InsideCounsel » January 2008
IP Owners Challenge State Immunity from Infringement
California knows a thing or two about patent law. For 12 consecutive years its university system has been the largest public recipient of U.S. patents—receiving more patents than the three next largest recipients combined.
According to the University of California (UC) technology transfer office, in fiscal 2006 the state university system had an active portfolio of more than 7,500 patents and reaped $210 million in revenue from licensing deals.
California is also aggressive about protecting its IP rights. For instance it recently took biotech giant Monsanto Co. to court over a bovine growth hormone that infringed a UC patent and won a settlement worth more than $100 million.
When it comes to IP California behaves just like a Fortune 500 company. That is except for one major caveat: No one can sue it for patent infringement.
In October the Federal Circuit affirmed the dismissal of Biomedical Patent Management Corp. v. State of California, Department of Health Services, ruling that—despite its extensive involvement in the patent system—California and all state entities are immune from infringement lawsuits under the 11th Amendment, which gives states general immunity from federal lawsuits.
The court came to that decision with some reluctance. “The court is indeed troubled by the University of California’s ability to reap the benefits of the patent system without being exposed to liability for infringement,” wrote trial court Judge Marilyn Hall Patel in dismissing the case. Ultimately, Patel had little choice. Supreme Court and Federal Circuit precedents both uphold state immunity from federal patent lawsuits, and BPMC doesn’t change that. But it does highlight just how difficult it is for a patent holder to recover against a state for infringement.
Unfair Advantage
Patel isn’t the only one troubled by the inequity of state institutions using the patent system to their advantage while avoiding any liability for infringing activities. In 1992 Congress tried to fix the situation by passing the Patent Remedy Act, which prohibited states from asserting sovereign immunity to evade infringement suits. But in the 1999 case Florida Prepaid v. College Savings Bank, the Supreme Court found the Patent Remedy Act was unconstitutional.
Following that decision, the only way to recover against a state entity that infringes a privately owned patent is if the state waives its immunity by voluntarily appearing in court to defend the case. The holding in BPMC highlights how rarely plaintiffs are able to prove that a state waived its immunity.
In BPMC California voluntarily intervened in a 1997 lawsuit in which BPMC alleged the state’s department of health services (DHS) was infringing its patent on a method of screening for birth defects. The Northern District of California dismissed that lawsuit without prejudice due to improper venue and the fact that several other cases on similar issues were pending. When BPMC refiled the case in 2006, the DHS asserted sovereign immunity as a defense.
The trial court dismissed the case, agreeing that the DHS was immune. On appeal BPMC argued the state had waived immunity by participating in a 1997 suit on the same issue. The Federal Circuit rejected that argument, ruling that under Florida Prepaid, only a valid waiver in the same lawsuit—not a related case between the same parties—would suffice to waive sovereign immunity.
