CAFC Continues to Support Strong State Immunity from Patent Infringement

BPMC v. California Department of Health (Fed. Cir. 2007).

There is a reason why states generally support strong patent rights: States are increasingly major patent holders – based on inventions developed through federal grants. At the same time, states are generally immune from being sued for infringement. In this case, the CAFC allows the State of California to assert immunity based essentially on a case-numbering technicality.

The facts are simple: Kaiser filed a declaratory judgment action against the patent holder BPMC back in 1997. The California DOH intervened in that case — an action generally considered a waiver of immunity. That case was dismissed for improper venue. In 2006, BPMC filed an identical (mirror image) infringement action against the DOH asserting the identical patent and issues and in the same venue as the 1997 action. The issue here is whether the waiver in the original case of California’s 11th Amendment immunity applies also to the new case. 

Here, the CAFC narrowly construed the state’s waiver of immunity to be strictly limited to the same action. The court noted precedent that the waiver would apply if BPMC had been able to file its case as a revival of the original action an “numbered as that cause of action.”

The appellate panel also rejected BPMC’s argument that the DOH should be judicially estopped from changing its position in this litigation. According to the court, the about-face was excusable because of an intervening change in the law of immunity. (Florida Prepaid). 

Expect that this case will receive a petition for certiorari.

Notes:

10 thoughts on “CAFC Continues to Support Strong State Immunity from Patent Infringement

  1. I am not a lawyer so bear with me. What if BPMC goes out and find someone CA is suing for infringement and form a joint venture with that company, would BPMC be able to counter-sue CA for infringement?

  2. I might well have to grin and bear it, EG, but not just yet. College Savings Bank dealt only with the constructive waiver doctrine (i.e., waiver by non-litigation activities). Lapides made expressly clear that different standards apply to a state’s litigation conduct. “College Savings Bank distinguished the kind of constructive waivers repudiated there from waivers effected by litigation conduct.” Lapides, 535 U.S. at 620.

    California’s patent litigation conduct is at issue here, quite unlike the State of Florida’s marketing of a financial product in College Savings Bank. California is not merely engaging in commercial activity — it is using the federal courts themselves (at least 22 times) to profit (over $1 billion from litigation) from its enormous patent portfolio (over 3,000 active patents).

    The Supreme Court might decide, actively or passively, that states do indeed have the carte blanch I’ve been discussing. Still, nothing in College Savings Bank, Fla. Prepaid, Lapides or any other case thus far dictates the result either way.

    By the way, Justice Kennedy’s concurrence in eBay is very interesting for its concern about “non-practicing entities”. California doesn’t practice anything with respect to its patent portfolio, except frequent and massive litigation. Recall that he was in the majority of College Savings Bank.

  3. Andrew,

    One other thing: while I agree that it’s strange to allow the states to aggressively assert their own patents, then hide behind the 11th Amendment when other patentees are knocking at their door, the Florida Prepaid case (by a bare 5-4 majority of SCOTUS) created this kettle of fish. SCOTUS is not going to upset the 11th Amendment apple cart now when it comes to enforcing IP rights, especially when it involves patents. Witness eBay, Medimmune, KSR and Microsoft which can’t be categorized as favoring patentees. And Florida Prepaid has just about made it impossible for Congress to properly abrogate (in SCOTUS’ eyes) that immunity, i.e., would require Congress to show a consistent pattern of state patent infringement. Short of another Constitutional Amendment (even less likely than SCOTUS taking the BPM case), we’re stuck with this strange situation. We’ll just have grin and bear it.

  4. Andrew,

    Thanks for the correction of my misstatement about why BPM’s first action was dismissed. I should have been more careful. I was just trying to point out to MM why the two actions were considered separate by the Federal Circuit.

    You’re also right that it doesn’t take a crystal ball to see that SCOTUS won’t take this case. Afterall SCOTUS was the one that took Florida Prepaid which negated Congress’ effort to abrogate the state’s immunity here.

    I was also aware of (and sympathetic to) the district court’s quandry as to states’ unfair advantage in being able to exploit the patent system when it’s to their liking, but then hiding behind the 11th Amendment when it’s not. The case of Vas-Cath v University of Missouri was the most brazen example of this where the University of Missouri initiated an interference, got a favorable verdict and then got the district court to dismiss Vas-Cath’s effort to appeal the adverse verdict. Fortunately, even the Federal Circuit said the University of Missouri went too far with sovereign immunity: if the state initiates the action, they can’t hide behind the 11 Amendment shield when it suits them.

  5. Correction, EG — BPMC did not conclude the initial action by voluntary dismissal (Rule 41). It moved to dismiss for improper venue (Rule 12(b)(3)) and the district court dismissed on that basis. One cannot voluntarily dismiss for improper venue. Thus, the CAFC is saying to defendants, do not assert your personal jurisdiction or venue rights if you want to preserve the right to have your case heard in federal court.

    As for your prediction that the Supreme Court will not grant cert., that’s not a particularly bold prediction. All cert. petitions face long odds. This cert. petition will challenge the idea that a state can enjoy unlimited access to federal court patent jurisdiction, with none of its burdens.

    The district court agreed with BPMC on the unfairness of California’s overall patent litigation conduct. Judge Marilyn Hall Patel wrote that she was “troubled by the University of California’s ability to reap the benefits of the patent system without being exposed to liability for infringement. Similarly situated private universities enjoy no such advantage.” 2006 WL 1530177 at *6. The CAFC’s agreement on that can be seen in their decisions in Florida Prepaid and Univ. of Cal. v. Genentech. Unfortunately, both courts believe that College Savings Bank (a non-litigation waiver case) controls here.

    The question for the IP community is whether it will support BPMC’s petition, or let carte blanch stand as the permanent rule for states’ exploitation of federal court in patent cases. Simply put, the principles of fairness and consistency discussed in Lapides v. Bd. of Regents, 535 U.S. 613 (2002) should apply to California’s overall patent litigation conduct. Those principles require that if California wishes to exploit federal court patent jurisdiction so extensively, it must submit to that same jurisdiction when accused of infringing others’ patents.

  6. MM,

    Read the BMP case carefully. The Federal Circuit has been very consistent in ruling that the the “waiver” must be specific to the action in progress, not an earlier action that was terminated. Yes, California intervened in the prior action and “waived” immunity there, but then BPM concluded that action (by voluntary dismissal), and filed a new action against Calfornia. Unless the action in progress is deemed to be a continuation of the prior action (which in BMP wasn’t the case), the state is not bound by any “waivers” in prior cases. Whether you like and it or not, that’s the way 11th Amendment immunity works (and believe me, I’ve studied all the recent Federal Circuit cases on this issue).

  7. J. Gajarsa co-teaches an excellent seminar at Georgetown on sovereign immunity. I wonder why he didn’t write the opinion…

  8. “Unless the state files the suit or actively intervenes, there will be no “waiver” of 11th Amendment sovereign immunity.”

    But the state did intervene in the earlier identical suit, thereby waiving their immunity.

    Now they’ve “changed their mind” and want to become immune again?

    Seems bogus.

  9. MM,

    The result isn’t “absurd” to me. I predicted that BPM’s chances were “slim and none” of getting reversal of the district court dismissal. Unless the state files the suit or actively intervenes, there will be no “waiver” of 11th Amendment sovereign immunity. And if a petition for cert is filed, SCOTUS won’t accept it either.

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