By
Kevin E. Noonan —

The
Federal Circuit, in a split decision, affirmed denial of motions to dismiss on
jurisdictional grounds and Federal Court joinder rules in University of Utah v. Max-Planck-Gesellschaft zur Forderung der
Wiessenschaften e.V et al., a decision likely to be
reviewed by the Supreme Court (if only because the case implicates the Court's
original jurisdiction over disputes between the states under Article III of the
Constitution).

The
case arose as an inventorship dispute over the "Tuschl" patents, U.S.
Patent Nos. 7,056,704 and 7,078,196.  The
University of Utah ("UUtah") was plaintiff, and defendants included
the assignees and licensees of the patents, including the Max-Planck-Gesellschaft
zur Forderung der Wiessenschaften e.V., Max-Planck-Innovation GmbH, Whitehead
Institute for Biomedical Research, Massachusetts Institute of Technology,
Alnylum Pharmaceuticals, Inc., and the University of Massachusetts ("UMass").  As set forth in the Federal Circuit's
majority opinion, Dr. Thomas Tuschl, from the University of Massachusetts,
filed for and obtained the patents-in-suit.  Dr. Brenda Bass, of the University of Utah, claimed that she disclosed the
inventions claimed in the Tuschl patents at professional conferences attended
by Dr. Tuschl.  UUtah alleges in the suit
that Dr. Bass is the sole or at least a joint inventor and, after the
defendants declined to correct inventorship by agreement UUtah filed suit under
35 U.S.C. 256 (as well as various state law claims).

Defendant
U Mass argued in a motion to dismiss that the Supreme Court has original
jurisdiction because the dispute was between two States (through their
Universities), citing Article
III, § 2, cl. 2 of the Constitution:  "In all Cases . . . in which a State
shall be Party, the [S]upreme Court shall have original Jurisdiction."  In response, UUtah substituted four officials
for UMass to avoid the original jurisdiction issue.  UMass then argued the case should be barred
by sovereign immunity, and that UMass was an indispensible party (as an assignee).

District
Court Judge Patti Saris denied defendants' motions to dismiss and defendants
appealed.  The court based its denial of
UUtah's original jurisdiction argument under Connecticut ex rel. Blumenthal
v. Cahill, 217 F.3d 93, 98 (2d Cir. 2000) because, first, UUtah had amended
its complaint to recite university officials rather than Massachusetts, and
that correction of inventorship was not a "core sovereign interest"
that rose to a dispute between the States.  The District Court also dismissed the argument that UUtah had failed to
name UMass as an indispensible party because "neither UMass nor Defendants
would be prejudiced by a judgment rendered in UMass's absence because UMass's
interests would be adequately represented by the existing defendants, including
the Named Officials" and that the remedy — ordering the U.S. Patent and
Trademark Office to correct inventorship — would provide "adequate relief"
with or without UMass.

The
Federal Circuit affirmed, in a decision by Judge Reyna joined by Judge Wallach,
and a dissent by Judge Moore.  The
majority addressed the issues squarely:  whether inventorship disputes involving
state university-assigned patents could properly be brought in federal court
(instead of the Supreme Court) and whether the suit should be barred under
sovereign immunity.  In affirming the District Court, the Federal Circuit majority almost ensured that the Supreme Court will
have another opportunity to correct Federal Circuit patent jurisprudence.  Additionally, the majority held that the District Court did not grant defendants' motion to dismiss for failure to join
an indispensible party because UMass was not
indispensible in the action.

The
majority begins its opinion recognizing the distinction between private
assignees and the state, which "typically enjoys sovereign immunity."  This immunity does not extend to suits
brought by one state against another, however, and States can sue individual
citizens of other States without raising sovereign immunity issues with the
State in which an individual defendant resides.  This is not the typical case, according to the
Court, because there are States in both sides of the dispute.

The
defendants raised three issues.  The
first is jurisdictional:  according to defendants, the District Court did not
have jurisdiction because a dispute between the States implicates the Supreme
Court's original (and as noted by the majority, exclusive (28 U.S.C. § 1251(a))
jurisdiction.  This question the majority
considers under the law of the regional (here, First) Circuit, which reviews
decisions on motions to dismiss de novo.  Second, defendants argue that UMass is
entitled to sovereign immunity as an "arm" of the State.  The question of whether Massachusetts has
waived its immunity is a question of Federal Circuit law according to the
majority, citing Regents of the Univ. of N.M. v. Knight, 321 F.3d 1111,
1124 (Fed. Cir. 2003), which review is also de
novo.  Finally, defendants argued
that UMass is an indispensible party and UUtah could not bring suit against the
four University officials under Fed. R. Civ. Pro. 19(b), a question that the
Court says is a matter to regional circuit law that in the First Circuit is
decided under an abuse of discretion standard.

Having
explicated the procedural niceties, the majority turned to the merits.  On the
issue of original jurisdiction, the Court affirmed based on its determination
that UMass is not a real party in interest.  Thus, the question for the majority was whether UUtah's suit is against
the State of Massachusetts or individuals residing in Massachusetts (where the
Supreme Court does not have original or exclusive jurisdiction under §
1251(b)(3)).  Having made this
distinction based on the identity of the parties, the majority somewhat
incongruously shifts to a discussion on the weight of the merits of the case
before them:  "[w]hether original jurisdiction is appropriate depends upon 'the
seriousness and dignity of the claim,' whether the 'named parties' have another
forum 'where appropriate relief may be had,' and whether the case raises 'serious
and important, federalism concerns," citing Illinois v. City of Milwaukee,
Wis., 406 U.S. 91, 93-94 (1972); Wyoming v. Oklahoma, 502 U.S. 437,
451 (1992) and Mississippi v. Louisiana, 506 U.S. 73, 77 (1992).  The majority also relies on the Illinois case for the proposition that
it is appropriate for them to "look behind the named parties and determine
the real party in interest" in making their ruling.  The Supreme Court jurisdictional standard is
that the state is "the real, substantial party in interest" wherein judgment
in the matter would "operate against" the State and thus "adequate
relie[f] cannot be granted without it," citing Pennhurst State School &
Hosp. v. Halderman, 465 U.S. 89 (1984); Dugan v. Rank, 372 U.S. 609,
620 (1963); Cunningham v. Macon & Brunswick R. R. Co., 109 U.S. 446,
457 (1883); as well as Illinois.  The opinion also refers to cases where the
State has been an indispensible party, not surprisingly under circumstances not
before the Court here, as well as cases where the State was not an
indispensible party (Illinois again).

Here,
the Court asserted that UUtah is an arm of the State of Utah and that UMass is
also an arm of the State; accordingly, as originally filed, UUtah's complaint
might have implicated the Supreme Court's original and exclusive jurisdiction.  That is not the case before the Court,
according to the majority; Utah amended its complaint by naming the four
university officials rather than UMass, and thus there are no State defendants
before the Court.  Thus the case is
governed by § 1251(b)(3), not § 1251(a), and the Supreme Court does not have
exclusive jurisdiction.  The mere
identity of the named defendants is not sufficient to decide the question,
however, as defendants contended that Massachusetts is a real party in interest
because UMass's (intellectual) property is at issue and UUtah should not be
able to avoid Supreme Court jurisdiction by the procedural gambit of
substituting state officials for the State as defendants.  The majority agreed with the District Court
that, under Cahill (paradoxically
Second, not First, Circuit precedent) as well as "other Supreme Court
precedent," the question of whether a State is a real party in interest is
whether the question at issue "implicates the State's core sovereign
interests" with a focus on "the seriousness and dignity of the claim"
in cases that "implicate serious and important concerns of federalism."  Such "core sovereign interests"
include "boundary disputes, disputes over water rights, and disputes over
contracts between states" from relevant Supreme Court precedent.  (In an interesting twist in view of the
likely trajectory of this case, then-Circuit Judge Sotomayor dissented in Cahill, finding that New York State was
the real party in interest.)

Nevertheless,
the majority applied the rubrics from Cahill
in deciding that Massachusetts was not a real party in interest here and thus
that the case did not fall under the Supreme Court's original and exclusive
jurisdiction under Article III § 2, cl. 2, because even if "the alleged
injury was caused by actions specifically authorized by State law," the
inventorship issue did not implicate a "core sovereign interest"
because the state officials are only defendants under Counts in the complaint
directed solely to correcting inventorship.  The majority's reasoning was based on the
inventorship issue being personal to the inventors, and because "States
cannot be inventors," any question of inventorship is not a "core
sovereign interest."  Additionally,
the majority asserted that the defendants (and Judge Moore in dissent) "confuse
the issue" by implicating ownership into the dispute.  While ownership and inventorship are "closely
related," the majority refused to equate (without explanation) State
ownership of patent rights with, for example, water rights or other property
rights that do implicate "serious and important concerns of federalism"
which would implicate a State's "core sovereign interests."  The majority also distinguished the Cahill dissent's reasoning on the
grounds that the relief here, correction of inventorship by the PTO, will not
compel Massachusetts to act (or not to act); inventorship can be corrected by
the PTO without any participation by Massachusetts.  The majority conceded that Massachusetts
would be a "proper" party if named but refused to acknowledge that it
is an indispensible party because "[w]hile certain of UMass' interests may
be 'more or less affected by the decision'" the majority apparently did
not think they would be affected enough (applying an unenunciated standard).

The
majority rejected the second issue, sovereign immunity, almost summarily:
because this is not a suit "by citizens against a State" there was no
sovereign immunity issue according to the majority, and thus no basis to reverse
the District Court's refusal to dismiss.

Finally,
the majority turned to whether Massachusetts is an indispensible party under
Fed. R. Civ. Pro. 19(b).  That it would
be feasible to join UMass is not the issue (the first prong of the test on
whether a district court should dismiss under Rule 19); the issue is whether
UMass is an indispensible party.  The
majority's decision that it is not is entirely consistent with its reasoning
regarding lack of original jurisdiction by the Supreme Court.  Here, the majority set out the four factors
used in the First Circuit to decide the question:

(1) the extent to which a judgment
rendered in the person's absence might prejudice that person or the existing
parties;

(2) the extent to which any prejudice could be
lessened or avoided by:

    (A) protective provisions in the judgment; (B)
shaping the relief; or
(C) other measures;

(3) whether a judgment rendered in the person's
absence would be adequate; and

(4) whether the plaintiff would have an adequate
remedy if the action were dismissed for non-joinder.

These
factors must be considered because there is "no per se rule that patent
owners are automatically indispensable parties — there is no patent-specific
exception to Rule 19(b)" (a position that should garner approval from the
Supreme Court if it considers the matter).  The majority held that the District Court did not abuse its discretion
in ruling against defendants motion to dismiss, despite the fact that the lower
court relied on precedent not from the First but from the Federal Circuit
relying on Ninth Circuit law (Dainippon Screen Mfg. Co. v. CFMT, Inc.,
142 F.3d 1266 (Fed. Cir. 1998)) because in the majority's view the reasoning in
the Dainippon case was consistent with First Circuit law.  In Dainippon,
a suit against a wholly owned subsidiary of a named party that was created as a
holding company for the patent was permissible without joining the
patent-owning subsidiary (over which the court did not have personal jurisdiction)
because the subsidiary's interests were adequately represented by the named
party.  Here, the majority held that
UMass's interests were adequately represented by the other defendants, who had
even more to lose (i.e., their
exclusive ownership interests in the Tuschl patents) by an adverse judgment
than the State.  Also, UMass had "handed
sole and exclusive control of this suit over to Alnylam," a named party,
so there was little or no prejudice to UMass or Massachusetts.  The prospective judgment, a change of
inventorship by the USPTO, could be adequately rendered in the State's absence,
and the alternative remedy (the Supreme Court exercising original jurisdiction)
is not certain (and according to the majority unlikely).  In the face of these distinctions, the
majority held that the District Court did not abuse its discretion in denying
defendants' motion to dismiss for failure to join an indispensible party
(albeit admonishing the District Court to resolve "fact intensive"
questions regarding joinder under the circumstances that prevail when the base
returns to the lower court for trial or further proceedings).

Judge
Moore filed a vigorous dissent, based on her perception of error in the
majority's determination that an inventorship dispute involving patents owned
by state universities is not a "controversy between two or more States"
and further for failing to hold a patent owner to be an indispensible party.  As to the first question, Judge Moore argued
that the District Court lacked jurisdiction in what is at root a dispute
between Utah and Massachusetts through their respective administrative arms in
their state universities.  Judge Moore
disagreed with the majority on the merits but her concerns are more importantly
directed to institutional integrity.  Specifically, the question of whether the issues at stake in the
litigation are sufficient for the Supreme Court to decide to exercise its
original and exclusive jurisdiction is a different question of whether that
jurisdiction exists, which to Judge Moore is a question whose answer comes
directly from the plain language of the statute (28 U.S.C. § 1251(a)).  Even more important, however, is that whether
the Court will exercise its jurisdiction is the prerogative of the Court, and
lower courts cannot and should not act as gatekeepers in deciding which
questions the Court will be able to consider based on the lower court's
perception of whether the question involved a "core sovereign interest."  And the fact that UUtah and Dr. Bass had
alternative avenues (such as filing their own application(s) and provoking an
interference) is not a sufficient "perceived injustice" to permit the
Federal Circuit or any lower court to usurp the Supreme Court's prerogatives
regarding the exercise of its original jurisdiction.

Judge
Moore also rejected the majority's view that UMass is not an indispensible
party, and discredited the majority's conclusion that a change in inventorship
for the Tuschl patents would not affect the State's interests.  In her view, the majority erred in straying
from the Court's established precedent that patent owners are indispensible
parties, and she disagreed with the majority's view that the other defendants
can adequately represent the university's interests.  After all, she noted, UMass like many other
universities garner considerable revenues from licensing their patents, and a
decision by the other parties, for example, to settle by permitting Dr. Bass to
be named as a co-inventor (or with even more dire consequences to UMass's
interest, as a sole inventor) would negatively impact UMass's ability or
opportunity to benefit from patent ownership (at least as against UUtah and its
licensees if Dr. Bass is a co-inventor, and as against all its present
licensees if Dr. Bass were to be found to be the sole inventor).

The
majority's decision, particularly in the face of Judge Moore's dissent is
likely to provoke Supreme Court review.  Despite the majority's obeisance to the concept that there is no "patent
exception" to Rule 19(b), and thus that patent owners are not always
indispensible parties, it is neither unreasonable or unforeseeable that
defendants will file a petition for certiorari
having a Question Presented along the lines of the following:

Whether the Federal Circuit erred in holding that lower courts are responsible
in the first instance for deciding whether the Supreme Court has original and
exclusive jurisdiction in disputes between two or more States acting through
their state universities.

In
view of the Court's history with reviewing Federal Circuit decisions over the
past decade, it does not take a Supreme Court scholar to compute the
likelihood of the Court granting such a certiorari
petition.

University of Utah v. Max-Planck-Gesellschaft zur Forderung der Wiessenschaften e.V. (Fed. Cir. 2013)
Panel:  Circuit Judges Moore, Reyna, and Wallach
Opinion by Circuit Judge Reyna; dissenting opinion by Circuit Judge Moore