Ilya Shapiro is a Senior Fellow at the libertarian Cato Institute in DC. He was also my classmate in both college and law school. In a recent op-ed for the Legal Times, Shapiro supported BPMC’s contention that the state of California should not be immune from charges of patent infringement.
What’s Sauce For the Private Goose…
by Ilya Shapiro (This article appeared in the Legal Times on June 2, 2008.)
… In Biomedical Patent Management Corp. v. California Department of Health Services, the biotechnology company known as BPMC is suing the state of California for patent infringement—specifically, of the company’s patent on a form of prenatal screening for fetal abnormalities. Ignoring the merits of the suit, the federal district court in San Francisco dismissed it on the ground of “sovereign immunity”: Under the Supreme Court’s reading of the 11th Amendment, a state cannot be sued in federal court without its consent. The U.S. Court of Appeals for the Federal Circuit—which handles all appeals in patent litigation—affirmed the lower court decision.
So BPMC has turned to the Supreme Court, which in recent years has been increasingly willing to reverse the Federal Circuit. The company wants the Court to strip California’s immunity in this case because the state’s Department of Health Services previously waived immunity when it joined a suit brought by a state contractor about the same patented procedure. That is, after California actively litigated the earlier suit (which sought and failed to obtain a declaratory judgment that the contractor was not infringing BPMC’s patent), the state should be precluded from turning around to claim immunity when it gets sued over the same issue.
Moreover, as BPMC notes, the University of California (among other state agencies) routinely submits to federal court jurisdiction when it pursues claims for violations of its own patent rights. Given that California uses the patent system (and courts’ enforcement thereof), it has relinquished whatever sovereign immunity the state enjoys—immunity that is legally suspect in any event when the sovereign engages in commercial activities.
And, boy, does California use the patent system. The state universities alone own more than 3,300 patents that generate $210 million in annual revenue. California has filed 21 patent infringement suits since 1990 and won more than $900 million in judgments since 2000.
And yet the state has also wielded sovereign immunity arguments to get suits dismissed at least six times since 1987 (including suits by Genentech and Eli Lilly & Co.).
While the worst peddler of this double standard, California is by no means alone. At least 32 states have filed at least 173 patent suits since the mid-1990s.
Business groups hope that the Supreme Court will remove what they see as a competitive advantage enjoyed by state entities: Private patent holders can’t seek recompense for a state’s unlicensed use of software or medical devices, while states can turn to the courts to protect their patents. Medical innovators and technological entrepreneurs in the private sector suffer.
“It’s audacious for a state to use the federal courts to sue for patent infringement, but to block infringement suits against it as a sovereign that cannot be sued,” says Robin Conrad of the National Chamber Litigation Center in a press release. The center has filed an amicus brief on behalf of the U.S. Chamber of Commerce in the case—only the second time the Chamber has ever filed in a Supreme Court patent case.
This hypocrisy should not even be in play any more, not since Congress passed the Patent Remedy Act of 1992. That legislation was intended to “clarify that states .?.?. are subject to suit in federal court by any person for infringement of patents.”
That sounds clear enough. But in 1999 the Supreme Court ruled in a trademark case, College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, that Congress’ legislative powers under Article I of the Constitution were insufficient to trump states’ sovereign immunity. Except in 2006 the Court held the opposite in a federal bankruptcy case, Central Virginia Community College v. Katz. The votes in these seemingly contradictory decisions were 5-4.
In fact, neither case should have been close: When a state repeatedly and voluntarily invokes federal court jurisdiction in a series of similar cases—under patent or any other law—it generally has waived immunity against suits brought by private parties under those same laws. And the precedent is well established that a state waives sovereign immunity when it seeks to adjudicate its rights in federal court. For example, the Supreme Court unanimously held in the 2002 case of Lapides v. Board of Regents of the University System of Georgia that a state loses its 11th Amendment immunity when it removes a case from state to federal court.
So, as the solicitor general’s office collects agency views and mulls the administration’s position, it should recognize that Biomedical Patent Management Corp.—an unwieldy name for an important case—not only represents the chance to right the balance between a state and its citizens with respect to intellectual property. It also provides the perfect opportunity for the Court to clarify its jurisprudence on the relationship between Congress’ Article I powers and states’ 11th Amendment immunity.
Sovereign immunity is properly a shield against lawsuits challenging a state’s governmental action, not a sword with which to carve out economic advantage over private competitors. If the Supreme Court declines to hear this case, thereby letting the Federal Circuit ruling stand, it would reinforce that unfair advantage—and strike a blow against private sector innovation.
Whoever it is that replaces the outgoing Paul Clement should not agonize over this one. The next solicitor general should advise the Supreme Court to grant this petition for review. And the justices should take his advice.