The Court of Appeals for the Federal Circuit poked another hole in the state immunity shield that that public universities and other state entities use to protect themselves from lawsuits in federal court. (Vas-Cath, Inc. v. , University of Missouri; 06-1100).After Vas-Cath, Inc. had appealed the dismissal of its appeal of the decision of the USPTO in an interference proceeding between Vas-Cath and the University of Missouri, the Federal Circuit found that by requesting and participating in the interference proceeding in the United States Patent and Trademark Office, the University waived its constitutional immunity not only in that proceeding but also in the appeal taken by the losing party.

The appeal had been dismissed by the District Court on Eleventh Amendment grounds. A patent interference proceeding, 35 U.S.C. §135, is conducted for the purpose of determining priority of invention as between competing applicants for patent on the same invention. In general the patent examiner checks for interfering patent applications while they are pending, (“Where two or more applications are found to be claiming the same patentable invention, they may be put in interference, dependent on the status of the respective applications and the difference between their filing dates.”), and if conflict is discovered the examiner will initiate interference proceedings or suggest that the applicant amend the application by presenting a claim drawn to the same invention for interference purposes.

In the present case, the Vas-Cath patent had issued while the University’s application, although filed before the Vas-Cath application, was still pending. The University invoked the procedures to institute an interference between the University’s pending application and Vas-Cath’s issued patent; the University amended its application by copying into the application all nineteen claims from the Vas-Cath patent, as USPTO practice permits.

During a six-year interference proceeding, both sides vigorously contested the issues, producing records, examining and cross-examining witnesses, filing motions and briefs, and arguing their positions. The PTO awarded priority to the University, granted the nineteen Vas-Cath claims to the University, and held that Vas-Cath is not entitled to the patent that had been issued to Vas-Cath.

Vas-Cath appealed to the District Court and the University asserted Eleventh Amendment immunity from suit in federal court, and on this ground the district court granted the University’s motion to dismiss.

The Eleventh Amendment limits the judicial authority of the federal courts and bars unconsented suit against a state:

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. U.S. Const., amend. XI.

The district court held that since there was not a waiver of immunity by the University, Vas-Cath’s suit must be dismissed on Eleventh Amendment grounds. The University argued that it has absolute immunity from any action in federal court, and that this immunity was not waived by its participation in the PTO proceeding or its action to secure the patent to which it was entitled as first inventor.

Vas-Cath argued that any immunity was waived when the University provoked and successfully litigated the interference contest, and that such waiver includes appeal by the party that lost its patent to the University — that its §146 action was not a new claim against the University, but simply the statutory path of review of the agency ruling.

A state’s participation in the federal patent system does not of itself waive immunity in federal court with respect to patent infringement by the state, and such waiver cannot occur unless the conditions are such that there is violation of the Fourteenth Amendment’s guarantee of due process.

Vas-Cath argued that when the University requested the PTO to conduct an interference proceeding without raising any Eleventh Amendment issue, a waiver was created that extends not only to the initial agency litigation but also to the subsequent judicial review.

The court stated that:

Judicial review of PTO adjudications is established by statute, and when such procedure is invoked by the losing party in an interference proceeding, the result of that proceeding is stayed. See 37 C.F.R. §1.663 (“Whenever an adverse judgment is entered as to a count against an applicant from which no appeal (35 U.S.C. 141) or other review (35 U.S.C. 146) has been or can be taken or had, the claims . . . stand finally disposed of.”). Upon completion of judicial review, the patenting process is completed. See 35 U.S.C. §146 (“Judgment of the court in favor of the right of an applicant to a patent shall authorize the Director to issue such patent.”). Thus the interference proceeding is a multi-part action with appeal as of right, starting in the PTO and culminating in court.

The district court correctly observed that “a state does not waive its sovereign immunity simply by engaging in activities normally conducted by private individuals or corporations.” Op. at 9. However, here the University did not simply procure a patent through the routine of ex parte examination, but requested the PTO to conduct litigation-type activity, obtaining a favorable agency ruling for which the statute authorizes judicial review.

It is likely that involvement in administrative proceedings similar to the patent interference process could be seen as abrogating immunity and could limit the circumstances under which public entities can claim state immunity in federal court.



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