Gensetix v. Univ. Texas v. Baylor College of Med. (Fed. Cir. 2020)
Here is the three-party setup in this case involving the patentee, licensee, and accused infringers:
- Invent & Patent: Dr. Decker, a UTexas researcher invented a method for generating anti-tumor immune response and UTexas obtained the patents (US8728806; US9333248);
- License: UTexas provided an exclusive license to Mr. Mirrow who later transferred the license to Gensetix;
- Infringe: Dr. Decker later moved his lab to BCM and continued research without license;
- Sue: Gensetix sued BCM & Decker for infringement, but the patent owner UTexas refused to participate in the case.
The usual rule is that a patent infringement lawsuit cannot proceed unless the patentee — i.e., the patent owner — is a plaintiff. And, in a normal lawsuit being a plaintiff is voluntary business. However, our rules of civil procedure do also call for “involuntary plaintiffs.”
(2) Joinder by Court Order. [A required party] who refuses to join as a plaintiff may be made either a defendant or, in a proper case, an involuntary plaintiff.
Fed. R. Civ. Pro. R. 19(a)(2). This happens occasionally in patent cases such as this where the patentee has promised to enforce the patent, but then later refuses. In that situation, the licensee files the lawsuit as plaintiff and joins the patent owner as an involuntary plaintiff. The problem here — UTexas is part of the State of Texas and claims sovereign immunity in this case.
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.
U.S. Const., Amendment XI (1795). Although the 11th Amendment offers only a limited amount of State Sovereign immunity, the Supreme Court has repeatedly written that the structure and nature of Federal system includes additional State immunities.
In its appellate decision in the case, the Federal Circuit answered two questions (1) Does sovereign immunity protect TX from being joined as an involuntary plaintiff; (2) If TX cannot be joined as a party, may the case proceed without the patentee? The court then issued three separate opinions with Judge O’Malley’s approach garnering a majority on each issue:
Thus, in the end, the court found that TX is immune from being joined, but that the case should proceed with the licensee suing BCM for infringement.
BCM subsequently petitioned for en banc review on the following question:
Can a party who is not a patentee “have remedy by civil action for infringement”?
BCM En Banc Petition. That petition has now been denied — setting up potential Supreme Court review.
The basic framing of the appeal is that there is some tension between the language of R.19 and the Supreme Court decision in Republic of Philippines v. Pimentel, 553 U.S. 851 (2008).
First, R. 19: The text of the rule expressly allows a court to continue with a lawsuit even though a “required party” cannot be joined. The basic approach is that the court must apply “equity and good conscious” to determine whether to dismiss the case or to proceed.
19(b) When Joinder Is Not Feasible. If a person who is required to be joined if feasible cannot be joined, the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.
Id. (listing factors to consider).
On the other hand, in Pimentel, the court appeared to endorse a stark limit on continuing suits such as this where the sovereign is absent but will be potentially injured by an adverse decision:
A case may not proceed when a required entity sovereign is not amenable to suit. [Our prior] cases instruct us that where sovereign immunity is asserted, and the claims of the sovereign are not frivolous, dismissal of the action must be ordered where there is a potential for injury to the interests of the absent sovereign.
Republic of Philippines v. Pimentel, 553 U.S. 851 (2008).
The patent act creates a cause-of-action for patent infringement, and the en banc question presented quotes from from the statute:
A patentee shall have remedy by civil action for infringement of his patent.
35 U.S.C. 281. The petition mentions that on remand it will be able to raise this issue and dismiss the case since Gensetix is not a “patentee.” The FedCir has held that exclusive assignees can be considered a patentee if they have “all substantial rights” to the patent. In this case, Gensetix originally argued that it had all substantial rights, but now admits that it does not. Thus on remand this may become a standing issue.