The Patent and Trial Appeal Board dismissed petitions for inter partes review challenging the claims of a patent owned by a state university that had neither waived the protections offered it by the Eleventh Amendment nor consented to the trial. Covidien LP v. University of Florida Research Foundation Inc., IPR2016-01274, -01275, -01276 (PTAB Jan. 25, 2017). Covidien LP filed three IPR petitions seeking review of U.S. Patent No. 7,062,251, which is owned by the University of Florida Research Foundation, Inc. (UFRF). In response, UFRF filed a motion to dismiss these petitions on the basis that UFRF is immune from being brought before the Board to adjudicate Covidien’s petitions. In dismissing the petitions, the Board applied Supreme Court and Federal Circuit precedent to determine that USRF is an arm of the State of Florida and is thus entitled to invoke sovereign immunity to bar institution of an IPR.

The Eleventh 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 for any foreign State.” U.S. Const. amend. XI. The Supreme Court determined that the sovereign immunity provided by the Eleventh Amendment applies to adjudicative administrative proceedings in Federal Maritime Commission v. South Carolina State Port Authority, 535 U.S. 743, 753-761, 2002 (“FMC”). In FMC, a private cruise ship company filed a maritime services complaint against the South Carolina State Port Authority (SCSPA), seeking the Federal Maritime Commission’s review of whether the SCSPA violated federal law in denying the company’s request to berth its ship in the Port of Charleston. The Supreme Court examined the nature of the administrative proceeding to determine whether it was “the type of proceeding from which the Framers would have thought the States possessed immunity when they agreed to enter the Union.” Id. at 756. The Supreme Court reasoned that there are many common features shared by administrative and judicial proceedings, and the existence of these similarities determined whether a state is protected from the administrative proceeding pursuant to the Eleventh Amendment. In FMC, the Supreme Court concluded that sovereign immunity barred the Federal Marine Commission from adjudicating the complaint of a private party against the SCSPA. Id at 760.

Using the framework provided in FMC, the Board analyzed whether sovereign immunity bars the institution of an IPR petitioned by a private party against a patent owned by a state university. Covidien asserted that a patent is not a public right but rather a right subject to the statutory conditions for its grant; and therefore, UFRF cannot rely on its sovereign immunity to bar review. The Board was not persuaded by this argument because Covidien did not identify any case law or persuasive authority supporting its position that there is a public rights exception that limits sovereign immunity. Covidien also argued that the IPR proceeding is directed to the patent itself and is not a suit by a private party against the state, focusing on the fact that monetary relief is not available in an IPR. The Board determined that the type of relief sought is irrelevant to the applicability of sovereign immunity.

UFRF argued that there was sovereign immunity under FMC, arguing that an IPR proceeding is similar to civil litigation for the following reasons: (i) IPR proceedings are adversarial, contested cases between the patent owner and a petitioner; (ii) the IPR petition is routinely reviewed by three impartial APJs that are insulated from political influence; (iii) IPR pleadings are similar to those in civil litigation; (iv) discovery is available during an IPR; and (v) the Federal Rules of Evidence govern the proceeding. In response, Covidien highlighted differences between an IPR proceeding and civil litigation such as: (i) the lack of personal jurisdiction; (ii) the only relief available in an IPR is cancelation of claims; (iii) discovery is limited; (iv) a different standard of proof; and (v) a different pleading standard.

The Board noted that Congress created inter partes review to establish a more efficient and streamlined patent system that should improve patent quality and limit litigation cost. With that in mind, the Board concluded that the procedures governing the IPR proceeding considerably resemble civil litigation and this similarity is sufficient to implicate the immunity provided by the Eleventh Amendment. The Board also cited Vas-Cath, Inc. v. Curators of University of Missouri, 473 F.3d 1376, 1383 (Fed. Cir. 2007), and noted that the Federal Circuit determined that interference proceedings can be characterized as a lawsuit when determining whether sovereign immunity can be applied.

The Board also analyzed whether UFRF is an “arm of the State of Florida,” entitling it to the protections of the Eleventh Amendment. The Board’s analysis focused on the function of the UFRF, how state law defines the UFRF, the degree of control the state maintains over the UFRF, and the sources from which UFRF derives its funding. Based on this detailed factual analysis, the Board concluded that the UFRF is an arm of the State of Florida, and dismissed Covidien’s IPR petitions.

There was no related federal court patent infringement (or declaratory judgment) action brought by the university. Thus, the Board did not decide whether the existence of such an action would effect a waiver of Eleventh Amendment immunity. UFRF did file suit in state court alleging Covidien breached a license agreement concerning the challenged patent, but the Board did not address whether this suit was a waiver of Eleventh Amendment immunity. Nevertheless, this decision should be welcome news to patent-owning universities that consider themselves an arm of a state and otherwise fear the potential of having to defend patentability in an AIA trial. Whether such a university would qualify for this immunity, however, is a fact-intensive determination that may well include consideration of state law provisions that define the university’s character.

It appears that the Board’s dismissal of these petitions is not appealable under 35 U.S.C. § 314(d), in view of developing case law suggesting that such a dismissal is not subject to judicial review. See Cuozzo Speed Technologies, Inc., v. Lee, which we discussed here. Nevertheless, the aggrieved petitioner may seek a writ of mandamus from the Federal Circuit or the federal district court in Virginia.