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Congress is maneuvering to make an end run around last year’s Supreme Court decision that gave states and state universities special status in the IP arena. The Court ruled in June 1999 that states cannot be sued in federal court for patent infringement. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627, the Court held that Congress overstepped its authority by passing a 1992 law that allowed states to be sued for infringement. The legislation, the Court said, abrogated states’ rights to “sovereign immunity” under the Eleventh Amendment of the U.S. Constitution. The ruling created an uproar in the IP community. The U.S. Patent and Trademark Office, copyright holders, members of Congress and several law professors say the decision creates an inequitable situation. “If states want to participate in the IP system — get patents and use them — they should also be bound by the same rules,” PTO Commissioner Q. Todd Dickinson says. Dickinson adds that the ability of state entities to freely infringe could make it difficult for the United States to enforce its patents in other countries. The PTO held a roundtable discussion on Florida Prepaid in March with a panel of constitutional and IP scholars, industry representatives and state attorneys general. And last month Rep. Howard Coble, R-N.C., held a hearing on the issue at which the PTO, the U.S. Copyright Office and law professors suggested options to hold states accountable for IP violations. Many in the IP community support legislation introduced last October by Sen. Patrick Leahy, D-Vt. The measure would require states to waive their sovereign immunity in any future IP suits as a condition for obtaining patents, copyrights and trademarks. Leahy contends that IP protections are a privilege, not a right, and that Congress could deny states access to such protections. “States and their institutions, especially state universities, benefit hugely from the federal intellectual property laws,” Leahy testified at Coble’s hearing. It is appropriate for the federal government to give them IP protection, he said, “so long as the states hold up their end of the bargain by honoring the exclusive rights of other intellectual property owners.” Those in favor of the Florida Prepaid decision say concerns about IP piracy by states are unfounded. Opponents of sovereign immunity “can’t present cases where states are infringing,” says Gerald Dodson, a partner at Morrison & Foerster’s Palo Alto, Calif., office and counsel to the University of California. UC Berkeley Boalt Hall law professor Peter Menell agrees that the Supreme Court decision does not pose a large threat to IP owners. “It’s hard to come up with a compelling case that this is happening or that if it happened it would be condoned,” Menell says. However, he adds, “there’s not a strong argument against extending liability to states, and it would be a relatively good policy to adopt it.” PTO attorney Justin Hughes agrees that state agencies are not committing massive piracy. But he says it’s wrong to say infringement is not occurring. “I could send you 20 citations where state institutions are defendants,” Hughes says, adding that these do not include settled cases, cease and desist requests or instances where an IP owner didn’t file suit. It remains to be seen whether Congress can compel states to turn in their free pass from being sued in federal court in a manner that the Supreme Court will OK. Hughes notes that the courts have previously upheld waiver of state immunity in other situations. He says the classic case is the Supreme Court’s 1987 ruling in South Dakota v. Dole, 483 U.S. 203, in which Congress made receipt of highway funds conditional upon the states raising the drinking age to 21. The Supreme Court ruled that Congress had to offer a genuine carrot — a gift or gratuity — to get states to waive their immunity. “We don’t know if a patent is a gift or gratuity,” Hughes says. “This is a big open question.”

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