Sovereign Indignity: Texas must Litigate its Infringement Case in Delaware

by Dennis Crouch

University of Texas v. Boston Scientific Corp. (Fed. Cir. 2019)

UT sued Boston Scientific for patent infringement in its home district of W.D. Texas (Austin).  BSC responded with a motion to transfer/dismiss on venue grounds — arguing that venue was improper under 28 U.S.C. 1400(b).  BSC is not a Texas corporation and has no regular-and-established place of business in W.D. Texas.  As such, the district court found venue improper and transferred the case to D.Delaware. (BSC does have a few dozen employees in W.D.Tex., all of whom work from home, but that did not create proper venue.)

UT appealed the transfer — arguing sovereign immunity, sovereignty, and “State Dignity”.  In particular, UT argued that an implicit exception to the venue statute allows for State of Texas has a right to sue for patent infringement in the state of Texas. The argument:

Venue is proper in the Western District of Texas because UT is an arm of the State of Texas, has the same sovereign immunity as the State of Texas, it would offend the dignity of the State to require it to pursue persons who have harmed the State outside the territory of Texas, and the State of Texas cannot be compelled to respond to any counterclaims, whether compulsory or not, outside its territory due to the Eleventh Amendment. . . .

[T]he federal patent venue statute cannot abrogate a State’s right to choose the forum when asserting infringement of its federal patent rights. UT also argues that the District
of Delaware lacks jurisdiction because UT never consented to suit in Delaware, never waived its sovereignty in Delaware, and never had its sovereignty abrogated by statute.

On appeal, the Federal Circuit “disagree[d] with UT on all grounds. . .  state sovereignty principles asserted by UT do not grant it the right to bring a patent infringement suit in an improper venue.”

We acknowledge that States are sovereign entities that entered the Union with particular sovereign rights intact. We are not convinced, however, that the inherent powers of Texas as a sovereign allow UT to disregard the rules governing venue in patent infringement suits once it chose to file such a suit in federal court.

Here, the appellate panel is effectively making a waiver argument — since UT filed suit in Texas, it implicitly agreed that the suit might be transferred to another state if such a transfer fit under the rules of civil procedure.

When a State voluntarily appears in federal court . . . [i]t logically follows that the State must then abide by federal rules and procedures—including venue rules—like any other plaintiff. We see nothing in UT’s cited authorities that suggests  otherwise. Indeed, it would be “anomalous or inconsistent” for UT to both invoke federal question jurisdiction and then to assert sovereignty to defeat federal jurisdiction.

Slip opinion.

Of some interest — UT might be able to refile the case directly to the U.S. Supreme Court under the “original Jurisdiction” clause of Article III, Section 2 of the U.S. Constitution.

In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction.

This jurisdiction is not ‘exclusive’ to the Supreme Court and so the normal route is to go through the district courts.

= = = =

Note that ordinarily parties do not have a right to directly appeal a transfer order. Here, however the court found appellate jurisdiction under the collateral order doctrine.

= = = =

The patents at issue here cover implantable drug-releasing biodegradable fibers used in stents. U.S. Patent Nos. 6,596,296 and 7,033,603.  The patents are exclusively licensed to TissueGen, another Delaware Corp.

21 thoughts on “Sovereign Indignity: Texas must Litigate its Infringement Case in Delaware

  1. 6

    “When a State voluntarily appears in federal court”

    So is the Federal Circuit somehow suggesting that if, instead, UT had filed the case in state court, and then the Defendant removs it to Federal Court, that the analysis might be different because the State did not voluntarily appear in federal court?

  2. 5

    The other problem with Texas’ position is that the venue statute was enacted to protect defendants from being sued in distant venues in which they only have a tenuous connection. Texas here is the plaintiff, not the defendant. So why should the defendant suffer the inconvenience which Congress wanted to relieve it of, just because Texas is a sovereign state? What in the statute or its history supports the argument that there is such an exception?

    1. 5.1

      being sued in distant venues in which they only have a tenuous connection.

      THIS may well be true and all for the reason Congress acted, but the way that this has evolved desperately needs some reconsideration, as the presence (at the choice of the defendant) is NOT this “tenuous” connection.

      It really does not (or should not, to be more precise) matter if your presence is of the choice of “work from home” staff or if your choice is to establish an actual building FOR that staff to be located within. THIS is a difference that merits no distinction, but the courts have mucked it up.

    2. 5.2

      … but as to thrust of your question in general, the existence of State Sovereign Immunity (in and of itself) is “reason.”

      In other words, for ANY instance of a State having “an advantage” just because it IS a State, your “question” may well apply, and the answer would run along the same lines: because that is how this country was put together.

      1. 5.2.1

        because that is how this country was put together

        That does not answer the question. True, the states are sovereign, and that gives them some special privileges. Like sovereign immunity, which makes them immune from suit. I cannot just sue the State of Texas, unless it has consented to that, and even then it can make conditions on it (like only sue in a state court).

        But here Texas (or one of its divisions) brought suit in federal court. It decided voluntarily to invoke the powers of Article III courts. Having done so, it cannot then decide it gets to play by special procedural rules that do not apply to anyone else.

        Venue is one such procedural rules. Discovery is another. Could the plaintiff in this case say, sorry, I am not providing any discovery. It offends my status as a sovereign state to be ordered to produce documents or produce witnesses for deposition? Clearly not — you bring suit, you have to follow the rules of civil procedure.

        1. 5.2.1.1

          That expressly answers the question — AS the Sovereign of the State of Texas argues.

          As I noted, your “can’t be special” is something that you want to apply regardless of any “actually is special” that comes with any other application of Sovereign Immunity.

          And to be perfectly clear, I am NOT saying that I agree with the position being taken by the Sovereign State of Texas, just pointing out that THAT is their position (for example, down below, “Me” draws a nice distinction that I do not take issue with).

  3. 4

    The “only as a shield but not as a sword” angle is pretty interesting — especially if one considers the negative nature of the personal property right known as a patent (the negative nature is solely that of a sword, leastwise when it come to enforcing that property right).

    1. 4.1

      “Derp derp derpity derp derp derp DERP deepderp derpity doo but especially derp.”

      1. 4.1.1

        Nice Derp Dance — obviously, you have nothing meaningful to say.

        Somehow, we have gotten to the state that it is beneath the dignity of the State to enforce its property rights.

        Even for a Leftie like you, the state of the State enforcing its property rights as a matter of dignity should cause some concern (over and above the typical cognitive dissonance that should occur in light of what this portends for your clients).

  4. 3

    Yes, they could refile in the U.S. Supreme Court. However, it is highly unlikely that the Court would accept the case. It would be entirely discretionary with SCOTUS, and the Court has consistently declined to accept original jurisdiction cases where only one party is a state. See, e.g., Ohio v. Wyandotte Chemicals Corp., 401 U.S. 493 (1971). 35 USC 1251(b) also confirms that the Court’s jurisdiction in a matter between a state and a citizen of another state, while original, is not exclusive. (But, the Court has original and exclusive jurisdiction in an action between two states.)

    1. 3.1

      That’s my impression, too. SCOTUS never takes these cases where it is a state vs. a private citizen, only between two states (or a state v. the U.S.)

    2. 3.2

      While not rising to the level of which you note, is there not an element of “State v State” insofar as the State of Texas is denying that the State of Delaware is “offending” the State of Texas by agreeing to here the case?

      (Leastwise, that appears to be what the State of Texas is saying)

      1. 3.2.1

        Not sure I follow. The state of Delaware has absolutely nothing to do with this lawsuit. Yes, the particular federal trial court where the case was transferred is located in Delaware. But the connection with the state of Delaware ends there.

        1. 3.2.1.1

          Oh, I agree with you vis a vis the actual State of Delaware, but that is how the State of Texas complaint reads…

          (I never said that the State of Texas complaint was a solid complaint)

        2. 3.2.1.2

          The patent venue statute – 28 USC 1400(b) – is satisfied by bringing suit in the state in which the defendant “resides” [interpreted by the Fed. Cir. as the state where it is incorporated] OR where it has infringed AND has a regular and established place of business.
          All the residents of the District of East Texas have now been deprived of any Apple Stores, apparently because Apple got fed up with being sued there. They may not be the only ones leaving if that district court’s interpretation of this statue continues.

          1. 3.2.1.2.1

            AND has a regular and established place of business.

            The understanding of what this means needs to be updated.

            The choice of a business to avail itself IN any area should bring the benefit as well as the “risk.”

            The ‘game’ of having employees “work out of their homes” should NOT be a determinative factor, as the notion should be whether regular benefit in the State is being obtained.

            1. 3.2.1.2.1.1

              Yes, the “game” of calling a computer server a “a regular and established place of business” needs be eliminated.
              “Benefit in the State” is no part of the patent venue statute or its intent.

              1. 3.2.1.2.1.1.1

                B$ on your “intent.”

                When one avails oneself of the benefit IN the State, one — under ANY rubric of equity — should also recognize the reach of that State.

                While this may not be an explicit part of the PATENT venue statute, it certainly is an implicit part.

  5. 2

    Before PROST, Chief Judge, REYNA and STOLL, Circuit Judges.

    [Opinion written by] STOLL, Circuit Judge.

    1. 2.1

      It would be hard to put together a more ignominious group of judges. Maybe throw in Taranto too.

  6. 1

    Doesn’t sovereignty get set aside when the sovereign is engaging in activities inherently commercial?

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