By Courtenay C. Brinckerhoff,* a Partner at Foley & Lardner LLP, and editor of the firm’s PharmaPatentsBlog.
In January 2017, the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office (“USPTO”) ruled in three parallel decisions that state university-owned patents could not be challenged in inter partes review proceedings. See, e.g., Covidien LP v. Univ. of Florida Research Foundation Inc., Case IPR2016-01274 (PTAB Jan. 25, 2017). I authored a Legal Opinion Letter on that decision for WLF, which is available here.
A different PTAB panel came to the same conclusion in NeoChord, Inc. v. University of Maryland, Case IPR2016-00208 (PTAB May 23, 2017), where the University raised the defense on the eve of oral hearing, a few days after the Covidien decisions were published. After noting that the Covidien decisions were not binding, the NeoChord panel independently found that the University could raise an Eleventh Amendment defense to the inter partes review proceeding against its patent, even though it was exclusively licensed to a commercial entity.
In reaching its decision, the PTAB noted that NeoChord had not argued that Maryland had waived sovereign immunity “by market participation or by accepting a gratuity.” Nevertheless, the PTAB explained why neither waiver theory was likely to be successful. The PTAB reasoned that any argument of waiver by market participation would be precluded by the US Supreme Court decision in College Savings Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999), which the PTAB interpreted as holding that “market participation does not constitute a constructive waiver.” As to waiver by accepting a gratuity, the PTAB cited the US Court of Appeals for the Federal Circuit decision in Xechem Int’l., Inc. v. Univ. of Tex. M.D. Anderson Cancer Ctr., 382 F.3d 1324 (Fed. Cir. 2004), for the proposition that “the grant of a patent does not constitute a predicate for application of a ‘gratuity doctrine’ waiver because a patent is not a gratuity, i.e., the quid pro quo for receiving a patent is an invention.” Thus, that avenue for establishing waiver of sovereign immunity may be foreclosed as well.
NeoChord argued that the University’ participation in the IPR “up until the Oral Hearing” without raising sovereign immunity itself constituted a waiver, but the PTAB rejected that argument. The PTAB cited Lapides v. Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613 (2002), for the proposition that “mere participation in judicial proceedings does not create a waiver unless the State has taken affirmative steps to invoke federal jurisdiction, such as filing suit as a plaintiff or seeking removal of a proceeding to federal court.” The PTAB also found “no indication that the University has delayed for any tactical reasons,” but accepted the explanation that “before the Covidien decision it had not been aware that it could raise the Eleventh Amendment defense before the Board, and that it raised the defense within five business days of the Covidien decision.”
The PTAB also rejected NeoChord’s arguments that certain terms in the University’s license agreement constituted a waiver of sovereign immunity. NeoChord had cited terms that set conditions on the licensee’s “ability to take or cause the taking of any Patent Challenge,” but the PTAB agreed with the University that those terms only waived immunity for actions brought by the licensee. The PTAB also agreed that a section of the agreement stating that “[n]o provision of this Agreement shall constitute or be construed as a limitation, abrogation, or waiver of any defense or limitation of liability available to the State of Maryland … under Maryland or Federal law, including without limitation the defense of sovereign immunity or any other governmental immunity” operated as “a savings clause” that preserved the defense of sovereign immunity with respect to third parties.
NeoChord’s argued that the IPR could proceed without the University, i.e., with the exclusive licensee standing in as the “effective patentee,” but the PTAB disagreed. The PTAB found that the University had retained rights under the license agreement, and so had transferred “less than ‘substantially all’ rights” in the patent. Thus, the University was a “necessary and indispensable party.” As such, its ability to raise the defense of sovereign immunity meant that the IPR had to be dismissed.
Although this PTAB decision, like the Covidien decisions, is not designated as precedential, the fact remains that two different panels have independently found that state universities can raise the Eleventh Amendment as a defense against IPR challenges.
*Ms. Brinckerhoff’s practice focuses on all aspects of intellectual property counseling in the biotechnology and pharmaceutical space. The opinions expressed herein are personal to author, and do not necessarily reflect those of Foley & Lardner LLP or its clients.