State Sovereign Immunity Does Not Apply to IPR ProceedingsJune 25, 2019

On June 14, 2019 in Regents of the University of Minnesota v. LSI Corp., the Federal Circuit (CAFC) held that state sovereign immunity does not apply in inter partes review (IPR) proceedings. On appeal, the CAFC affirmed a decision by the Patent Trial and Appeal Board (PTAB) that declined to dismiss petitions for IPR proceedings that were alleged to be improper based on the idea that state sovereign immunity should apply.

Several patents owned by the University of Minnesota (“UMN”) are at issue in this case. UMN alleged that LSI Corp., as well as another entity, infringed these patents. After the infringement claims were brought by UMN, LSI Corp. and the other entity separately petitioned for IPR seeking to invalidate UMN’s patents. UMN then filed motions to dismiss the petitions, arguing that state sovereign immunity applies. In each case, the PTAB held that state sovereign immunity applies to IPR proceedings, but that UMN waived its right to immunity by instituting infringement claims in state court. UMN appealed the PTAB’s decisions, which have been consolidated.

In its opinion, the CAFC notes that state sovereign immunity typically applies to proceedings brought by private parties against the state but does not apply to instances in which the United States brings action against the state, including agency proceedings brought by the United States. UMN argues that state sovereignty applies in this case since it is an action brought by a private party against a state. The CAFC disagrees, however, basing its reasoning largely on the CAFC’s previous decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals, Inc., 896 F.3d 1322 (Fed. Cir. 2018). In Saint Regis, the CAFC held that tribal sovereign immunity does not apply in IPR proceedings.

In Saint Regis, the CAFC concluded that an IPR proceeding is more like an agency action than a civil lawsuit brought by a private party and thus tribal sovereign immunity does not apply. Here, the CAFC adopts this reasoning and applies it to state sovereign immunity. Here, the CAFC employs the same factors as the Saint Regis court in holding that sovereign immunity is not implicated in IPR proceedings. First, an IPR is not initiated by private parties in the same manner that a civil lawsuit is. The United States Patent and Trademark Office (USPTO) Director, who is an executive branch government official, can choose to institute IPR proceedings based on his or her own discretion, rather than a private party deciding to institute proceedings. Second, the petitioner and patent owner can choose not to participate in IPR proceedings and the PTAB can still come to a decision. Thus, the proceeding is more like an administrative decision than civil litigation. Third, there are procedural differences between IPR proceedings and civil litigation. Based on these factors, the CAFC holds that IPR proceedings are more like an agency enforcement action than civil litigation and thus state sovereign immunity is not implicated.

The CAFC also adopted reasoning by the Supreme Court in Oil States Energy Servs, LLC v. Green’s Energy Group, LLC, 138 S.Ct.1362 (2018). Here, the CAFC views the holding in Oil States as saying that an IPR concerns issues of public rights, and that it is a proceeding between the patent owner and the United States. Thus, the CAFC has further support for its holding that state sovereign immunity is not implicated by IPR proceedings. Additionally, UMN argues that Saint Regis should not be persuasive here because there are differences between tribal and state sovereign immunity. The CAFC rejects this argument holding that there are no differences between tribal and state sovereign immunity material to the present issue.

The panel of judges who heard the case also issued additional views. The judges write that though this case does not present the issue, state sovereign immunity also does not apply to IPR proceedings because they are similar to in rem proceedings in which state sovereign immunity is not implicated. The court compares IPR proceedings to in rem bankruptcy proceedings in which state sovereign immunity does not apply. The court reasons that an IPR proceeding is simply a reconsideration of the validity of a patent. Further, the only relief that can be granted via an IPR is revocation of the patent. Thus, state sovereignty is not at issue and IPR proceedings are, therefore, similar to in rem proceedings in which state sovereignty is not implicated.

This decision precludes states from asserting sovereign immunity to bar IPR proceedings. Thus, states cannot extend their sovereign immunity to private parties in order to stop proceedings as some in the patent community had feared might happen.