By Kevin E. Noonan —
Continuing its obliquely negative coverage of U.S. Patent law, Peter Lattman of The Wall Street Journal is shocked (shocked!) to find that the University of California is immune from patent infringement suits, despite being an avid participant in obtaining patents on technology developed by its faculty researchers. In an article entitled "Critics Take Aim at California’s Patent Shield" published yesterday, Mr. Lattman accurately reports that the University receives more patents than any other American university: it has made $521 million in royalty and fee income over the past five years, and received almost 29,000 "foreign and domestic" patents over that period. (Of course, the foreign patents are irrelevant to the point of the article, but they certainly inflate the numbers. According to the U.S. Patent and Trademark Office website, the number of U.S. patents granted to the Board of Regents of the University of California over this 5-year period is actually 2,567 patents.)
California has benefited from patent protection because it can (and does) sue infringers in federal court. The article specifically mentions major settlements from suits against Genentech ($200 million), Monsanto ($185 million) and Microsoft ($30 million). Conversely, and what has roused Mr. Lattman’s ire, is that California cannot be sued for its own infringement, terming the University, and the State of California "Teflon." (Curiously, without using the ® symbol.) Prompting the article is a recent decision by the Court of Appeals for the Federal Circuit affirming a decision from the District Court for the Northern District of California, Judge Marilyn Hall Patel presiding, that California was immune from a lawsuit by Biomedical Patent Management Corp. over a patent on a method for screening fetuses for birth defects. Judge Patel, Mr. Lattman reports, was unhappy with this immunity, noting that private universities "enjoy no such advantage."
And, Mr. Lattman reminds us, the problem is not limited to California (citing Texas and Massachusetts as other examples of state universities invoking the immunity) because all state universities have been held to fall within the scope of the immunity. This is relevant because, since passage of the Bayh-Dole Act in 1980 permitting (actually, encouraging) universities to patent the technological results of their faculty’s research, state universities "have become major players in the patent world," with "vast amounts of intellectual property." This has resulted in "billions of dollars in revenue" garnered from patent licensing to private enterprise.
But Mr. Lattman’s problem is not with the U.S. patent system, it is with the Constitution. As the article acknowledges, the source of the immunity is the 11th Amendment to the Constitution, which 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.
The concept of sovereign immunity stems from British common law, banning lawsuits against the king. Although not explicitly stated in the Amendment, the Supreme Court has interpreted 11th Amendment immunity to extend to actions of a citizen against the state in which she resides. Hans v. Louisiana, 134 U.S. 1 (1890). The rationale behind the immunity conferred by the Amendment is that the "States entered the federal system with their sovereignty intact," Blatchford v. Native Village of Noatak, 501 U.S. 775 (1991), and that "the sovereign immunity of the States neither derives from nor is limited by the terms of the Eleventh Amendment. Rather, . . . the States’ immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today," Alden v. Maine, 527 U.S. 706 (1999). Although Alden sets out this rationale for the scope of the immunity, it is important to recognize that Alden was a 5-4 decision, with the dissenting justices believing that the States had surrendered sovereign immunity when they ratified the Constitution. The immunity is also limited to state action, and is not shared by "lesser" jurisdictional entities like municipalities or counties.
Moreover, the immunity is not absolute. It can be waived, and many states (as well as the federal government) have waived sovereign immunity in suits for tort and contract. Certain U.S. Constitutional provisions trump the immunity, such as the Bankruptcy Clause and the 14th Amendment. However, patent law does not fall within any federal law exemption, and the Supreme Court has recently decided expressly that States enjoy sovereign immunity against suits for patent infringement. Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999).
But sovereign immunity is not limited to patent infringment lawsuits, and indeed there are even more "outrageous" consequences of applying the doctrine. For example, sovereign immunity is expected to shield Virginia Tech (a state school) from liability resulting from the shooting rampage that killed several students in April. Pursuant to Virginia’s limited waiver of sovereign liability for torts, suits will be limited to proof of state negligence and are capped at a maximum recovery of $100,000.
Thus, the issue is the Constitution, not patent law. The Supreme Court has not seen fit to include patent law within the power of Congress or the federal judiciary to abrogate; indeed, Justice Kennedy, writing for the Court in the Alden case, expressed the belief that Congress lacked the power to force States to waive sovereign immunity in patent cases. Although bills have been introduced to force States to waive sovereign immunity in order to be eligible for patent protection, Congress has never passed one. The only sure remedy would be to amend the Constitution, something there appears to be little political impetus or will to do.
ADDENDUM:
As Mark Rosen properly notes, there are instances where Congress can impose waiver of sovereign immunity on a state, but it isn’t as simple as legislation that would require waiver in order for states to be entitled to patent protection.
If there was a pattern or record of states violating the 14th (due process) or 5th (takings/eminent domain) Amendments with regard to property rights, then the Court in Florida Prepaid could consider the action constitutional. The quotation from the case reads as follows (emphasis added):
Thus, under the plain terms of the Clause and the clear import of our precedent, a State’s infringement of a patent, though interfering with a patent owner’s right to exclude others, does not by itself violate the Constitution. Instead, only where the State provides no remedy, or only inadequate remedies, to injured patent owners for its infringement of their patent could a deprivation of property without due process result.
* * *
Congress, however, barely considered the availability of state remedies for patent infringement and hence whether the States’ conduct might have amounted to a constitutional violation under the Fourteenth Amendment. It did hear a limited amount of testimony to the effect that the remedies available in some States were uncertain.
It isn’t clear whether the law could be selective (along the lines of "if a state is found to provide no or inadequate remedies for patent infringement") or whether it would require a finding that state were generally providing no or inadequate patent infringement remedies. It does point to a relatively clear path for Congress to address the question without having to amend the Constitution.
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