State sovereign immunity does not prevent inter partes review (IPR) proceedings asserted against patents owned by, or assigned to, states. In Regents of Univ. of Minnesota v. LSI Corp., the Federal Circuit found that because an IPR proceeding is more like a government agency enforcement action than a civil litigation as well as an adjudication of a public right, and because state and tribal sovereign immunity does not materially differ with regard to IPR proceedings, state sovereign immunity also does not apply to IPR proceedings.
This month, the Federal Circuit announced a notable change in the treatment of state-owned patents during IPRs, holding in LSI Corp. that, like patents owned by Native American Tribes, where tribal immunity did not apply, state sovereign immunity does not apply during IPRs before the Patent Trial and Appeal Board (PTAB). See No. 2018-1559, 2019 WL 2479596 (Fed. Cir. June 14, 2019).
States typically enjoy immunity from lawsuits brought by private parties in an Article III forum—including federal courts and “agency adjudications brought by private parties that are similar to court adjudications.” However, this protection “does not apply to suits brought by the United States, including agency proceedings commenced by the United States.” The Supreme Court has held, therefore, that a federal agency may bring an enforcement action against a state even if it is based on “information supplied by a private party.”
The procedural format of an IPR and the extent of the sovereign immunity provide the basis for the court’s decision in LSI. Specifically, the court found critical the fact that the Director of the United States Patent and Trademark Office (USPTO), an appointed official, decides to proceed with an IPR, rendering the action more like a government agency proceeding than private litigation. Additionally, because IPRs examine the propriety of a government-issued patents, the process may be considered “an adjudication of public rights,” landing the proceeding outside the scope of sovereign immunity.
The court distinguished IPR proceedings from typical civil litigation—to which sovereign immunity would normally apply—unless waived, and stated that IPR proceedings “are essentially agency reconsideration of a prior patent grant” and that the primary focus of the PTAB is determining whether a patent was granted in error, rather than resolving a dispute between two adversarial parties. In other words, IPRs are more akin to a government “agency enforcement action[s]” than civil litigations.
While this decision diverges from previous treatment, which shielded states and their operating entities, such as state universities, from IPR challenges, the court found that sovereign immunity was similar to Native American tribal sovereign immunity, and therefore the ruling comports with the 2018 decision in Saint Regis Mohawk Tribe v. Mylan Pharm. Inc., 896 F.3d 1322 (Fed. Cir. 2018), cert. denied, 139 S. Ct. 1547 (2019). The court in Saint Regis affirmed the PTAB’s decision denying sovereign immunity to the Saint Regis Mohawk Tribe and concluded, “IPR is more like an agency enforcement action than a civil suit brought by a private party… [and t]hus we conclude that tribal immunity is not implicated.” The court further held that because an “IPR represents the sovereign’s reconsideration of the initial patent grant, the differences between state and tribal sovereign immunity do not warrant a different result than Saint Regis. We, therefore, conclude that state sovereign immunity does not apply to IPR proceedings.”
Although sovereign immunity does not apply in IPRs, state universities may still rely on sovereign immunity in other patent litigation contexts, such as in seeking dismissal of declaratory judgment actions where the state university has not asserted affirmative patent infringement claims itself.
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