Vas-Cath, Inc. v. Curators of the University of Missouri

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United States Court of Appeals for the Federal Circuit
06-1100
VAS-CATH, INCORPORATED,
Plaintiff-Appellant,
v.
CURATORS OF THE UNIVERSITY OF MISSOURI,
DON WALSWORTH, CHERYL D.S. WALKER, ANNE C. REAM,
M. SEAN MCGINNIS, MARION H. CAIRNS, ANGELA M. BENNETT,
THOMAS E. ATKINS, VICKI M. ELLER, MARY L. JAMES
and CONNIE HAGER SILVERSTEIN,
Defendants-Appellees.
Vincent J. Belusko, Morrison & Foerster LLP, of Los Angeles, California, argued for
plaintiff-appellant. With him on the brief was J. Manena Bishop. Of Counsel was Nicole M.
Smith.
Barbara C. McCurdy, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, of
Washington, DC, argued for defendants-appellees. With her on the brief was Lara C.
Kelley.
Appealed from: United States District Court for the Western District of Missouri
Judge Gary A. Fenner
United States Court of Appeals for the Federal Circuit
06-1100
VAS-CATH, INCORPORATED,
Plaintiff-Appellant,
v.
CURATORS OF THE UNIVERSITY OF MISSOURI,
DON WALSWORTH, CHERYL D.S. WALKER, ANNE C. REAM,
M. SEAN MCGINNIS, MARION H. CAIRNS, ANGELA M. BENNETT,
THOMAS E. ATKINS, VICKI M. ELLER, MARY L. JAMES
and CONNIE HAGER SILVERSTEIN,
Defendants-Appellees.
__________________________
DECIDED: January 23, 2007
__________________________
Before NEWMAN, LOURIE, and RADER, Circuit Judges.
NEWMAN, Circuit Judge.
Vas-Cath, Inc. appeals the dismissal of its appeal of the decision of the United
States Patent and Trademark Office ("PTO") in an interference proceeding between
Vas-Cath and the University of Missouri.1 The appeal was dismissed by the United States
1 Vas-Cath, Inc. v. Curators of the Univ. of Missouri, No. 05-0400-CV-W-GAF
(W.D. Mo. Oct. 25, 2005).
District Court for the Western District of Missouri, on Eleventh Amendment grounds. We
conclude that the Eleventh Amendment does not shield the University from appeal of the
PTO's decision in favor of the University. By requesting and participating in the
interference proceeding in the PTO, the University waived its constitutional immunity not
only in that proceeding but also in the appeal taken by the losing party. Accordingly, the
dismissal of the appeal is reversed.
BACKGROUND
A patent interference proceeding, 35 U.S.C. §135, is conducted for the purpose of
determining priority of invention as between competing applicants for patent on the same
invention. In general the patent examiner checks for interfering patent applications while
they are pending, Manual of Patent Examining Procedure ("MPEP") §23032 ("Where two or
more applications are found to be claiming the same patentable invention, they may be put
in interference, dependent on the status of the respective applications and the difference
between their filing dates."), and if conflict is discovered the examiner will initiate
interference proceedings or suggest that the applicant amend the application by presenting
a claim drawn to the same invention for interference purposes. See id. ("If the applications
each contain at least one claim drawn to the same patentable invention (37 CFR 1.601(n)),
2 Citations are to the version of the MPEP and C.F.R. in effect at the time of the
events herein (the interference was declared on Aug 19, 1997 and the judgment from the
Board of Patent Appeals and Interferences issued on July 30, 2003). Subsequent revisions
do not affect the issues of this case. As of July 1, 2006, patent interferences are at 37
C.F.R. part 41.
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the examiner proceeds to propose the interference."); see also MPEP §2305 ("[T]he
examiner may suggest that an applicant present a claim drawn to an invention claimed in
another application or patent for the purpose of an interference with another application or
patent.").
Occasionally the examiner does not act with respect to interfering applications, and a
patent is issued to one applicant while another application on the same invention is still
pending. In such event the applicant can request that an interference be conducted
between the pending application and the issued patent. See 37 C.F.R. §1.607 (entitled
"Request by applicant for interference with patent"); MPEP §2306.01 ("In order to avoid the
issuance of two patents to the same patentable invention, the examiner should take steps
to propose an interference between the application and the patent."). Following such
proceeding and upon the PTO's determination of priority, the prior inventor is granted
a patent and, if the losing party has already obtained a patent, the lost claims of the issued
patent will be cancelled by operation of law. MPEP §2363.03 ("The Board's judgment in an
interference conducted under 37 CFR subpart E will state that the losing party is not
entitled to a patent containing the claims corresponding to the count or counts."). See
generally 35 U.S.C. §135(a) (Interferences - "A final judgment adverse to a patentee from
which no appeal or other review has been or can be taken or had shall constitute
cancellation of the claims involved in the patent.").
That is the situation at bar. The Vas-Cath patent had issued while the University's
application, although filed before the Vas-Cath application, was still pending. The
University invoked the procedures to institute an interference between the University's
pending application and Vas-Cath's issued patent; the University amended its application
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by copying into the application all nineteen claims from the Vas-Cath patent, as the practice
permits. During the ensuing six-year interference proceeding both sides vigorously
contested the issues, producing records, examining and cross-examining witnesses, filing
motions and briefs, and arguing their positions. The PTO awarded priority to the University,
granted the nineteen Vas-Cath claims to the University, and held that Vas-Cath is not
entitled to the patent that had been issued to Vas-Cath. The Board ruled: "Accordingly,
senior party Twardowski is entitled to a patent including its application claims which
correspond to the count (namely, claims 1 and 19-38) and junior party Martin is not entitled
to a patent including any of its patent claims which correspond to the count (namely, claims
1-19)." Martin v. Twardowski, Patent Interference No. 103,988 (Bd. Pat. App. & Int. 2003).
These were all of the claims in the Vas-Cath (Martin) patent.
Vas-Cath appealed, as authorized by 35 U.S.C. §146,3 to the United States District
Court for the District of Columbia. On the University's motion that court transferred the
case to the Western District of Missouri pursuant to 28 U.S.C. §1406(a). In Missouri the
University asserted Eleventh Amendment immunity from suit in federal court, and on this
ground the district court granted the University's motion to dismiss.
3 35 U.S.C. '146. Any party to an interference dissatisfied with the decision of
the Board of Patent Appeals and Interferences on the interference, may have remedy by
civil action, if commenced within such time after such decision, not less than sixty days, as
the Director appoints or as provided in section 141 of this title, unless he has appealed to
the United States Court of Appeals for the Federal Circuit, and such appeal is pending or
has been decided. . . . .
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DISCUSSION
The Eleventh Amendment limits the judicial authority of the federal courts and bars
unconsented suit against a state.4 See Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S.
261, 268 (1997) (a state cannot be sued in federal court without its consent); Seminole
Tribe of Florida v. Florida, 517 U.S. 44, 54 (1996) (stating that "federal jurisdiction over
suits against unconsenting States 'was not contemplated by the Constitution when
establishing the judicial power of the United States.'") (quoting Hans v. Louisiana, 134 U.S.
1, 15 (1890)). The entitlement of the University of Missouri to the constitutional immunity of
the state is not disputed. Mo. Const. Article IX, §9(a); Mo. Rev. Stat. §172.020 (2000).
Issues of Eleventh Amendment immunity receive plenary appellate review. McKesson
Corp. v. Div. of Alcoholic Beverages and Tobacco, Dep't of Bus. Regulation of Florida, 496
U.S. 18, 30 (1990); Martin v. Hunter's Lessee, 14 U.S. (1 Wheat.) 304, 348 (1816); Xechem
Int'l, Inc. v. Univ. of Texas M.D. Anderson Cancer Center, 382 F.3d 1324, 1326-27 (Fed.
Cir. 2004).
A
The district court held that since there was not a waiver of immunity by the
University, Vas-Cath's suit must be dismissed on Eleventh Amendment grounds. The court
relied on Quileute Indian Tribe v. Babbitt, 18 F.3d 1456 (9th Cir. 1994), wherein the court
4 U.S. Const., amend. XI. The judicial power of the United States shall not be
construed to extend to any suit in law or equity, commenced or prosecuted against one of
the United States by Citizens of another State, or by Citizens or Subjects of any Foreign
State.
06-1100 5
addressed the question of whether participation in contested proceedings before the
Interior Board of Indian Appeals constituted a waiver by the winning tribe of tribal immunity
as to the ensuing appeal by the losing tribe. The court held that the prevailing tribe had not
waived its immunity as to the subsequent court action, stating that the Quinault Tribe's
participation in the administrative proceeding, which it had not initiated, was not "the
express and unequivocal waiver of tribal immunity that we require in this circuit." Id. at
1460. By analogy, the Missouri district court held that the University had not waived its
immunity as to the subsequent appeal by Vas-Cath of the PTO decision.
Vas-Cath points to factual differences from the Quileute case and argues that
Supreme Court precedent, applied to the facts of this case, indeed supports waiver.
Vas-Cath stresses that the interference contest in the PTO was conducted at the
University's request, that the University fully participated in the PTO proceeding and
voluntarily produced state witnesses and documents, that the result was to deprive Vas-
Cath of its property, and that no Eleventh Amendment immunity was asserted by the
University at any stage of that proceeding. Vas-Cath argues that any immunity was clearly
and unequivocally waived when the University provoked and successfully litigated the
interference contest, and that such waiver includes appeal by the party that lost its patent to
the University; Vas-Cath states that its §146 action was not a new claim against the
University, but simply the statutory path of review of the agency ruling.
The University responds that it has absolute immunity from any action in federal
court, and that this immunity was not waived by its participation in the PTO proceeding or
its action to secure the patent to which it was entitled as first inventor. The University
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states that this civil action by Vas-Cath improperly subjects the University, as an arm of the
state, to federal authority, in violation of the Constitution.
B
It is established that a state's participation in the federal patent system does not of
itself waive immunity in federal court with respect to patent infringement by the state, and
that such waiver cannot occur unless the conditions are such that there is violation of the
Fourteenth Amendment's guarantee of due process. In Florida Prepaid Postsecondary
Education Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999) the Court held that
Congress does not have authority to abrogate Eleventh Amendment immunity with respect
to patent infringement by the states, for "Congress identified no pattern of patent
infringement by the States, let alone a pattern of constitutional violations," id. at 640, and
that the provisions of the Patent Remedy Act are unconstitutional as out of proportion to the
supposed remedial object. In the companion case, College Savings Bank v. Florida
Prepaid Postsecondary Education Expense Bd., 527 U.S. 666 (1999) the Court considered
state immunity in the context of trademark infringement and explained:
Nor do we think that the constitutionally grounded principle of
state sovereign immunity is any less robust where, as here, the
asserted basis for constructive waiver is conduct that the State
realistically could choose to abandon, that is undertaken for
profit, that is traditionally performed by private citizens and
corporations, and that otherwise resembles the behavior of
"market participants."
Id. at 684. This court, applying these principles in Xechem, 382 F.3d at 1332, held that
absent a sufficient showing of lack of remedy under state law, suit against a state university
in federal court to obtain correction of inventorship was correctly dismissed on Eleventh
Amendment grounds.
06-1100 7
On this background, we turn to the question of whether the Eleventh Amendment
immunizes the University from appeal of the decision in the PTO proceeding in which the
University prevailed. Vas-Cath argues that precedent does not authorize the University to
bar an appeal by the losing party, while retaining the benefits of the PTO decision. In
Lapides v. Board of Regents of Univ. System of Georgia, 535 U.S. 613 (2002), the Court
guided the Eleventh Amendment inquiry to "focus on the litigation act the State takes that
creates the waiver." Id. at 620. In Lapides the state defendant was held to have waived its
Eleventh Amendment immunity by voluntarily removing the case from state to federal court.
Id. In College Savings Bank, 527 U.S. at 675-76, the Court had reaffirmed that the state
waives its immunity when it voluntarily invokes federal jurisdiction or makes a clear
declaration of its intention to submit itself to federal jurisdiction. And when a state
voluntarily invokes federal jurisdiction, it is deemed to have waived its objection not only to
the cause of action but also to any relevant defenses and counterclaims. See Regents of
the Univ. of New Mexico v. Knight, 321 F.3d 1111, 1126 (Fed. Cir. 2003) (the University
waived its Eleventh Amendment immunity to the counterclaims by filing suit for a
declaration of patent ownership and inventorship, for "when a state files suit in federal court
to enforce its claims to certain patents, the state shall be considered to have consented to
have litigated in the same forum all compulsory counterclaims, i.e., those arising from the
same transaction or occurrence that gave rise to the state's asserted claims").
06-1100 8
Vas-Cath argues that when the University requested the PTO to conduct an
interference proceeding without raising any Eleventh Amendment issue, a waiver was
created that extends not only to the initial agency litigation but also to the subsequent
judicial review. Judicial review of PTO adjudications is established by statute, and when
such procedure is invoked by the losing party in an interference proceeding, the result of
that proceeding is stayed. See 37 C.F.R. §1.663 ("Whenever an adverse judgment is
entered as to a count against an applicant from which no appeal (35 U.S.C. 141) or other
review (35 U.S.C. 146) has been or can be taken or had, the claims . . . stand finally
disposed of."). Upon completion of judicial review, the patenting process is completed.
See 35 U.S.C. §146 ("Judgment of the court in favor of the right of an applicant to a patent
shall authorize the Director to issue such patent."). Thus the interference proceeding is a
multi-part action with appeal as of right, starting in the PTO and culminating in court. The
civil action authorized by §146 is not a new claim, but an authorized phase of the
interference proceeding that is conducted by the PTO and is subject to judicial review. See
Rexam Indus. Corp. v. Eastman Kodak Co., 182 F.3d 1366, 1370 (Fed. Cir. 1999) (a §146
action is "derivative of the interference conducted in the PTO" and includes the issues
before the Board); Conservolite v. Widmayer, 21 F.3d 1098, 1101 (Fed. Cir. 1994)
("Judicial review of the Board's determinations in an interference is provided for by 35
U.S.C. §146."); 37 C.F.R. §1.661(a) ("If an appeal to the U.S. Court of Appeals to the
Federal Circuit (under 35 U.S.C. 141) or a civil action (under 35 U.S.C. 146) has been filed
the interference is considered terminated when the appeal or civil action is terminated.").
In Federal Maritime Comm'n v. South Carolina State Ports Authority, 535 U.S. 743,
757-59 (2002) the Court drew analogy between some agency proceedings and civil
06-1100 9
litigation, in that case to preserve the immunity of the non-consenting state in the agency
proceeding. Like proceedings in the Federal Maritime Commission, contested interference
proceedings in the PTO bear "strong similarities" to civil litigation, id. at 760, and the
administrative proceeding can indeed be characterized as a lawsuit. PTO interferences
involve adverse parties, examination and cross-examination by deposition of witnesses,
production of documentary evidence, findings by an impartial federal adjudicator, and
power to implement the decision. See, e.g., 37 C.F.R. §1.651(a) (during an interference,
"an administrative patent judge shall set a time for filing motions (§1.635), for additional
discovery under §1.687(c) and testimony period for taking any necessary testimony.");
§1.671(a) ("Evidence [for an interference] consists of affidavits, transcripts of depositions,
documents and things."); §1.671(b) ("[T]he Federal Rules of Evidence shall apply to
interference proceedings" except "[t]hose portions of the Federal Rules of Evidence relating
to criminal actions, juries, and other matters not relevant to interferences."). The University
invoked and participated in these proceedings with no claim of immunity.
The district court correctly observed that "a state does not waive its sovereign
immunity simply by engaging in activities normally conducted by private individuals or
corporations." Op. at 9. However, here the University did not simply procure a patent
through the routine of ex parte examination, but requested the PTO to conduct
litigation-type activity, obtaining a favorable agency ruling for which the statute authorizes
judicial review. The principles of federalism are not designed for tactical advantage; the
Lapides Court recognized the possibility of a state's "selective use of 'immunity' to achieve
litigation advantages," 535 U.S. at 620 (citing Wisconsin Dep't of Corrections v. Schacht,
524 U.S. 381, 393 (1998) (Kennedy, J., concurring)). The Court stated that "the Court has
06-1100 10
made clear in general that 'where a State voluntarily becomes a party to a cause and
submits its rights for judicial determination, it will be bound thereby and cannot escape the
result of its own voluntary act by invoking the prohibitions of the Eleventh Amendment.'" Id.
at 619 (quoting Gunter v. Atlantic Coast Line R. Co., 200 U.S. 273, 284 (1906)) (emphasis
in original). The Court in Lapides recognized that there is a distinction between an express
waiver of immunity, and waiver by actions taken by the state. See 535 U.S. at 620 (waiver
based on action of removal to federal court).
It has long been recognized that a state's voluntary entry into federal court serves to
waive state immunity from federal adjudication of that claim. Clark v. Bernard, 108 U.S.
436, 447 (1883). The Lapides Court observed that inferred waiver of the Eleventh
Amendment "in the litigation context rests upon the Amendment's presumed recognition of
the judicial need to avoid inconsistency, anomaly, and unfairness, and not upon a State's
actual preference or desire." 535 U.S. at 620. The University here invoked the statutory
system of agency adjudication of a contested claim to patent property. Unlike the situation
in College Savings Bank, 527 U.S. at 685, this is not "a suit by an individual against an
unconsenting State," but review of an agency adjudication to which the state consented in
full adversary proceedings including testimony of state employees and evidence of state
documents. In New Hampshire v. Ramsey, 366 F.3d 1 (1st Cir. 2004) the court held that
when the state voluntarily participated in a federal administrative forum whose action would
be reviewed in federal court, the state waived its immunity from that federal court review.
In Ramsey the court found waiver because the state gained advantage from its voluntary
participation in the federal administrative forum. Id. at 16. We agree that this result,
applied to the factual situation now presented, is within constitutional principles.
06-1100 11
The University argues that Xechem supports its position. In Xechem a private party
filed suit against a state university in federal court to change the inventorship of
university-owned patents that resulted from a joint research project; the university did not
consent to the suit and the Federal Circuit affirmed that the Eleventh Amendment bars the
suit. 382 F.3d at 1332. However, the university in Xechem did not request the
adjudication, did not initiate and participate in a PTO adversarial proceeding, did not
engage in litigation-like conduct, and there was no contested proceeding in which the
university waived immunity and obtained the property of the losing party. We conclude that
Xechem does not support the University's position herein.
The University's recourse to the PTO tribunal for adjudication of its claim of prior
inventorship and thus of patent ownership negates the assertion of immunity to bar appeal
of that adjudication. Principles of fairness and consistency prohibit selective assertion of
immunity to avoid appeal by the loser after the University won the first round.
C
The University also argues that because a §146 appeal can involve live testimony
and witnesses in the courtroom, it is not simply a continuation of an administrative
proceeding. However, the University's full participation in the PTO proceeding negates its
argument that the Eleventh Amendment shields its employees from testifying, for University
witnesses testified in the PTO without raising any objection on Eleventh Amendment
grounds.
The University argues that it had no choice but to request the interference and
participate in an adversarial proceeding, for if it had not taken this action it would have lost
its rightful patent to Vas-Cath. The University points out that although the PTO could have
06-1100 12
and should have initiated this interference while the applications of both parties were
pending, the PTO did not do so. Thus the University argues that its initiation of the
interference was not a voluntary act, but an act of necessity compelled by the PTO's grant
of a patent to the junior applicant. The University states that its position is supported by the
Court's holding in College Savings Bank that "where the constitutionally guaranteed
protection of the State's sovereign immunity is involved, the point of coercion is
automatically passed-and the voluntariness of waiver destroyed-when what is attached to
the refusal to waive is the exclusion of the State from otherwise lawful activity." 527 U.S.
at 687. However, the question in this case is not whether the University voluntarily
participated in the PTO interference, but whether the University can now bar the appeal of
the PTO's decision in favor of the University. This argument raises issues not of
federalism, but of litigation tactics, for it is undisputed that the PTO decision cannot be
reviewed in state court. And it is undisputed that no recourse was made to the Eleventh
Amendment during the PTO proceeding. As the Ramsey court pointed out:
The state voluntarily put itself in the position of being a party in a federal
administrative forum whose actions would be reviewed in federal court. The
state's actions expressed a clear choice to submit its rights for adjudication in
the federal courts. To permit the state to reverse course would contravene
the reasons for the doctrine of waiver by litigation conduct recognized by
Lapides . . . .
366 F.3d at 16-17. We need not consider whether the University intended to gain an unfair
tactical advantage, for "[m]otives are difficult to evaluate, while jurisdictional rules should be
clear." Lapides, 535 U.S. at 621. We have concluded that when the University initiated
and participated in the interference, its participation included the ensuing statutory review
06-1100 13
procedures; the University cannot invoke Eleventh Amendment immunity, after it prevailed,
to shield the agency decision from review.
D
We agree with the district court that Vas-Cath's naming the individual Curators of the
University of Missouri as defendants does not invoke Ex parte Young, 209 U.S. 123 (1908).
In Young the Court explained that there must be "some connection with the enforcement of
the act, or else [the suit] is merely making him a party as a representative of the state, and
thereby attempting to make the state a party." Id. at 157. We have been directed to no
connection between the interference proceeding and actions of the University curators.
E
The University also argued that Vas-Cath chose the wrong appellate route in
proceeding under 35 U.S.C. §146, and should have appealed directly to the Federal Circuit
under 35 U.S.C. §141. Upon inquiry from the bench, the University's counsel stated that
only "a straight appeal that does not name the state here" is permissible under the Eleventh
Amendment, thus apparently departing from the position argued in the brief. In any event,
we are not told how appeal under §141 can avoid naming the University as a party. See
Wu v. Wang, 129 F.3d 1237, 1240 (Fed. Cir. 1997) (judicial appeals under §141 and §146
are alternative routes to challenge the Board's final judgment in an interference
proceeding); In re Van Geuns, 946 F.2d 845, 849 (Fed. Cir. 1991) (party seeking review of
an interference decision has the choice of either filing an appeal in the Federal Circuit
under §141 or an initial suit in a district court under §146).
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Summary
The University initiated and participated in the contested PTO interference against
Vas-Cath; we conclude that the University cannot both retain the fruits of that action and
bar the losing party from its statutory right of review, even if that review is conducted in
federal court. In the circumstances that here exist, the state's actions with respect to the
interference include waiver with respect to the ensuing civil action. Having waived any
potential immunity as to the interference contest in the PTO, we conclude that the
University waived any Constitution-based objection to Vas-Cath's statutory right of judicial
review. The dismissal of the §146 action is reversed; we remand to the district court for
further proceedings.
REVERSED AND REMANDED
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