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November 13, 2007

Impunity

The patent police state known as the USA is enshrined in the Constitution: sovereign immunity. The 11th amendment immunizes those sanctioned by the State from infringement accountability. Example: the University of California is an 800-pound patent gorilla that can't be touched, but gets all the bananas it wants.

Peter Lattman in the Wall Street Journal, on the University of California, which has amassed a 7,000-strong patent portfolio -

It receives by far more patents from the U.S. government than any school in the country. And by licensing out its intellectual property, the university has generated about $500 million in [patent] revenue in the past five years, [earning $193.5 million last year alone.]

The school also aggressively uses the courts as a sword, and is unafraid to take on big companies. As a plaintiff alleging patent infringement, the school has settled a claim against Genentech Inc. for $200 million, secured a payment of $185 million from Monsanto Co., and won a $30 million settlement from Microsoft Corp.

Yet, when it comes to getting sued for patent infringement, the university, as well as the state of California, are Teflon. A legal doctrine known as sovereign immunity protects states and state institutions from legal liability. Courts have held that participating in the federal patent system doesn't cost a state its immunity. The upshot -- states can sue, but effectively can't be sued.

Sovereign immunity is grounded in the idea that because the states were sovereign before the Constitution's ratification, they were immune from lawsuits in federal court. The 11th Amendment, ratified in 1795, reflects this principle and generally bars states from suits in federal court. And while Congress can pass laws explicitly permitting certain lawsuits against states in federal court, the Supreme Court, in a series of rulings in the past decade, has limited Congress's power to pass such laws and has expanded the scope of states' immunity from lawsuits.

State universities are a primary beneficiary of this impunity, as they harvest patents, but are untouchable.

In the context of sovereign immunity, federal courts have treated different branches of a state -- such as its university system -- as part of a single entity, much like different divisions of the same company.

State universities have become major players in the patent world, acquiring vast amounts of intellectual property through on-campus discoveries in such fields as technology and biomedicine. Since Congress passed legislation in 1980 giving universities ownership over their federally funded inventions, schools have collectively earned billions of dollars in revenue by licensing their patents to private companies.

A lawyer for the state essentially says tough luck. "Sovereign immunity came from the king not wanting to be sued by his subjects and it ended up in our jurisprudence," said Susan King, a deputy attorney general in California who argued the case. "It's not fair but it's the current state of the law."

The University of California has asserted a sovereign immunity defense against patent assertions at least six times since 1987; in other words, whenever necessary. No adherent to candor, the UC line is that the "use of sovereign immunity is highly limited and not a first course of defense."

Last month, Biomedical Patent Management had its California case tossed, like those before it that had tried to assert patent infringement against the government.

When trial-court judge Marilyn Hall Patel dismissed the lawsuit last year, she expressed displeasure with the state of the law. "The court is indeed troubled by the University of California's ability to reap the benefits of the patent system without being exposed to liability for infringement," wrote Judge Patel, who sits in federal court in San Francisco. "Similarly situated private universities enjoy no such advantage."

Congress did try to right the wrong, passing a law in 1992 striking sovereign immunity for patents. But the Supreme Court struck the exemption in its 1999 ruling Florida Prepaid v. College Savings Bank, which gave states and state-sponsored institutions protection from patent-infringement lawsuits. Since the time of Chief Justice Warren, the swing saxophonist who defied the conservatism of his time, the Supreme Court has acted as the ultimate defender of State impunity.

Congressional attempts since to override the Supreme Court decision have floundered. Rep. Howard Berman, a California Democrat, who has co-sponsored legislation to strip the safe haven: "You could make an argument that walling off and protecting some group from infringing conduct is bad for our economy." Not to mention the concept of equity.

Posted by Patent Hawk at November 13, 2007 8:25 PM | The Patent System

Comments

Oh, the irony of it all. Immunity is never good. Just ask the Russian diplomats who ran amok (are they still doing so) in Washington DC a few years back. Or maybe it WAS good for them. Is it good for the US patent situation? I cross-posted on your piece to http://blog.innovators-network.org The Innovators Network is a non-profit dedicated to bringing technology to startups, small businesses, non-profits, venture capitalists and intellectual property experts. Please visit us and help grow our community!

Best wishes for continued success,

Anthony Kuhn
Innovators Network

Posted by: Anthony Kuhn at November 14, 2007 2:53 PM

As I said on a different patent blog, we need some perspective on this state "sovereign immunity" issue. The judges are very conscious about the apparent unfairness of 11th Amendment immunity for state institutions. Witness the district court judge's comments on this in the Biomedical Patent Management case recently. But the Supreme Court's decision in Florida Prepaid is clear that the states enjoy this immunity, whether or not they use the patent system (or any other portion of the legal system). Moreover, Florida Prepaid has made it almost impossible to negate this immunity, other than by Constitutional amendment (Congress must show that there is a "pattern" by the states to infringe patents. Also, as you correctly point out, the states can "waive" this immunity (maybe Lattman should have also read the Univ. of New Mexico v. Knight and the Vas-Cath v. Univ. of Missouri cases). In fact, the states (or at least their officials) have no immunity against being enjoined from patent infringement under the ex parte Young doctrine (as the Pennington Seed case says, if you can find the state official having the right "causal connnection" to sue to get the injunction).

Posted by: EG at November 15, 2007 5:12 AM