Federal Circuit Opinion Holds That State Sovereign Immunity Doesn't Apply In IPRs

On June 14, 2019, the Federal Circuit issued a precedential opinion holding that state sovereign immunity does not apply to Inter Partes Reviews (IPR). Regents of the Univ. of Minn. v. LSI Corp., 2019 U.S. App. LEXIS 17887 (Fed. Cir. 2019). The Federal Circuit’s decision focused on the differences between IPRs and lawsuits, likening the Patent Office proceedings to federal agency enforcement actions. Thus, state entities, including public colleges and universities, cannot rely on sovereign immunity to shield their patents from IPRs.

In University of Minnesota, the University of Minnesota (UMN) sued LSI Corporation and Ericsson Inc. for patent infringement. LSI and Ericsson, in turn, each separately filed IPR petitions, alleging that the claims of UMN’s patents were invalid in view of the prior art. UMN moved to dismiss the IPRs on the basis of state sovereign immunity. The USPTO denied the motion, and UMN appealed. On appeal, the Federal Circuit distinguished private lawsuits (that trigger sovereign immunity) from federal agency proceedings (that do not trigger sovereign immunity) and concluded that IPRs are far more like the latter.

The Federal Circuit identified several key factors distinguishing IPRs from civil litigation:

1. IPRs are Determined by an Executive Branch Appointee: Although initiated by private parties, IPRs are determined by the Director of the USPTO. It is the “politically appointed executive branch official, not the private party, who ultimately decides whether to proceed against the sovereign.”
2. IPRs Do Not Require Petitioner Participation: The Board may continue with a final written decision on the patentability regardless of whether the petitioner participates. “The petitioner need not have constitutional standing to file the petition or participate in IPR.”
3. IPRs Lack the Hallmarks of Civil Litigation: In IPRs, the Federal Rules of Civil Procedure do not apply, patent owners may amend the claims of the patent at issue, and discovery and hearings are far more limited than in civil litigation.

The Federal Circuit also relied on its recent decision in Saint Regis Mohawk Tribe v. Mylan Pharms, Inc., F.3d 1322 (Fed. Cir. 2018), holding that tribal sovereign immunity does not apply as a bar to IPRs. “We conclude that state and tribal sovereign immunity do not differ in a way that is material to the question of whether IPR proceedings are subject to state sovereign immunity.” Regents of the Univ. of Minn. v. LSI Corp., 2019 U.S. App. LEXIS 17887, *28 (Fed. Cir. 2019).

While the consequences of this decision remain to be seen, the Federal Circuit’s holding confirms that state entities face the same risks and costs associated with enforcing their patents as private entities. The Federal Circuit’s opinion also underscores the continuing value of using IPRs to ward off infringement claims. For state entities, particularly state universities seeking to monetize their substantial patent portfolios, the University of Minnesota decision is also a stark reminder of the value of pre-enforcement evaluations—not just relating to infringement, but to the strength of any asserted patents. Conversely, for parties accused of infringing state-owned patents, the Federal Circuit’s decision will spark increased IPR activity.