Eleventh Amendment Revisited – Board Again Finds Sovereign Immunity Applies to PTAB

by Jones Day

[Co-author: Josh Sallmen]

Less than four months after its decision in Covidien LP v. University of Florida Research Foundation Incorporated, finding that Eleventh Amendment sovereign immunity applies to PTAB proceedings, the Board has again dismissed an IPR Petition filed against a state university.  See, Neochord, Inc. v. University of Maryland, Baltimore, IPR2016-00208, Paper 28 (“Neochord”); see also, “Board Tackles Constitutional Law – Finds Eleventh Amendment Sovereign Immunity Applies to PTAB.”  Neochord provides state universities with further insulation from PTAB review, but appears to leave the door open for subsequent challenges.

Neochord, Inc. filed an IPR Petition against a patent owned by the University of Maryland, Baltimore (the “University”) and exclusively licensed to Harpoon Medical, Inc. (“Harpoon Medical”).  Neochord, p. 2.  In light of the PTAB’s decision in Covidien, the University filed a motion to dismiss based on Eleventh Amendment sovereign immunity, claiming to be an “arm of the state” of Maryland.  Id. at pp. 2-3.  In response, Neochord argued that:  (1) the Eleventh Amendment does not apply to PTAB IPR proceedings and that Covidien’s procedural posture is distinguishable from Neochord; (2) the University waived its Eleventh Amendment defense by participating in the instant proceeding; and (3) the University waived immunity through its license agreement with Harpoon Medical.  The Board rejected each argument and agreed with the University’s sovereign immunity defense.

The Board first addressed whether sovereign immunity is available in IPR proceedings.  Neochord contended that the Covidien decision was not binding precedent due to its distinguishable procedural posture and the Board agreed.  The Board reconfirmed, however, that sovereign immunity applies in IPR proceedings, relying mainly on the Supreme Court’s decision in Federal Maritime Commission and the Federal Circuit’s decision in Vas-CathSee Fed. Mar. Comm’n v. South Carolina State Ports Auth., 535 U.S. 743 (2002) (“FMC”); Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).

In FMC, the Supreme Court held that if an agency proceeding “walks, talks, and squawks” like a court proceeding, then parties to that proceeding can be afforded Eleventh Amendment protections.  FMC, 535 U.S. at 751, 757-59.  The court in Vas-Cath discussed how interference proceedings before the Board of Patent Appeals and Interferences (PTAB’s predecessor) were similar to district court proceedings.  Vas-Cath, 473 F.3d at 1381.  The court ultimately found that Curators of University of Missouri (“Curators”) waived Eleventh Amendment protection by affirmatively seeking interference.  Id. at 1382.

The Board reasoned that IPR proceedings are analogous to interference proceedings and held that parties to IPR proceedings can be afforded sovereign immunity because of their similarity to interference and district court proceedings.  Neochord, pp. 5-6.  The Board distinguished the University’s litigation conduct from Curators’, pointing out that, unlike Curators, the University did not affirmatively commence proceedings.  Id.  The Board then dispatched with Neochord’s claim that the Supreme Court’s decision in Cuozzo bars sovereign immunity as a defense in IPR proceedings.  Id. at pp. 8-9; see, Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016).  In Cuozzo, the Supreme Court compared IPR proceedings to reexamination proceedings and distinguished them from district court proceedings, but the Board determined that Cuozzo was inapplicable because the Supreme Court’s rationale was solely in the context of determining the claim construction standard for IPR proceedings.  Neochord at pp. 8-9.

Neochord also contended that the University waived its sovereign immunity defense by participating in the proceeding, relying on Hill v. Blind Industries and Services of Maryland, 179 F.3d 754 (9th Cir. 1999).  In Hill, the court barred the State from claiming sovereign immunity based on a finding that the State had delayed in raising a sovereign immunity defense for tactical reasons.  Id. at 757.  The Board distinguished Hill from Neochord by taking the University’s claim at face value that it did not know it could raise a sovereign immunity defense until Covidien was published.  Neochord at p. 16.  Further, the Board stated that “it is well established that Eleventh Amendment immunity is a defense that may be raised at any time.”  Neochord, p. 16 (citing Florida Dep’t of State v. Treasure Salvors, Inc., 458 U.S. 670, 683 n.18 (1982)).

Lastly, Neochord argued that the University waived its sovereign immunity defense through its license agreement with Harpoon Medical.  The Board disagreed, concluding that any waiver of sovereign immunity would apply only to claims brought by Harpoon Medical.  Neochord at pp. 16-18.

With analogous decisions from two PTAB panels in Neochord and Covidien, it remains to be seen whether the Federal Circuit will weigh in on this important issue, something for practitioners to monitor in the coming months.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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