IP News

The Federal Circuit recently held that when the state voluntarily enters a federal court to enforce a patent, the state waives Eleventh Amendment immunity for all compulsory counterclaims. See Regents of the University of New Mexico v. Knight, 2003 U.S. App. LEXIS 3647 (Fed. Cir. Feb. 28, 2003). In Knight, two faculty inventors refused to assign their patents to the University. The University prosecuted the patents anyway and later licensed them to a third party, warranting the ownership of the licensed patents. After being sued by the licensee for breach of warranty, the University filed suit against the inventors arguing that their employment contracts required assignment. Initially, the University claimed money damages and the inventors asserted various counterclaims including a claim for royalties. The University then amended its complaint and withdrew requests for money damages. The district court held that as an arm of the state, the University was protected by the Eleventh Amendment immunity clause in the U.S. Constitution, which immunizes the state from being sued. The district court held that the University waived immunity only for the inventors' claims in recoupment, which arose out of the same transaction or occurrence of the University's claims. Id. at 10. By amending the complaint to withdraw money damages, the district court held that the inventors' money counterclaims were no longer claims in recoupment and were, therefore, barred by the Eleventh amendment. Id.

After affirming the district court on contract and patent ownership issues, the Federal Circuit reversed the district court's decision on the barred counterclaims. First, the Court held that in the interests of keeping national uniformity in patent law, the question of Eleventh Amendment waiver was a matter of Federal Circuit and not regional Circuit law. Next, the Court decided that recoupment was the wrong criteria for determining the extent of a state's Eleventh Amendment immunity waiver. The Court pointed out that simultaneously bringing a case in a court and claiming immunity from that court was unfair and inconsistent. Id. at 35-36. The Federal Circuit held that states voluntarily appearing in federal court waive immunity not only for claims in recoupment, but for the larger class of compulsory claims. Id. at 34-35. The Court stated that compulsory claims were claims that may not be strictly the same kind or nature as the claims at issue, but that should be litigated together with the claims at issue. Id. at 35. Ultimately, the Court held that the inventors' claims were compulsory and, therefore, not barred, and remanded to the district court to determine if the inventors' other counterclaims were compulsory. Id. at 39-40.

No Waiver in Failing to Bring an Invalidity Claim in a Summary Judgment Motion for Infringement

The Federal Circuit held that the failure to raise patent invalidity in opposition to a summary judgment motion of infringement was not a waiver of the validity claims. See Pandrol USA, LP v. Airboss Ry. Prods., Inc., 320 F.3d 1354 (Fed. Cir. 2003). In Pandrol, defendants did not raise their affirmative defense and counterclaim of invalidity in response to plaintiffs' motion for summary judgment. Id. at 1360. The district court granted plaintiffs' motion for summary judgment of infringement and held that the defendants waived their invalidity affirmative defense and counterclaim by not raising the same in opposition to plaintiffs' motion. Id. at 1360-61.

The Federal Circuit did not agree. The Court stated that the summary judgment motion was only for infringement and not for liability or validity. Id. at 1365. The Court reasoned that while the issues of infringement, validity, and unenforceability are usually addressed together, the issues are still distinct. Id. The Court pointed to Cardinal Chemical Co. v. Morton Int'l, Inc., 508 U.S. 83, 102-03 (1993), where the Supreme Court held that finding noninfringement did not render invalidity moot. Pandrol, 320 F.3d at 1364. The Federal Circuit then cited to a number of cases that declined to find a waiver of invalidity in other contexts such as admitting infringement and accepting a license for a patent. The case was remanded to the district court to allow the defendants to assert their invalidity defense and counterclaim. Id. at 1366.

New European Community Patent Proposal

At the March 3rd meeting of the Competitiveness Council in Brussels, the Ministers agreed to a common political approach to creating a Community Patent. The proposal would create a special court, the Community Patent Court (CPC), with exclusive jurisdiction to hear invalidity, infringement and declaratory actions as well as other actions such as claims based on prior use. The litigation of Community Patents would initially take place before a three-judge panel. All appeals would be heard by the Court of First Instance in the European Communities (CFI). Technical experts would be available to assist the judges in handling the case. The EPO would still be responsible for granting the patent, but National Patent Offices would be heavily involved as well. Once the patent is granted, the patentee would have to translate the patent into all 21 languages of the member states. This aspect has upset some members of European industry because translation may add up to 15,000 Euros to the cost of obtaining the patent. Council members propose to establish the Community Patent by 2010. A copy of the Council's proposal can be found at http://ue.eu.int at the press office link.

The Federal Circuit Rules on Eleventh Amendment Immunity

The Federal Circuit recently held that when the state voluntarily enters a federal court to enforce a patent, the state waives Eleventh Amendment immunity for all compulsory counterclaims. See Regents of the University of New Mexico v. Knight, 2003 U.S. App. LEXIS 3647 (Fed. Cir. Feb. 28, 2003). In Knight, two faculty inventors refused to assign their patents to the University. The University prosecuted the patents anyway and later licensed them to a third party, warranting the ownership of the licensed patents. After being sued by the licensee for breach of warranty, the University filed suit against the inventors arguing that their employment contracts required assignment. Initially, the University claimed money damages and the inventors asserted various counterclaims including a claim for royalties. The University then amended its complaint and withdrew requests for money damages. The district court held that as an arm of the state, the University was protected by the Eleventh Amendment immunity clause in the U.S. Constitution, which immunizes the state from being sued. The district court held that the University waived immunity only for the inventors' claims in recoupment, which arose out of the same transaction or occurrence of the University's claims. Id. at 10. By amending the complaint to withdraw money damages, the district court held that the inventors' money counterclaims were no longer claims in recoupment and were, therefore, barred by the Eleventh amendment. Id.

After affirming the district court on contract and patent ownership issues, the Federal Circuit reversed the district court's decision on the barred counterclaims. First, the Court held that in the interests of keeping national uniformity in patent law, the question of Eleventh Amendment waiver was a matter of Federal Circuit and not regional Circuit law. Next, the Court decided that recoupment was the wrong criteria for determining the extent of a state's Eleventh Amendment immunity waiver. The Court pointed out that simultaneously bringing a case in a court and claiming immunity from that court was unfair and inconsistent. Id. at 35-36. The Federal Circuit held that states voluntarily appearing in federal court waive immunity not only for claims in recoupment, but for the larger class of compulsory claims. Id. at 34-35. The Court stated that compulsory claims were claims that may not be strictly the same kind or nature as the claims at issue, but that should be litigated together with the claims at issue. Id. at 35. Ultimately, the Court held that the inventors' claims were compulsory and, therefore, not barred, and remanded to the district court to determine if the inventors' other counterclaims were compulsory. Id. at 39-40.

No Waiver in Failing to Bring an Invalidity Claim in a Summary Judgment Motion for Infringement

The Federal Circuit held that the failure to raise patent invalidity in opposition to a summary judgment motion of infringement was not a waiver of the validity claims. See Pandrol USA, LP v. Airboss Ry. Prods., Inc., 320 F.3d 1354 (Fed. Cir. 2003). In Pandrol, defendants did not raise their affirmative defense and counterclaim of invalidity in response to plaintiffs' motion for summary judgment. Id. at 1360. The district court granted plaintiffs' motion for summary judgment of infringement and held that the defendants waived their invalidity affirmative defense and counterclaim by not raising the same in opposition to plaintiffs' motion. Id. at 1360-61.

The Federal Circuit did not agree. The Court stated that the summary judgment motion was only for infringement and not for liability or validity. Id. at 1365. The Court reasoned that while the issues of infringement, validity, and unenforceability are usually addressed together, the issues are still distinct. Id. The Court pointed to Cardinal Chemical Co. v. Morton Int'l, Inc., 508 U.S. 83, 102-03 (1993), where the Supreme Court held that finding noninfringement did not render invalidity moot. Pandrol, 320 F.3d at 1364. The Federal Circuit then cited to a number of cases that declined to find a waiver of invalidity in other contexts such as admitting infringement and accepting a license for a patent. The case was remanded to the district court to allow the defendants to assert their invalidity defense and counterclaim. Id. at 1366.