In the lucrative world of patents, the University of California is a major player. It receives by far more patents from the U.S. government than any school in the country. And by licensing out its intellectual property, the university has generated about $500 million in revenue in the past five years.
The school also aggressively uses the courts as a sword, and is unafraid to take on big companies. As a plaintiff alleging patent infringement, the school has settled a claim against Genentech Inc. for $200 million, secured a payment of $185 million from Monsanto Co., and won a $30 million settlement from Microsoft Corp.
Yet, when it comes to getting sued for patent infringement, the university, as well as the state of California, are Teflon. A legal doctrine known as sovereign immunity protects states and state institutions from legal liability. Courts have held that participating in the federal patent system doesn’t cost a state its immunity. The upshot states can sue, but effectively can’t be sued.
Now a recent federal court case has reignited the debate over states’ immunity from patent lawsuits. Late last month, the U.S. Court of Appeals for the Federal Circuit, reinforcing settled law, ruled California can sue others for patent infringement as often as it wishes, and still maintain immunity from patent lawsuits. In the case, Biomedical Patent Management Corp. sued the state of California for refusing to pay royalties on a patented method of screening birth defects in fetuses. Owned primarily by an inventor, San Diego-based BPMC has as its only asset the patent at issue in the case.
When trial-court judge Marilyn Hall Patel dismissed the lawsuit last year, she expressed displeasure with the state of the law. “The court is indeed troubled by the University of California’s ability to reap the benefits of the patent system without being exposed to liability for infringement,” wrote Judge Patel, who sits in federal court in San Francisco. “Similarly situated private universities enjoy no such advantage.”
A lawyer for the state essentially says tough luck. “Sovereign immunity came from the king not wanting to be sued by his subjects and it ended up in our jurisprudence,” said Susan King, a deputy attorney general in California who argued the case. “It’s not fair but it’s the current state of the law.”
In the context of sovereign immunity, federal courts have treated different branches of a state such as its university system as part of a single entity, much like different divisions of the same company.
