Biomedical Patent Management Corporation v. State of California (on cert.)
States have become major players in the patent market. Many of the largest universities and research institutions are state-owned, and their inventions increasingly contribute substantial revenues to the state. In recent years, states have increasingly turned to the federal courts to maximize the value of their patent portfolios. Through aggressive litigation, states have won judgments and settlement awards in the hundreds of millions of dollars. Since the 1990's, at least 32 states have filed at least 173 affirmative patent actions.
The problem, as BPMC sees it, is while states (i.e., universities) embrace federal jurisdiction when it comes to the plaintiff side, states "simultaneously avoid federal jurisdiction when they themselves are faced with claims of patent infringement; in those circumstances, they assert sovereign immunity under the Eleventh Amendment." Thus, universities are having their cake and eating it too, while other participants in the patent system cannot avail themselves of such immunities.
BPMC is the sole owner of a patent related to non-invasive prenatal screening for fetal abnormalities such as trisomy 21 (Down Syndrome). California’s Department of Health Services (“DHS”) manages the only sizable prenatal screening program in the nation that implements the procedure described in the patent without a license. Moreover, DHS has issued regulations that would prevent existing and potential licensees of the patent from practicing the invention in California except under license from DHS. Under the regulations, all fees for practicing the invention in California must be remitted directly to the state.
Naturally, litigation ensued thereafter. In August 1997, Kaiser Foundation Health Plan, Inc. (“Kaiser”), a subcontractor of DHS, filed an action against BPMC in the United States District Court for the Northern District of California, seeking a declaratory judgment of non-infringement or invalidity as to the patent. DHS was allowed to intervene in the case. The court dismissed the case under improper venue.
In February 2006, BPMC refiled its complaint against DHS in the United States District Court for the Northern District of California, alleging the same counts of patent infringement. DHS moved to dismiss on the basis of Eleventh Amendment immunity. The district court granted DHS’s motion, and the Federal Circuit affirmed (link).
The CAFC reasoned that “DHS’s intervention in the [First Action] constituted a waiver of its sovereign immunity in that suit,” but held that, “where a waiver of immunity occurs in an earlier action that is dismissed,” the waiver “does not extend to the separate lawsuit.” The court also rejected BPMC’s contention that California’s patent-litigation activities effected a waiver, agreeing with the district court that this was a “constructive waiver” theory foreclosed by College Savings Bank.
BPMC disagreed, and petitioned the Supreme Court. According to the petition, the questions presented are:
1. Whether a state’s waiver of Eleventh Amendment immunity in one action extends to a subsequent action involving the same parties and the same underlying transaction or occurrence.
2. Whether a state waives its Eleventh Amendment immunity in patent actions by regularly andvoluntarily invoking federal jurisdiction to enforce its own patent rights.
Read/download the petition here (link)