Addressing for the first time the issue of whether an inter partes review (IPR) may proceed where one of the co-owners was entitled to sovereign immunity under the 11th Amendment, the Patent Trial and Appeal Board (PTAB) held that the proceeding could continue against the co-owner not entitled to sovereign immunity, even in the absence of the other co-owner. Reactive Surfaces Ltd., LLP v. Toyota Motor Corp., Case No. IPR2017-00572, Paper 32 (PTAB, July 13, 2017) (Moore, APJ).

Reactive Surfaces filed an IPR against a patent co-owned by Toyota and Regents of the University of Minnesota (collectively, patent owner), alleging that the patent owner’s patented processes for preparation of a protein-polymer composite material, and the patented material itself, were obvious in view of prior art. During prosecution of the patent, three of the six named inventors assigned their interest in the patent to the Regents. The remaining three inventors assigned their rights to Toyota. Accordingly, the patent is co-owned by Toyota and the Regents.

After Reactive filed the IPR petition, patent owner was granted authorization to file a motion to dismiss the petition on the grounds that the Regents were entitled to sovereign immunity under the 11th Amendment and that the proceeding could not continue in their absence. Patent owner argued that sovereign immunity had already been held to apply to IPR proceedings, that the Regents (as an arm of the State of Minnesota) were clearly entitled to invoke it, and that the merits of the IPR proceeding could not be adjudicated in the absence of the Regents. Reactive opposed the motion on several grounds, arguing that the 11th Amendment does not extend to IPRs, that the patent owner failed to prove that the Regents were entitled to assert sovereign immunity, and that any sovereign immunity possessed by the Regents did not extend to Toyota.

The PTAB reiterated that sovereign immunity may be asserted in IPRs, citing its own precedent (which, while non-binding, was found to be persuasive). Next, the PTAB found that the Regents were entitled to assert sovereign immunity because “a state university typically enjoys sovereign immunity” and the Regents were “interchangeable [with the University of Minnesota] for purposes of 11th Amendment analysis.” Finally, the PTAB determined that the proceeding could continue against Toyota in the absence of the Regents. The PTAB noted that the rules governing IPRs provided for “at least three circumstances” where proceedings could continue in the absence of a patent owner. Although the PTAB found that none of the three circumstances applied to the present situation, it demonstrated that the patent owner’s argument “for a rule requiring automatic termination of a proceeding upon the dismissal of a party” was unsupported. Citing federal case law allowing actions to proceed against private defendants after a co-defendant had asserted sovereign immunity, the PTAB concluded that an IPR proceeding against a private co-owner could proceed where the co-owner “adequately represents the interest of the absent sovereign party.” Here, where the same legal counsel represented both co-owners of the patent, the PTAB concluded that Toyota could adequately represent the Regents’ interests.

Practice Note: Universities and other state actors should be aware that co-owning a patent with a private party leaves the patent susceptible to IPR challenges. It may behoove such state actors to completely own their patents to protect against post-grant challenges. Similarly, private parties should be aware that co-owning a patent with a state actor will not protect the patent from post-grant challenges.