State University 11th Amendment Defense Prevails at PTAB then Supreme Court and US Senate get involved!


Two State Universities successfully use 11th Amendment Defense in IPRs before the PTAB

On May 24th, 2017, the US Patent & Trademark Appeals Board (PTAB) denied an Inter-Parte Review of a University of Maryland patent based on the US Constitution’s 11th Amendment, finding the University is an “arm of the State of Maryland.” The 11th Amendment reads:

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 of any Foreign State.

This event marks the second time I am aware of in 2017 that a State University successfully used this defense in an IPR before the PTAB.  In January, the University of Florida Research Foundation successfully used the argument  that the 11th Amendment to US Constitution shields a university from a USPTO Patent & Trademark Inter-Parte Review because the University is an “arm of the State of Florida.”

In that Florida decision, the PTAB judges noted that deciding this case based on an 11th  Amendment defense could have further implications; especially for the future of validity challenges to patents held by public university research arms or “a monetization foundation” affiliated with a state university.

That Florida PTAB decision goes on to state:

We are cognizant of the fact that applying an Eleventh Amendment immunity to inter parties review, absent waiver by the state entity, precludes the institution of inter parties review against a state entity entitled to Eleventh Amendment immunity. This, indeed, is precisely the point of the 11th Amendment.

 

“As a result of this decision, state university-owned patents are stronger and more attractive to enforce, said Edward Gates, chairman of Wolf, Greenfield & Sacks, P.C.  Wolf Greenfield represented the University of Florida in this case.  Gates continued by saying that “the risk of invalidity is reduced, so these patents are potentially more valuable as a result.” He added that “tech transfer offices at state universities across the country should be considering how this PTAB decision could help them leverage their patents for better monetization of their intellectual properties”.

These two PTAB decisions leave several open legal questions and similar decisions by the PTAB may get appealed if the current IPR process survives the Supreme Court review.  It will be interesting to see what arguments are employed to overcome this 11th amendment defense in Federal Court patent cases involving State entities.

Will the Supreme Court eliminate or restrict Inter-Partes Reviews because a patent is a “property right”?

On June 19th, The Supreme Court agreed to review the question regarding the nature of patent rights in the Oil States Energy Services, LLC, v. Greene’s Energy Group, LLC case. In granting the review, the Supreme Court stated they will decide:

Whether inter partes review—an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

One side, in this case, claims a patent is a “private property right” requiring “due process” while the other side claims a patent is a “public right” that may be adjudicated by a US Government agency, for example, the USPTO.  A decision by the Supreme Court on this IPR case will not happen until sometime in 2018.

Then in late June 2017, Senators Coons and Cotton introduced the STRONGER Patents Act of 2017.

This new patent law proposal also appears to limit or eliminate the current IPR process.  This new legislation has broad support from many US Univerisity and venture capital organizations. I  recall four or five years of heated legislative debate leading up the passage of the America Invents Act – AIA – of 2011. That act, with some recent changes, is the patent law that introduced the current Inter-Partes Review process.  Back then, this IPR process was championed by several of our largest US software companies and opposed by some of the same groups that support this new 2017 Senate patent legislation.  I believe we will begin to hear some very vocal and influential opposition to this proposed STRONGER Patents Act of 2017 as this year progresses.

The prospect of the IPR process being limited or going away totally will certainly change the economic analysis used to decide on pursuing any IPR.  The impact this Supreme Court IPR review has on any particular group is also unclear at this time.

What is clear is that a State Univerisity’s 11th Amendment current protection from an IPR action at the PTAB  is established as a separate issue that has yet to be appealed.

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