the six patents were reissued) for its own mistakes; and then claim that the federal government is prohibited from correcting agency mistakes based on sovereign immunity.
As pointed out in the Oil States briefing and oral arguments, the USPTO has had the power to review patents since the 1980s. While attempts were made to distinguish AIA trial proceedings from reexamination, those attempts did not resonate. Any entity availing itself of the patent system takes such rights subject to the existing statutory framework, regardless of its sovereign affiliation.
It seems unlikely that the PTAB sovereign immunity defense will survive 2018.
Scott A. McKeown is an author of the Patents Post Grant.