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Latest PTAB decision weakens sovereign immunity defense

By Jesse Schwartz
Published: February 28th, 2018

A Patent Trial and Appeal Board (PTAB) decision regarding sovereign immunity throws more cold water on the idea of state universities using it to defend against inter partes review (IPR), but it is not the end of the road.

There is still room for interpretation, enough that state universities should not abandon the strategy altogether, attorneys say. However, their negotiating power with patient infringers may be weakened now because the threat of suing in district court could be countered with a threat to initiate an IPR – at which point sovereign immunity would not be an option, if the PTAB decision holds.

That became clear when PTAB recently issued an order dismissing a sovereign immunity challenge by the State of LM Ericsson v. Regents of the University of Minnesota. The board granted Ericsson’s IPR petitions, and the State of Minnesota filed a motion to dismiss based on its Eleventh Amendment sovereign immunity, seeking to avoid the IPR.

The board had supported similar sovereign immunity claims in IPR proceedings, most notably in Covidien LP v. Univ. of Fla. Research Found., Inc.. in which PTAB dismissed three petitions challenging the claims of a patent owned by the University of Florida Research Foundation. PTAB concluded that UFRF had a valid sovereign immunity defense for IPR. That decision and subsequent developments gave universities reason to feel confident of using a sovereign immunity defense when challenged, and even to use the defense as reason to be more bullish when negotiating license terms because they could promise licensees that there would never be an IPR.

In this case, however, PTAB concluded that Minnesota had waived its sovereign immunity by asserting the IPR-challenged patents in a patent infringement lawsuit in district court.

Until and unless the decision is overturned, it’s bad news for state universities, says Rubén H. Muñoz, JD, partner with the Akin Gump law firm in Philadelphia, PA. In clear cases of infringement, universities have been willing to sue in district court to protect their patents because they are generally on good footing there, he says. But this decision means district court litigation makes you more susceptible to PTAB challenges, where patent holders are not on such solid ground.

“It gives more leverage to potential infringers out there. Before this, universities had the perfect sword in going to court in a patent infringement case but they also had the perfect shield. The key thing is that the standard for [invalidating a patent] at the Patent Office is lower — only a preponderance of the evidence versus going to district court where it is clear and convincing evidence,” Muñoz says. “There is a presumption of validity in the district court that doesn’t exist at the Patent Office, but this decision will make a university think twice about going after infringers.”

The risk goes beyond just losing the dispute with one party. Muñoz explains the disincentive this way: If a university is deriving royalties from third parties to whom it has licensed the patent and sues another party for infringement, that litigation puts the patent at risk of going to an IPR and potentially losing the revenue from the legitimate licensees.

“If the patent goes down, and remember there is no presumption of validity in the Patent Office, the royalties from those licensed third parties will go away because you no longer have a patent to assert,” Muñoz says. “This decision changes the equation, though this is not the last that will be written about this. It does change the game for now.”

A detailed article analyzing the latest PTAB ruling and its impact on universities appears in the February issue of Technology Transfer Tactics. To subscribe and access the full article, along with the publication’s entire 10+ year archive of best practices and success strategies for TTOs, CLICK HERE.

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