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Sovereign Immunity May Not Shield Schools in All Patent Disputes

Feb. 4, 2020, 9:06 PM

Public universities may not be able to hide behind sovereign immunity to avoid involvement in some patent infringement lawsuits, a Federal Circuit panel signaled.

“As a university, once you agree to participate in the patent system, you are on the same playing field as everyone else,” Judge Pauline Newman said during oral argument in a case involving two medical treatment patents.

State universities usually qualify for immunity from patent litigation because they are an arm of the state, but the panel appeared skeptical the University of Texas could claim immunity here.

The court was hearing a case in which the university licensed U.S. Patent Nos. 8,728,806 and 9,333,248 related to methods of modifying a patient’s immune system to kill cancer cells to Gensetix Inc. The agreement allowed the university to keep an interest in the patents and the right to income, and required Gensetix to sue for infringement. The university, which still owns the patents, retained a broad right to sue and control litigation.

Gensetix later alleged the creator of the technology infringed its patent rights by continuing to practice the methods at Baylor College of Medicine with Diakonos Research Ltd.

When the University of Texas refused to help it enforce the patents, Gensetix joined it as an involuntary plaintiff. The U.S. District Court for the Southern District of Texas dismissed the suit, finding that sovereign immunity barred the university from being forced to join the dispute, and that Gensetix lacked standing to sue without the patent owner’s involvement.

The Federal Circuit panel appeared to question the lower court’s logic.

Generally, a contract invokes sovereign immunity because the state doesn’t want to be sued, Judge Kathleen M. O’Malley said. “Here it said the licensee must sue but UT is making it impossible,” she said.

But Gensetix agreed to that provision, Michael Hawes of Baker Botts LLP in Houston, arguing for Baylor and Diakonos, said. The court doesn’t have the power to adjudicate the state’s interest without its consent, he said.

That raises the question of whether the contract can ever been enforced, Newman said.

“Why would anyone ever make a deal with a state university?” Newman asked. “It’s like rolling the dice.”

Gensetix’s attorney, Paul Skiermont of Skiermont Derby LLP in Dallas, argued that the university isn’t being dragged into the suit—it entered the contract with Gensetix and required it to protect its patent rights.

“UT’s interests are 100% aligned with Gensetix,” he said. “It’s not fair for Gensetix to have to sit on the sidelines because UT won’t participate.”

Judge Richard G. Taranto, however, said that requiring the university to join the litigation could bind UT to a judgment of invalidity it might prefer not to be saddled with.

The case is Gensetix, Inc. v. Baylor College of Medicine, Fed. Cir., No. 19-1424, argued 2/4/20.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Melissa B. Robinson at mrobinson@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com