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The public university is sometimes the outside world’s most visible representation of another state’s individuality. Citizens in the university’s home state expect the institution to serve them. The research and development of new patents is an accepted part of a university’s mission these days. Citizens hoping to benefit from these new inventions, however, may be disappointed when they learn they’re actually paying twice for the same inventions. As the statutory and case law stands now, universities enjoy a “favored patent party” status among patent holders. Using the doctrine of sovereign immunity as a shield, public universities are not subject to the same specter of possible lawsuits that helps keep many private companies focused on avoiding mistakes and doing no harm. This point was amply illustrated in Tegic Communication Corp. v. Board of Regents of the University of Texas System, 458 F.3d 1335 (Fed. Cir. 2006), a case decided by the U.S. Court of Appeals for the Federal Circuit in August. The U.S. Patent and Trademark Office identifies more than 540 colleges and universities that hold more than 42,700 patents. Not all of these colleges and universities can claim sovereign immunity, but many have and can. Many in Congress have not been unsympathetic to complaints about the free pass universities seem to enjoy, but courts and congressional factions have stymied efforts to hold universities at least somewhat accountable for their own possible infringement of others’ patents. How did we get here? Sovereign immunity is based on the concept that there can be no legal right against the authority that makes the law on which the right depends. In a constitutional monarchy, the sovereign creates the courts for the protection of his or her subjects. Accordingly, the courts have no power to act against the sovereign that created them. The U.S. government has sovereign immunity. Though neither the phrase nor the concept appears in the Constitution, sovereign immunity has nonetheless been recognized judicially since at least 1821, when Cohens v. Virginia, 19 U.S. 264, 411-12 (1821), proclaimed, “The universally received opinion is, that no suit can be commenced or prosecuted against the United States.” Despite no grant of sovereign immunity from “We the People,” it does seem reasonable for a government to be immune from prosecution or liability for acts it performs on behalf of the society that created it. It also seems reasonable that a government could be sued if and when it consents to be sued, that is, if it waives its sovereign immunity, as it does via the Federal Tort Claims Act. In Hans v. Louisiana, 134 U.S. 1 (1890), the U.S. Supreme Court held that the 11th Amendment to the U.S. Constitution extended sovereign immunity to individual states. Favorably citing a 1793 court opinion, the Supreme Court said, “The suability of a State without its consent was a thing unknown to the law. This has been so often laid down and acknowledged by courts and jurists that it is hardly necessary to be formally asserted.” Id. at 16. A publicly funded university is considered to be an arm of a state. Some states even codify this relationship. The Texas Government Code � 411.101(3) deems the University of Texas (U.T.) to be an arm of the state of Texas. Logically then, a university like U.T. can claim 11th Amendment protection, or sovereign immunity, just as the state can and not be sued without giving consent. The concept of sovereign immunity is not without its critics. Some argue that no one should be above the law in a society that recognizes the rule of law. It has also been argued that sovereign immunity can be unfairly used to avoid liability for acts that would legally ensnare any private citizen or corporation. Though a private party might be able to get equitable relief against the government-an injunction, for example-any monetary compensation is off limits without the state’s waiver. Universities take control Before 1980, the U.S. government generally retained title to inventions created with federal funds. Then, the government made those inventions available to anyone willing to enter into a nonexclusive license, that is, one for the use of multiple parties, not for the sole use of one party. These nonexclusive licenses did not foster the technological development that the government hoped for, as companies were reluctant to invest in and develop new products if their competitors could acquire the same licenses to manufacture and sell similar products. In 1980, Congress passed the Bayh-Dole Act, P.L. 96-517 (Patent and Trademark Act Amendments of 1980), which let public universities choose whether they would retain title to their own federally funded inventions or whether the federal government would keep control. Universities jumped at the chance. If they chose to retain title themselves, universities could then grant exclusive licenses to single parties, a potentially lucrative prospect. The move also fostered increased technological development, as license holders now had the incentive to develop their own unique products with the licensed invention. While the Bayh-Dole Act was still being debated, then-Secretary of Commerce Phillip Klutznick reportedly remarked that the act was akin to “using tax money to pay a contractor to build a road and then allowing the contractor to charge an additional toll to those who travel the road.” Nonetheless, Bayh-Dole was enacted in 1980 (and privately constructed toll roads are increasingly commonplace!). To its proponents, Bayh-Dole has been a success. After the law went into effect, many universities hired “technology managers” to oversee the transfer of university research to private companies. Soon, the technology managers formed an association: the Association of University Technology Managers (AUTM). In a May 16, 2002, public letter to senators Patrick Leahy, D-Vt., and Orrin Hatch, R-Utah, AUTM urged the lawmakers to consider a 1995 Massachusetts Institute of Technology study of AUTM data, estimating that Bayh-Dole spurred more than $41 billion in economic activity and generated nearly 300,000 jobs in its first 15 years. See www.autm.net/about/sovereign.pdf. In the same letter AUTM also pointed out that the fiscal year 2000 Annual AUTM Licensing Survey showed that at least 454 new companies were formed based on academic discoveries in fiscal year 2000, and 4,362 new licenses and options were executed. The total number of active licenses and options for that fiscal year was 20,968. In addition, joining the several thousand university technology-inspired products already on the market, close to 350 new products were first made commercially available in fiscal year 2000. With the passage of Bayh-Dole, universities could exploit their patents for their own commercial gain, yet they could still claim immunity against patent infringement claims. Many in Congress thought this was unfair since a private company could not simultaneously exploit its patents on the one hand and claim immunity from a claim of patent infringement on the other. Thus, in 1992, Congress enacted a statute abrogating sovereign immunity for states for federal patent law violations. A mere seven years later, in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 666 (1999), the Supreme Court invalidated the statute as “inappropriate.” The court said that Congress could abrogate state sovereign immunity under � 5 of the 14th Amendment, but to do so, it had to first identify some conduct that ran afoul of the 14th Amendment’s substantive provisions, and it had to tailor its legislative scheme specifically to remedying or preventing such conduct. In the early 2000s, Congress considered offering states a trade: In exchange for access to the full range of remedies for infringement of their own intellectual property, states had to waive sovereign immunity from similar suits filed against them. States choosing not to waive their sovereign immunity would be left with the same limits on enforcement of intellectual property suits as private parties would have against the state, that is, they could get injunctive relief but not monetary relief. According to the drafters of one congressional proposal (S. 2031): “States enjoy substantial revenue from intellectual property. If they wish this revenue stream to continue, they will agree to be held accountable when they interrupt someone else’s revenue stream.” Congress’ proposed action generated considerable debate. AUTM argued, in its letter to Leahy and Hatch, that there was no need for any change partly because of the “paucity of occurrences where sovereign immunity has been utilized as a defense against infringing acts.” Congress ultimately took no action. Rah, rah for ol’ state U Against this backdrop, on Aug. 10, 2006, the Federal Circuit issued a decision in Tegic Communication Corp. v. Board of Regents of the University of Texas System. U.T. had filed a patent infringement suit in a Texas federal district court against 48 cellular telephone companies over a method for inputting text into a keyboard. Tegic, a Washington company, sold and licensed text-input software to 39 of the 48 defendants. Tegic then sued U.T. in a Washington federal district court, seeking a declaration that the university’s patent was invalid, unenforceable and not infringed. Tegic argued that U.T.’s suit in Texas, though ostensibly directed against cellular phone manufacturers, was actually directed against Tegic as the manufacturer and licensor of text-input software. U.T. argued that as an arm of the state, it was not subject to the jurisdiction of the Washington federal court and was protected against Tegic’s suit by 11th Amendment immunity. Judge Robert S. Lasnik of the Western District of Washington agreed with U.T. Tegic appealed, but the Federal Circuit affirmed. There was no ‘clear’ waiver The appeals court found that U.T.’s filing in Texas federal court did not waive its consent to suit in the Washington federal court action. A “clear” waiver was required, yet none was present in this case. While U.T. made itself a party to the Texas litigation “to the full extent required for its complete determination,” the university did not clearly voluntarily submit itself “to a new action brought by a different party in a different state and a different district court.” Tegic argued that when U.T. voluntarily invoked the jurisdiction of a federal court in Texas, it waived its immunity against a manufacturer that would be favored under the customer-suit exception, which holds that a manufacturer’s action to resolve patent infringement charges against its customers receives preferential treatment over a patent owner’s earlier filed suit, when the manufacturer (Tegic) was the real party in interest in the university’s suit. The Federal Circuit stated that the guiding principles in the customer-suit exception case are efficiency and judicial economy, and Tegic had not established that it would be more efficient to allow its declaratory action to proceed in Washington than it would to allow U.T.’s case to proceed in Texas. According to the Tegic court, a public university that files a patent infringement lawsuit waives sovereign immunity to the extent that it allows a complete determination to be made and to the extent that it agrees to allow compulsory counterclaims, which it could “surely anticipate” to be made against it. A clear waiver of immunity is therefore needed but cannot be found here. A university that takes steps to enforce its own patent rights in federal court-even if a company acts solely as a “market participant”-does not necessarily clearly waive its sovereign immunity. Cases involving an arguably related party on the same patent but filed in a different court than the one originally chosen by the university are not voluntarily submitted or consented to by the university. Thanks to Tegic and the Supreme Court, U.S. citizens must pay twice for certain products: once when their taxes support university research, and once again when they pay companies for products the companies developed based upon “licensed” university research. Congress, seeking to treat universities and private companies equally, has endeavored to reduce or eliminate claims of sovereign immunity by universities. But courts have thwarted Congress’ efforts. With no change on the horizon, publicly funded universities will continue to enjoy greater latitude than most entities seeking to enforce patents.

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