State Sovereignty Cannot Be Used as a Sword to Overcome Federal Venue Rules for Patent Infringement Suits When the State is Solely a Plaintiff in the Case

September 24th, 2019

In July of 2018, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) held that tribal sovereign immunity does not apply in inter partes review (IPR) proceedings. Saint Regis Mohawk Tribe v. Mylan Pharm., Inc., 896 F.3d 1322, 1329 (Fed. Cir. 2018). But they left “for another day the question of whether there is any reason to treat state sovereign immunity differently.” Id.  In June of 2019, the Federal Circuit addressed this question, stating that sovereign immunity applies to lawsuits brought by private parties, not to lawsuits brought by the United States (including agency proceedings commenced by the United States), and further that an IPR proceeding “is properly viewed as an agency’s reconsideration of a previous patent grant that is aided by information supplied by a third party, and state sovereign immunity does not bar these proceedings.” Id. at 1341.

Still, however, the Federal Circuit did not address in these prior sovereign immunity cases the question of whether state sovereignty applied to patent infringement suits filed by a State, allowing them to bypass federal venue requirements. This question was recently answered by the Federal Circuit in Bd. of Regents of the Univ. of Tex. Sys. v. Boston Sci. Corp. where they affirmed the Western District of Texas’s decision to transfer a case to the District of Delaware and held that the “state sovereignty principles asserted by [the University of Texas] do not grant it the right to bring a patent infringement suit in an improper venue.” Bd. of Regents of the Univ. of Tex. Sys. v. Boston Sci. Corp., No. 2018-1700, 2019 U.S. App. LEXIS 26759, at *16 (Fed. Cir. 2019).

The Board of Regents of the University of Texas (“UT”), which is legally an arm of the State of Texas, sued Boston Scientific Corporation (“BSC”), a Delaware corporation with a principal place of business in Massachusetts, for patent infringement in the Western District of Texas. Id. at *2-3, 17. BSC asserted that venue was not proper in the Western District of Texas because BSC does not reside in or have a place of business in the Western District of Texas. Id. at *4. BSC moved to either have the case dismissed or have the case transferred to the District of Delaware. Id.

In response, UT did not contend that the Western District of Texas was a proper venue pursuant to federal venue rules. Id. at *17. Instead, UT argued that it can bypass federal venue rules because it had sovereign immunity and thus “the right to sue a nonresident in its forum of choice as long as personal jurisdiction is satisfied.” Id. at *15.

State sovereign immunity, a “complementary attribute of state sovereignty” and otherwise known as “Eleventh Amendment Immunity,” shields a State from lawsuits “commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” Id. at *18, 22 (quoting U.S. Const. amend. XI) (emphasis added). The district court rejected UT’s sovereign immunity argument on the grounds that UT was acting only as a plaintiff and that there was no claim or counterclaim against UT. Id. at *5. The district court explained that “[s]overeign immunity is a shield; it is not meant to be used as a sword.” Id. (citations omitted). It then transferred the case to the District of Delaware and UT appealed the transfer order based on state sovereignty. Id.

On appeal, UT first argued that “the Eleventh Amendment allows a State ‘to control where it litigates against a private party’” and that “only the State can dictate where it litigates its property rights; a private party cannot dictate the forum.” Id. at *18 (citation omitted) (capitalization altered). To support its argument, UT relied on several Supreme Court decisions that UT argued conveyed broad discretion on a State’s forum selection. Id. at *22-23. However, the Federal Circuit rejected UT’s arguments because none of the cases “involved the assertion of sovereign immunity by a State as a plaintiff.” Id. at *23.

The Federal Circuit went on to note that they were “aware of no cases in which the Supreme Court has applied the Eleventh Amendment to suits in which a State is solely a plaintiff” and that in Regents of the Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997), they had already “emphasiz[ed] that ‘the Court did not construe the Eleventh Amendment to apply to suits in which a State is solely a plaintiff.’” Id. (quoting Eli Lilly, 119 F.3d at 1564).

Next, UT argued that it can choose the forum in which it sues for patent infringement “based on the inherent powers of a state sovereign.” Id. at *27. UT explained that “each State has ‘residual and inviolable sovereignty,’ and retained the right ‘as a sovereign, to choose the forum with requisite jurisdiction in which to enforce its property rights against citizens of another State.’” Id. (citation omitted) (capitalization altered).

The Federal Circuit acknowledged that each State is a sovereign entity and “entered the Union with particular sovereign rights intact.” Id. at *28 (citation omitted). However, the court found that it would be “anomalous or inconsistent” for a State to “both invoke federal question jurisdiction and then to assert sovereignty to defeat federal jurisdiction.” Id. at *28-29 (citing Lapides v. Bd. of Regents of Univ. Sys. of Ga., 535 U.S. 613, 619 (2002)). As such, “[w]hen a State voluntarily appears in federal court, as UT has done here, it ‘voluntarily invoke[s] the federal court’s jurisdiction.’” Id. at *28 (citing Lapides, 535 U.S. at 620). Thus, because UT had filed suit in federal court, it had waived all sovereign immunity rights and could be subjected to federal jurisdiction rules. Id. at *29.

Finally, UT argued that it “did not consent to suit in Delaware, did not waive its sovereignty in Delaware, and never had its sovereignty abrogated by statute” and, therefore, the District of Delaware did not have jurisdiction over the case. Id. at *31 (citation omitted). Additionally, they argued, any waiver of sovereignty must be “unequivocal and voluntary.” Id. The Federal Circuit also rejected these arguments and noted that because sovereign immunity does not apply to a State that is solely a plaintiff, there are no sovereign immunity rights to waive or abrogate. Id. at *32-34.

Because the Federal Circuit rejected UT’s arguments regarding sovereign immunity and state sovereignty, it decided that “UT’s sovereign rights do not allow it to escape application of the patent venue statute.” Id. at *35. Therefore, the district court’s transfer order to the District of Delaware was affirmed. Id.

Conclusion: A State may not wield its sovereignty rights to bypass federal venue requirements when the State is solely a plaintiff in the case. Rather, the State waives such rights when it voluntarily invokes the federal court’s jurisdiction by filing a patent infringement suit and, as with any other plaintiff, is subject to transfers to other federal forums when venue is improper in the original forum. Additionally, a State cannot evade IPR proceedings commenced by the United States by evoking its state sovereignty rights.