The University of Florida’s reliance on sovereign immunity to prevail in a patent challenge could represent a new defense for state schools, but the ruling isn’t a get-out-of-jail-free card. There are limitations to its usefulness, and in some cases a university might have already forfeited its immunity.
In the recently decided case (Covidien LP v. University of Florida Res. Found. Inc., IPR2016-01274, -01275, -01276), the Patent Trial and Appeal Board (PTAB) found the sovereign immunity defense valid, dismissing three petitions challenging the claims of a patent owned by the University of Florida Research Foundation (UFRF). The PTAB ruled that because UFRF is an arm of the State of Florida by way of the University of Florida, the foundation is entitled to a sovereign immunity defense for an inter partes review of the challenged patent. The decision could significantly hamper private party challenges to the validity of patents owned by public universities, university foundations, or any other state entity.
Trouble began when UFRF requested an audit of royalties under its patent license agreement with Covidien and the company refused. UFRF sued for breach of contract and Covidien counterclaimed by seeking a declaratory judgment on the basis that it did not infringe the patent, while also filing three IPR petitions challenging the patent’s validity.
When Covidien refused UFRF’s audit request for an accounting of royalties due under its license, UFRF filed the original breach of contract suit in Florida state court. UFRF asked the U.S. District Court for the Northern District of Florida to transfer the case back to state court, and the court agreed. The court’s decision to send the case back hinged on its assessment that UFRF was an arm of the State of Florida and thus entitled to sovereign immunity, the protection provided to government bodies under the Eleventh Amendment of the U.S. Constitution. Covidien argued that a sovereign immunity finding would protect invalid patents just because they were held by a state entity and that patents would be insulated from inter partes review. The PTAB disagreed and dismissed Covidien’s IPR challenges.
The University of Florida declined to comment on the case, but the PTAB ruling immediately gained notice throughout the tech transfer community. On the surface, it seemed to offer an ironclad defense to IPR challenges for state universities. Not quite, legal experts say, but the ruling is still good news for many TTOs.
TTOs at state universities now have the opportunity to block some patent challenges right away, says Christopher M. Humphrey, JD, a patent attorney with the Womble Carlyle law firm in Raleigh, NC.
“This is definitely a win for state universities in terms of strengthening their patent portfolio and making it more attractive for licensing overall. For state entities this is a good thing, for sure, and it’s nice to have it in black and white in a case holding,” Humphrey says. “It’s also generally speaking a net positive for potential licensees, unless you happen to be Covidien or another unhappy licensee. For other licensees, this can remove some worry that the patent you licensed could be invalidated.” A detailed article on the sovereign immunity case and its implications appears in the March issue of Technology Transfer Tactics. To subscribe and get the full article, along with the publication’s 10-year archive of best practices and success strategies for TTOs, CLICK HERE.