Federal Circuit Rules That State Sovereign Immunity Does Not Bar IPRs
On June 14, 2019, the Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion affirming Patent Trial and Appeal Board (“PTAB”) decisions declining to dismiss petitions for inter partes review (IPR). Regents of the Univ. of Minn. v. LSI Corp. et al., —F.3d—, (Fed. Cir. June 14, 2019). The CAFC ruled that the doctrine of sovereign immunity does not bar IPR of state-owned patents.
An IPR is an administrative procedure by which one can challenge the validity of an issued patent. The patent challenger files a petition in the Patent Office, the patent owner may respond, and the Patent Trial and Appeal Board (PTAB) decides whether to institute an IPR. If an IPR is instituted, the PTAB ultimately issues a written decision finding the challenged claims either unpatentable or not.
In this case, the challenged patents are owned by the University of Minnesota, and thus by the State of Minnesota. The university sued various defendants for patent infringement, and the accused infringers petitioned for IPRs. Before the PTAB issued an institution decision, the university filed motions to dismiss, arguing that state sovereign immunity protects its patents from IPR challenges brought by private parties.
The PTAB denied the motions to dismiss, ruling that sovereign immunity applies, but that the State had waived its immunity by filing the infringement suits.
The CAFC affirmed, but on different grounds. In its opinion, the Court noted that patents are granted via an ex parte procedure, and that “in light of the USPTO’s constrained resources and the absence of material outside input during the initial examination, it is inevitable that there are patents granted in error.” The Court went on to explain the history that led Congress to create IPRs, which Congress intended “to improve patent quality and limit unnecessary and counterproductive litigation costs.” The Court also explained that while state sovereign immunity does apply in agency adjudications brought by private parties that are similar to court adjudications, it does not apply to suits or agency proceedings commenced by the United States.
IPRs are instituted based on petitions brought by private parties. However, the Court reasoned that in an IPR, the Patent Office is taking “a second look” at its previous issuance of the patent in question. “It is clear from the history and operation of IPR that these proceedings are designed to allow the USPTO to harness third parties for the agency to evaluate whether a prior grant of a public franchise was wrong.” Thus, the Court found, an IPR is more “similar” to an agency enforcement action instituted by the USPTO than it is to civil litigation, “so state sovereign immunity is not implicated.”