The 2017 decisions in NeoChord, Inc v University of Maryland (IPR2016-00208) and Covidien LP v University of Florida Research Found Inc (IPR2016-01274) addressed the issue of whether sovereign immunity reserved to states under the Eleventh Amendment may be asserted by public universities in inter partes review proceedings. In both cases, administrative judges of the Patent Trial and Appeal Board (PTAB) concluded that Eleventh Amendment sovereign immunity may be invoked by public universities in inter partes review proceedings.
On July 13 2017 a panel of three administrative patent judges echoed these decisions, but for the first time found that inter partes review proceedings may continue in the absence of a patent owner should the patent be jointly owned by an entity not entitled to immunity. This decision is of particular interest to companies and public universities which actively engage in collaborative R&D projects.
On January 4 2017 Reactive Surfaces Ltd filed an inter partes review petition. Reactive Surfaces requested inter partes review of US Patent 8,252,571 (the ‘‘571 patent’), which was issued on August 28 2012 and is jointly owned by the Regents of the University of Minnesota and Toyota Motor Corporation. The '571 patent is directed to a process for preparing a composite material that can be used as a bioactive coating, such as a clear coat on a biosensor. After receiving authorisation from the administrative judges, the patent owners filed a motion to dismiss the proceedings, claiming that:
"Eleventh Amendment sovereign immunity extends to inter partes reviews, that [the University of Minnesota is] entitled to assert sovereign immunity, and that the merits of [the] inter partes review cannot be adjudicated in the absence of [the University of Minnesota]." (Page 3.)
Reactive Surfaces opposed the patent owners' arguments, in part because "any sovereign immunity possessed by the [the University of Minnesota] does not extend to Toyota" (page 3).
Administrative judges decision
In the decision entered on July 13 2017 the judges dismissed the university from the inter partes review, but disagreed with the patent owners' position "that the merits of [the] inter partes review cannot be adjudicated in the absence of the [University of Minnesota]".
First, the judges noted that "[t]he rules governing inter partes review proceedings provide for continuing [the proceeding] in the absence of a patent owner" (page 11) in a number of circumstances, concluding that "it is not the case that the absence of one patent owner necessarily requires the termination of the inter partes review" (page 12).
The judges then addressed the patent owners' argument "requiring automatic termination of a proceeding upon the dismissal of a party on the grounds of sovereign immunity" (page 12). The patent owners argued that Republic of Philippines v Pimentel provides a basis for such an action, namely that "the only way to prevent 'injury to the interests of the absent sovereign' is to dismiss the action entirely" (page 13). The judges stated that “federal courts that have considered the issue have not applied a bright-line rule that requires dismissal of any action after a finding that one defendant has sovereign immunity" (page 13), but that proper application of Rule 19(b) factors of the Federal Rules of Civil Procedure should be considered instead.
Further, the judges held that successful assertion of sovereign immunity by one party does not necessarily require the dismissal of the action against the remaining parties, elaborating that "even under the more restrictive rules that prevail in Federal court, Toyota would represent adequately the interests of the Regents in the '571 patent" (page 17).
The judges concluded that the university was therefore entitled to immunity from inter partes review proceedings under the Eleventh Amendment, but that the proceeding may continue in their absence should the patent be jointly owned by an entity not entitled to immunity.
Patents entirely owned by public universities can be a valuable asset for companies, as these patents have been deemed immune to inter partes review proceedings. Moreover, this decision will surely be on the minds of those negotiating IP ownership provisions in collaborative R&D agreements between public universities and industry, as companies must now decide whether the risk of inter partes review is worth taking an ownership stake in intellectual property developed under the agreement.
This article first appeared in IAM. For further information please visit www.iam-media.com.