Supreme Court Seeks Solicitor General Brief in Case Regarding 11th Amendment and Patents
April 21, 2008. The Supreme Court issued an order in Biomedical Patent Management v. California Department of Health Services. It wrote that "The Solicitor General is invited to file briefs in these cases expressing the views of the United States." See, Orders List [12 pages in PDF] at page 4.
The patent at issue, U.S. Patent No. 4,874,693, is titled "Method for assessing placental dysfunction". That is, it pertains to testing for certain pregnancy abnormalities. However, at issue in this case is the ability of states to enforce their own patents and other intellectual property rights, while as the same time evading lawsuits for their infringement of the intellectual property rights of others.
The Supreme Court held in a string of bizarre opinions ten years ago that states have sovereign immunity in intellectual property litigation, and that the Congress cannot abrogate that immunity. The cert petition in the present case addresses when that immunity might be waived.
The original opinions were all decided by a vote of 5-4. The minority has never abandoned it opposition to these rulings. It is possible that the Supreme Court could revisit its underlying opinions. Alternatively, it might only address the issue of waiver of immunity. Or, the Supreme Court might deny certiorari, in which case the opinion of the Court of Appeals (no waiver of immunity) will stand.
The Supreme Court held, 5-4, in Seminole Tribe v. Florida, 517 U.S. 44 (1996), that the Congress lacks authority under Article I of the Constitution to abrogate the States' 11th Amendment immunity from suit in federal courts. It then held, 5-4, in Florida Prepaid v. College Savings Bank, 527 U.S. 627 (1999), that the holding of Seminole Tribe extends to patent suits.
Also, the Supreme Court held, 5-4, in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666 (1999), that the Trademark Remedy Clarification Act is invalid under state sovereign immunity analysis.
The 11th Amendment states that "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."
Proceedings Below. Biomedical Patent Management Corporation (BPMC) filed a complaint in U.S. District Court (NDCal) against the state of California's Department of Health Services (DHS) alleging infringement of its Patent No. 4,874,693.
The District Court held that California is entitled to assert 11th Amendment immunity. BPMC appealed to the U.S. Court of Appeals (FedCir).
The Court of Appeals issued its opinion [PDF] on October 23, 2007. It wrote that "The issue presented in this appeal is whether a State is entitled to assert its sovereign immunity under the Eleventh Amendment where the State intervened in an earlier, related action that was dismissed for improper venue. The district court concluded that a State was entitled to assert its Eleventh Amendment sovereign immunity in those circumstances and, accordingly, granted a motion to dismiss on that ground filed by" the California's Department of Heath Services.
The Court of Appeals, citing the Supreme Court's 1999 opinion in Florida Prepaid, affirmed.
Petition for Writ of Certiorari. BPMC filed a petition for writ of certiorari with the Supreme Court. Review by the Supreme Court is discretionary, and the Supreme Court has not yet decided whether or not to hear the case. However, that the Supreme Court has requested a brief from the Department of Justice's (DOJ) Office of the Solicitor General suggests that there is interest in the case.
BPMC wrote in its petition for writ of certiorari [156 pages in PDF] that the questions presented are:
"1. Whether a state’s waiver of Eleventh
Amendment immunity in one action extends to a subsequent action involving the
same parties and the same underlying transaction or occurrence.
2. Whether a state waives its Eleventh Amendment immunity in patent actions by regularly and voluntarily invoking federal jurisdiction to enforce its own patent rights."
BPMC argued that "States are major players in the patent market. Many of the largest universities and research institutions are state-owned, and their inventions increasingly contribute substantial revenues to the state fisc. In recent years, states have increasingly turned to the federal courts to maximize the value of their patent portfolios; through aggressive litigation, states have won judgments and settlement awards in the hundreds of millions of dollars."
It continued that "While they embrace federal jurisdiction when it helps them to enhance their patent revenue streams, states simultaneously avoid federal jurisdiction when they themselves are faced with claims of patent infringement; in those circumstances, they assert sovereign immunity under the Eleventh Amendment."
It added that "This case concerns the scope of waiver by litigation conduct. Here, California voluntarily invoked federal jurisdiction to determine whether it was liable to BPMC for infringing a patent, thereby waiving its sovereign immunity. That case, however, was filed in an improper venue and was ultimately dismissed. When the case was refiled -- to resolve precisely the same dispute as to the same patent between the same parties -- California claimed immunity."
It asked the Supreme Court to grant certiorari, reverse the Court of Appeals, and hold that California waived sovereign immunity.
SIIA Amicus Brief. The Software and Information Industry Association (SIIA) and the U.S. Chamber of Commerce submitted a joint amicus curiae brief [27 pages in PDF] to the Supreme Court urging it to grant certiorari.
They wrote that their members "hold numerous patents and copyrights. Those members sometimes are sued by the States for infringement, and are in regular negotiations for licensing and use of intellectual property, but find themselves unable to enforce their own rights fully and meanignfully against state entities, which invoke sovereign immunity. They have first-hand experience with the devastating impact that claims of sovereign immunity can have on licensing negotiations and other efforts to enforce property rights." (Meaningfully misspelled in original.)
They wrote the Court of Appeals' opinion "creates an obvious and inordinate imbalance. State institutions own myriad patents. In 2006, the University of California alone was awarded more patents than Pfizer, Merck, and SmithKline Beecham combined. Under the decision below, however, States and state entities can vigorously enforce such patent and intellectual property rights in federal court, at the same time rejecting federal court jurisdiction whenever others seek to enforce their intellectual property rights against the State."
"Perhaps worse still, businesses that are concerned about being victims of a State’s infringement suit cannot seek declaratory judgments to determine the legality of their conduct, because any such suit will be met with a claim of sovereign immunity." The SIIA and Chamber continued, "They thus are forced either to undertake the potentially infringing conduct and confront possibly ruinous liability, or steer well clear of the ``zone´´ of the State's patent even if a claim of infringement (or the patent's validity) would be debatable. The in terrorem effect of even a marginal suit by the state entity -- and the absence of any way to get a declaration of rights in advance -- permits the State to assert an overly expansive construction of its patent to deter competition without fear of challenge." (Parentheses in original. Italics in original.)
States Rights. Florida Prepaid and College Savings Bank represent a blind and bizarre application of a states rights constitutional philosophy to intellectual property rights.
There is a group of states rights advocates on the Supreme Court who owe their appointments, in part, to the judicial politics of school prayer, abortion, capital punishment, busing, and other non-economic issues. Social conservatives have long sought the appointment of Justices with judicial ideologies that include support for states rights. They do so with the expectation that these Justices will render opinions to their liking on these social issues.
Yet, with no pressure from social conservatives, no rationale grounded in the "Authors and Inventors" clause, and no policy rationale, these Justices delivered a wholly unanticipated string of states rights rulings in the area of intellectual property.
States that develop and exploit, or simply steal, intellectual property have received a financial windfall from these opinions, and now work to block any legislation that would have the effect of restoring intellectual property rights. The state of California, the defendant in this case, is one of the most egregious violators.
There were efforts in prior Congresses to address state abuse of 11th Amendment immunity in intellectual property cases. See, stories titled "Legislators Introduce Bills to Address Infringement by States" in TLJ Daily E-Mail Alert No. 302, November 6, 2001; "Sen. Leahy Reintroduces Bill to Close 11th Amendment Loophole to IPR" in TLJ Daily E-Mail Alert No. 394, March 22, 2002; "Senate Judiciary Committee Considers Federalism and Intellectual Property" in TLJ Daily E-Mail Alert No. 522, October 3, 2002; and "Legislators Re-Introduce Bills to Address State IPR Sovereign Immunity" in TLJ Daily E-Mail Alert No. 680, June 13, 2003.
However, legislative efforts were blocked by Sen. Dianne Feinstein (D-CA), and others. Sen. Feinstein is a senior member of the Senate Judiciary Committee (SJC), which has jurisdiction over these bills.
Central Virginia Community College v. Katz. The present case, Florida Prepaid, and College Savings Bank all involve intellectual property and the 11th Amendment.
In 2006 the Supreme Court decided an 11th Amendment case involving the Bankruptcy Code's treatment of preferential transfers by a debtor to state entities. See, January 23, 2006, opinion [60 pages in PDF] in Central Virginia Community College v. Katz, 546 U.S. 356.
The Supreme Court held, 5-4, that the Congress can abrogate state sovereign immunity in the Bankruptcy Code. See, story titled "Supreme Court Rules in State Sovereign Immunity Case" in TLJ Daily E-Mail Alert No. 1,295, January 24, 2006. See also, story titled "Supreme Court Grants Certiorari in State Sovereign Immunity Case" in TLJ Daily E-Mail Alert No. 1,109, April 5, 2005.
Justice Thomas wrote in his dissent, bluntly and correctly, that the majority opinion is "impossible to square with this Court's settled state sovereign immunity jurisprudence".
Katz and Seminole Tribe and its progeny cannot be reconciled.
That is, Article 1, Section 8, Clause 4, of the Constitution provides that "The Congress shall have the Power ... To establish ... uniform Laws on the subject of Bankruptcies throughout the United States". The Supreme Court held in Katz that this clause gives the Congress authority to abrogate state sovereign immunity from suits to set aside preferential transfers.
However, it is also Article 1, Section 8, that provides that "The Congress shall have the Power ... To regulate Commerce with foreign Nations, and among the several states, and with the Indian tribes" and "To Promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries".
Yet, the Supreme Court held in Seminole Tribe and Florida Prepaid these clauses, enumerated in the same Article I, Section 8, do not give the Congress authority to abrogate state sovereign immunity in those areas of law.
The argument can be made that Katz cannot be reconciled with Florida Prepaid, unless it be by the explanation that the Supreme Court has determined to apply inconsistent interpretations of 11th Amendment immunity in the contexts of bankruptcy and intellectual property law.
One might predict that the Supreme Court will eventually address this inconsistency. Hypothetically, if the Supreme Court were to grant certiorari in the present case, it could retreat from Seminole Tribe and Florida Prepaid. Second, it could retreat from Katz. Third, the Supreme Court could leave both Katz and Florida Prepaid in place. That is, it might take the case solely to address the issue of waiver of immunity in patent cases, and not to resolve the inconsistency between Katz and the earlier cases.
The BPMC's petition for writ of certiorari does not raise the argument the Katz implicitly overturned Florida Prepaid. However, BPMC made this argument in both the District Court and Court of Appeals. The Court of Appeals rejected it in a single paragraph. The petition for writ of certiorari discusses Katz, but only in a single footnote, and only for a different purpose.
Supreme Court Voting Record. Seminole Tribe, Florida Prepaid and College Savings Bank, which were decided in 1996 and 1999, were all 5-4 cases. In the first two cases, former Justice Rehnquist wrote for the majority, and was joined by Scalia, Thomas, Kennedy, and O'Connor. In the third, Scalia wrote the opinion. The four dissenters in all three cases were Stevens, Souter, Breyer, and Ginsburg.
In Katz, Rehnquist was no longer on the Court. Roberts had just taken his place. In Katz, the states rights position lost, 4-5. Roberts, like Rehnquist before him, voted with the states rights block. However, O'Connor switched sides, and voted against states rights, thereby shifting the majority. She wrote no opinion to explain her shift. Also, immediately thereafter, she left the Court, and was replaced by Alito.
There would appear to be a solid block of four Justices who have never bought into Seminole Tribe and its progeny. The doctrine of stare decisis has done nothing the dampen their opposition. This block is Stevens, Souter, Ginsburg and Breyer.
This block could serve as the basis for voting to grant certiorari in the present case.
In contrast, there appears to be a solid block of three states rights Justices who have always backed the Seminole Tribe interpretation. This block is Scalia, Thomas, and Kennedy.
In addition, there is Roberts, who was not on the Court for the early opinions, but joined the states rights block in Katz. One might speculate that he would continue to vote with the states rights block. Also, there is Alito, who joined the Court after Katz. His opinions as a Judge of the 3rd Circuit, his confirmation hearing, and his selection by President Bush, suggest that he might join the states rights block. This would leave the states rights block with a continuing 5-4 majority.
Case Information. This case is Biomedical Patent Management Corporation v.
California Department of Health Services, Sup Ct. No. 07-956, a petition for
writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App.
Ct. No. 2006-1515. The Court of Appeals heard an appeal from the U.S. District
Court for the Northern District of California, Judge Marilyn Patel presiding.
Judge Kathleen O'Malley wrote the opinion for the Court of Appeals, in which
Judges Randall Rader and Arthur Gajarsa joined. Judge O'Malley is a Judge of the
U.S. District Court for the Northern District of Ohio who sat by designation. See also,
Supreme Court docket.