Sovereign ImmunityTarget: Sovereign Immunity
Shore Chan DePumpo LLP has represented sovereign state entities for more than a decade. Through that experience, the Firm fully understands the importance of sovereign immunity to its clients, as well as the potential advantages or disadvantages of asserting immunity. The Firm played an instrumental role in establishing that sovereign immunity is a bar to an inter partes review before the Patent Trial and Appeal Board.
What is inter partes review?
Inter partes review, or IPR, is a procedure established by the American Invents Act in 2012. Purportedly a means to establish a separate and quicker alternative to district court litigation, IPRs have resulted in a "crisis mode" for the U.S. patent system, according to former Federal Circuit Chief Judge Paul Michel. Since IPRs became available, economists are estimating the decline in the value of U.S. patents to be in the trillions of dollars. The average price per patent over the three-year period 2012 to 2014 dropped 61% from $422,286 per patent to $164,232. In that timeframe, the number of patents sold dropped from just under 7,000 to 2,800, showing a decrease in liquidity in the patent market. Overall sales dropped from $3 billion to well under one-half billion dollars in patent sales per year, or by 84%. This trend accelerated after 2014. Since passage of the AIA, the United States has fallen from 1st to 10th in the ranking of the strength of its intellectual property system. As the patent system in the U.S. continues to weaken, other countries are strengthening theirs. China in particular is beefing up their patent infringement remedies like injunctions and allowing ever higher damages awards. Shore Chan is leading the charge to repeal the worst aspects of the America Invents Act, a law designed by large multi-national corporations to destroy the United States patent system that built the strongest, most innovative, and dynamic economy the world has ever seen.
Sovereign immunity from IPRs
The idea that sovereigns were immune from declaratory judgment suits in patent cases was established by Tegic v. The Board of Regents of The University of Texas System, a case Michael Shore argued at the Federal Circuit. Tegic established that a sovereign can only be sued to have its patents invalidated in the same forum the sovereign chooses to file an infringement action.
The next step came in January of 2017 with a case for The University of Florida Research Foundation ("UFRF"). UFRF filed suit for an audit in Florida state court. The licensees filed an IPR to have the licensed patent declared invalid (to moot the license). Our firm was able to use the Tegic opinion and others to convince the PTAB that an IPR is equivalent to litigation and that a sovereign has to consent prior to suit there. UFRF did not consent, the PTAB agreed they had immunity, and the IPR was dismissed.
Shore Chan immediately recognized the value in sovereign-held patents. The value of the same patent held by a sovereign has a much higher value than the same patent held by a non-sovereign because for sovereigns, the presumption of validity and all of the protections of an Article III court (presumption of validity, clear and convincing evidence standard, and jury trial on damages at the same time as a validity challenge). The Firm began strategizing to reap the value of that difference in value.