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Party Initiating Interference Cannot Assert Eleventh Amendment Immunity upon Appeal of the Board’s Decision to the Federal District Court

January 23, 2007

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Last Month at the Federal Circuit - February 2007

Judges: Newman (author), Lourie, Rader

[Appealed from: W.D. Mo., Judge Fenner]

In Vas-Cath, Inc. v. Curators of the University of Missouri, No. 06-1100 (Fed. Cir. Jan. 23, 2007), the Federal Circuit reversed the district court’s dismissal of Vas-Cath, Inc.’s (“Vas-Cath”) appeal of the interference decision in favor of the Curators of the University of Missouri (“University”).

The PTO issued a patent directed to catheters to Vas-Cath while the University’s patent application on the same subject matter was pending in the PTO, even though the University’s application was filed first. The University initiated an interference between its pending application and Vas-Cath’s issued patent. The Board awarded priority to the University and held that Vas-Cath, the junior party, was not entitled to any claims corresponding to the count.

Vas-Cath appealed the Board’s decision to the district court, pursuant to 35 U.S.C. § 146. In response, the University asserted Eleventh Amendment immunity from suit in federal court and moved to have the appeal dismissed. The University asserted that the Eleventh Amendment limits federal courts from exercising authority over states, i.e., a state cannot be sued in federal court without its consent, and the University is part of the state of Missouri. The district court granted the University’s motion.

Vas-Cath appealed the dismissal to the Federal Circuit, arguing that the University waived immunity by initiating the interference proceeding in the PTO, and thereby submitting itself to an appeal in a district court. Vas-Cath asserted that the appeal was not a new claim against the University, but rather the appropriate method for reviewing the Board’s priority decision. Vas-Cath reasoned that the University cannot bar an appeal by the losing party, i.e., Vas-Cath, while the University retains the benefits of the Board’s decision.

The Federal Circuit agreed with Vas-Cath and reversed the district court’s dismissal. While the Court acknowledged that precedent has held that (1) a state’s participation in the federal patent system does not itself waive immunity in federal court with respect to patent infringement by the state; and (2) without proof that there was no remedy under state law, suit against a state university in federal court to obtain correct inventorship was correctly dismissed on Eleventh Amendment grounds, the present case is different. According to the Federal Circuit, the issue in this case was whether the Eleventh Amendment immunized the University from appeal of the Board’s decision in which the University prevailed.

The Federal Circuit held that the University had waived immunity for multiple reasons. First, the University proactively requested that the PTO conduct an interference, which is a litigation-type activity, and successfully obtained a favorable ruling. The Court pointed out that “[t]he principles of federalism are not designed for tactical advantage,” and that the Supreme Court has held that when a state voluntarily becomes a party to an action and submits its rights for judicial determination, as it did in this case, doing so waives immunity and the state cannot escape the result of its own actions by invoking the Eleventh Amendment. Slip op. at 10. This was not a suit by an individual against an unconsenting state; rather, this case involved review of an agency adjudication to which the state consented in full adversary proceedings, including testimony by state employees and use of state documents. Therefore, the University waived its Eleventh Amendment immunity by its participation in the interference and submitting its patent rights to the Board for judicial determination.

Second, the Federal Circuit held that the University’s consent and participation in the interference proceeding included the ensuing statutorily prescribed review procedures, i.e., appeal in federal district court. The Court rejected the University’s argument that it was forced to initiate the interference because the PTO failed to do so. The Federal Circuit explained that the issue is not whether the University voluntarily participated in the PTO interference, but whether the University can now bar the appeal of the Board’s decision. The Federal Circuit reiterated that the University had not asserted Eleventh Amendment grounds during the interference, but did participate fully in the interference. Interference proceedings, the Federal Circuit pointed out, are multipart actions with the right of appeal, starting in the PTO and culminating in federal court. Therefore, the losing party’s appeal to district court, which is authorized by 35 U.S.C. § 146, is not a “new claim,” but rather another phase of the interference proceeding.

Thus, based on the appeal procedures set forth by Congress and the University’s actions prior to the appeal, the Federal Circuit held that the University waived any Eleventh Amendment immunity and that Vas-Cath has a right to appeal the Board’s priority decision in federal district court.