Sovereign immunity: a venue-dependent protection
At first glance, sovereign immunity—a constitutionally and judicially-created doctrine that protects sovereign entities such as countries, states, or indigenous tribes from suit unless the entity has waived its immunity or consented to suit—may seem like a get-out-of-jail-free card for a sovereign patent owner involved in a patent dispute.
But, as the case between the University of Texas (UT), its licensee Gensetix, and Baylor College of Medicine illustrates, the immunities afforded to sovereign patent owners differ greatly depending on the venue of the dispute. Understanding those differences is central to developing a patent trial strategy across parallel venues.
Sovereign immunity in patent law
Sovereign immunity is a longstanding legal concept. It dates back to medieval monarchs and is often attributed to the phase “the King can do no wrong.” Although the founding of the US was premised on a rejection of monarchy, sovereign immunity nevertheless survived, instead imputed to the political state.
Textually, sovereign immunity is often ascribed to the Eleventh Amendment which restricts courts from considering any suit against a state by citizens of another state. But as the Supreme Court itself has recognised: “The sovereign immunity reflected in (rather than created by) the Eleventh Amendment transcends the narrow text of the Amendment itself” (Coll Sav Bank v Fla Prepaid Postsecondary Ed Expense Bd [1999]).
Rather, the “concern that states not be unduly burdened by litigation” is a result of “ensuring that the states’ dignitary interests can be fully vindicated” as part of the federalist system (PR Aqueduct & Sewer Auth v Metcalf & Eddy [1993]).
Sovereign immunity intersects with patent law primarily through entities that are considered arms of the state, frequently state universities. When a public university owns a patent, it is the state that owns the patent through the university, such that cases involving that patent raise questions of sovereign immunity.
Because the doctrine shields the state from any liability for patent infringement, enterprising parties often seek new ways to introduce sovereign immunity into a dispute. Some patent owners have attempted to take advantage of sovereign immunity to shield their patents from invalidity challenges, even going as far as assigning their patents to sovereign indigenous tribes in return for an exclusive licence.
Parallel proceedings and differing outcomes
The dispute between UT, Gensetix, and Baylor College of Medicine perfectly illustrates the differing role sovereign immunity plays in the Patent Trial and Appeal Board (PTAB) and district court proceedings.
Gensetix exclusively licensed from UT two patents directed to methods of modifying a patient’s immune system to kill cancer cells. The licence required Gensetix to enforce the patents. In April 2017, Gensetix sued Baylor for infringement of the licensed patents in federal district court and sought to join UT as an involuntary co-plaintiff under Federal Rules of Civil Procedure (FRCP) rule 19(a). In response to this suit, Baylor filed two inter partes review (IPR) proceedings challenging those patents at the PTAB.
UT asserted sovereign immunity in both sets of proceedings, and both eventually made their way to the Federal Circuit in 2020.
In the appeal from the district court proceeding, the Federal Circuit stated that UT could not be involuntarily joined as a plaintiff due to its sovereign immunity. The court then remanded for further consideration, explaining that the district court had not properly weighed the relevant factors of FRCP rule 19(b) to determine whether the case could proceed without UT (Gensetix v Bd of Regents of the Univ of Tex Sys [Fed Cir, 2020]).
That decision, however, was not without controversy: Judge Newman concurred with the remand but argued that states waive their sovereign immunity when they participate in commercial transactions.
Judge Taranto dissented with the remand, arguing that sovereign immunity alone obviates the need to consider other factors for whether the case may proceed.
The parallel IPR appeal reached a more straightforward but contradictory result. In that appeal, the Federal Circuit issued a nonprecedential per curiam opinion affirming that UT was not entitled to immunity in the IPR proceedings, essentially adopting in full a prior 2019 opinion: Regents of the University of Minnesota v LSI Corp (Fed Cir, 2019).
Sovereign immunity availability moving forward
As reflected by the UT dispute, the inapplicability of sovereign immunity within the IPR context is largely settled. The seminal case on this issue is Saint Regis Mohawk Tribe v Mylan Pharmaceuticals. In that case, Allergan attempted to invoke sovereign immunity to dismiss IPRs by transferring ownership of its patents to the Saint Regis Mohawk Tribe while retaining an exclusive licence (896 F.3d 1322 [Fed Cir, 2018], cert denied 139 S Ct 1547 [2019]).
In rejecting this attempt, the Federal Circuit explained that the heart of any inquiry for whether sovereign immunity applies is how closely the proceeding in question resembles administrative action as opposed to a lawsuit in court, stating: “Generally, immunity does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action.”
Emphasising that IPRs are initiated at the discretion of a politically accountable executive officer and may continue without involvement of the patent owner, the court held that IPRs are more administrative than judicial, such that sovereign immunity did not apply.
