Baker Donelson - USA
On January 25 2017 three administrative patent judges of the US Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB) entered an order dismissing multiple petitions for inter partes review of patents owned by the University of Florida Research Foundation (UFRF) based on sovereign immunity. By effectively creating inter partes review immunity for public universities, this order strengthens patents owned by public universities and ultimately makes such patents more valuable.
The initial dispute arose from Covidien's refusal to pay royalties for the sale of specific products that it felt were not covered by US Patent 7,062,251 (the ''251 patent'), which was assigned to the UFRF. As part of a response to the UFRF's breach of contract claim, Covidien, a provider of essential medial products, filed three petitions seeking inter partes review of the '251 patent.
Entitled "Managing critical care physiologic data using data synthesis technology (DST)", the '251 patent claims a method of integrating physiologic treatment data from at least two bedside machines comprising the following steps:
- receiving physiologic treatment data from the bedside machines;
- converting the physiologic treatment data from a machine-specific format into a machine-independent format within a remotely located computing device;
- performing a programmatic action involving the machine-independent data; and
- presenting results from the programmatic actions on a bedside graphical user interface.
Irrespective of whether such patent would be able to stand up to a patentable subject matter challenge, Covidien chose to challenge the validity of the patent based on obviousness in light of patented subject matter in an inter partes review. Inter partes review is a trial proceeding conducted at the PTAB to review the patentability of one or more claims in a patent only on grounds that could be raised under Sections 102 or 103, and only on the basis of prior art consisting of patents or printed publications.
However, before the review could commence, the administrative judges dismissed Covidien's petitions for inter partes review, ruling that the UFRF, as an arm of the state of Florida, was entitled to a sovereign immunity defence to the institution of inter partes review under the 11th Amendment to the US Constitution.
The 11th Amendment provides that the "judicial powers 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 anther state, or by citizens or subjects of any foreign state", and largely shields states from lawsuits in federal courts without their consent. The Supreme Court has extended such sovereignty to encompass certain adjudicative administrative proceedings, noting the numerous common features by administrative adjudications and judicial proceedings.
Covidien's arguments – namely, that inter partes review was simply a "mechanism for the office to 'take a second look at an earlier administrative grant of a patent'" and that "sovereign immunity is irrelevant to inter partes review because these proceedings are directed to the patent itself, and are not suits or adjudications of a private claim against the state by another party" – were unpersuasive. The judges wrote: "On the whole, considering the nature of inter partes review and civil litigation, we conclude that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment." At least for the time being, the judges' order has extended such sovereignty to include inter partes review proceedings.
Of relevance to public universities across the United States, this order appears to increase the value of patents assigned to such institutions as they are effectively immune to inter partes review challenges. The judges noted this 'immunity', stating that "we are cognizant of the fact that applying the Eleventh Amendment immunity to inter partes review…precludes the institution of inter partes review against a state entity entitled to Eleventh Amendment immunity", but that "an application of sovereign immunity to inter partes review will [not] do violence to the patent system".
Tech transfer offices, at state universities in particular, will likely take note of this ruling and use it as a tool to increase monetisation during negotiations for a patent licence agreement. However, some have noted that this ruling appears to "be a case of first impression", and it is likely that the order will be revisited in future judicial proceedings.
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