Not unexpectedly, the State of Minnesota, as sovereign of the Regents of the University of Minnesota, filed on Thursday its petition to Supreme Court for certiorari.  The State contends that the Federal Circuit erred in deciding that the university, as an "arm of the state," could not assert sovereign immunity against LSI in its attempt to have the Patent Trial and Appeal Board institute inter partes review against university-owned patents.  The State's Question Presented was succinct:

Whether the inter partes review proceedings brought by private respondents against the University of Minnesota in this case are barred by sovereign immunity.

The State made several arguments in support of its petition.  Not surprisingly, the State's main argument is based on a case used by both parties below, Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 761 (2002).  In the State's view, this case mandates that "[s]tates and state entities, including the University of Minnesota, have sovereign immunity to suits by private parties before courts and 'court-like administrative tribunals.'"  Minnesota specifically contends that inter partes review (IPR) are the type of adversarial proceedings that the Eleventh Amendment to the U.S. Constitution was intends to fall within the scope of sovereign immunity, giving the Several States the prerogative to avoid suit by private parties.  The State also contends that the distinctions used by the Federal Circuit "do not withstand scrutiny," that the issue is sufficiently important to warrant review and this case is an "excellent" vehicle to do so.

In many ways this is a quintessential Supreme Court case, having to do with State sovereignty as it existed before the states ratified the Constitution (Minnesota having done so much later than the Original States) and the extent to which and how that sovereignty survived formation of the Union.  See, e.g., Alden v. Maine, 527 U.S. 706, 713 (1999).  Minnesota raises a policy issue at the beginning of its brief:  the University is a land-grant university that "invest[s] billions of dollars in public funds into research that results in valuable patents, the revenues from which are reinvested in the States' research and educational programs" (thus implicating the State's sovereignty in supporting this research and pursuing patent protection in the public interest).  The State's brief acknowledges waiver of its sovereign immunity under circumstances where is asserts its patents against infringers, blunting the argument that the State was trying to "eat its cake and have it too.

The issue is not whether the university's patents can be challenged, because the State has asserted these patents against Respondent in district court litigation.  The issue, according to the brief, is that the State has the constitutional right to choose the forum before which its patents are put at issue.  This position is contrary to the Federal Circuit's blanket determination (begging for Supreme Court review) that IPRs are not subject to any sort of sovereign immunity, based on the appellate court's decision in St. Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc.  The significance of the Federal Circuit's decision (and the need for the Supreme Court to grant the university's cert. petition) is put forth starkly in the brief:

The Federal Circuit's decision is indisputably consequential.  It injures the sovereignty of every State and subjects public universities to a new and increasingly invoked form of litigation without their consent.  Those disputes implicate billions of dollars' worth of intellectual property rights at the center of some of the most important sectors of our economy.  It is unsurprising, then, that state universities and fourteen States filed amicus briefs below attesting to the importance of the question presented here and its impact on state funding for scientific research.  The Department of Justice's amicus brief likewise professed that the issue has "cross-cutting significance for the federal government."

The brief enumerates the five ways a patent can be challenged: as a defense in patent infringement or in a declaratory judgment action before a district court; and in ex parte reexamination, the former inter partes reexamination, and in the current inter partes review.  Inter partes review is different from the other types of challenges that can or could have been brought before the Patent Office because, according to the brief, Congress intended inter partes review proceedings to "convert[] inter partes reexamination from an examinational to an adjudicative proceeding," citing the legislative history H.R. Rep. No. 112-98, pt. 1, at 46-47 (2011).  Relying on the Supreme Court's decision in SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1353 (2018), the brief enumerates all the ways the Court has appreciated IPRs to be litigation-like.  The brief then turns to the historical recognition of a State's "'residuary and inviolable sovereignty'" the Founders intended to persist (citing the Federal Circuit's own citation of The Federalist No. 39, at 245 (James Madison) and that this immunity extends to "arms of the state" including state universities, citing Raygor v. Regents of the Univ. of Minn., 534 U.S. 533, 535-36 (2002).  And Congress has but a limited right to abrogate this immunity, Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627 (1999), which has not been asserted in this case.  The point is not whether a State can be sued, but where (i.e., what forum or tribunal), under Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 99 (1984).  The Board disagreed that a State could assert its sovereign immunity from IPR proceedings once it had asserted its patents against accused infringers, holding that assertion constituted waiver both in the district court and before the PTAB.  And the Federal Circuit relied on its St. Regis decision in holding that sovereign immunity does not apply to IPR proceedings for States any more than it did for Indian tribes (despite the difference in scope of these immunities).  The basis for that decision, and the principle of law that Minnesota is basing its petition upon, is that "IPR is more like an agency enforcement action than a civil suit brought by a private party" at least in part because "even if the petitioner or patent owner elects not to participate during IPR, the Board can continue to a final written decision."

Minnesota's arguments focus on the conflict between the Federal Circuit's decision and Supreme Court precedent, including Fed. Mar. Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 760-61 (2002) (FMC), and its recent decision in Return Mail, Inc. v. U.S. Postal Serv., 139 S. Ct. 1853, 1866 (2019) (which was not yet decided during the case below).  As it had done before the PTAB and the Federal Circuit, the State's argument is that IPRs are too akin to adversarial proceedings for State sovereign immunity not to apply, and the brief lays out those similarities and analogizes them to FMC.  Moreover, "[m]ore important than the sheer number of parallels to civil litigation was the fact that the administrative proceedings inflicted precisely the harms sovereign immunity is intended to prevent" according to the State's brief, comprising an affront to the State's sovereign dignity.  The similarities between IPRs and litigation is based on the Court's own statements in SAS.

Turning to the distinctions made by the Federal Circuit, the brief points out the inconsistencies in its reasoning.  As recognized by the Court in SAS, Congress did not intend IPRs to be merely another form of agency actions, for example, like ex parte reexamination where the PTAB "plays the role of the superior sovereign" but rather opted for a party-directed, adversarial process," citing the legislative history of the Leahy-Smith America Invents Act in support of this argument.  H.R. Rep. No. 112-98, pt. 1, at 46-47 (2011).  The brief uses this distinction to differentiate IPRs from ex parte reexamination (necessary because the existence of ex parte reexamination has been persuasive, both before the Federal Circuit and the Supreme Court, to reach the conclusion that patents are a governmental grant (readily rescinded under appropriate circumstances) rather than a property right).  Oil States Energy Services, LLC. v. Greene's Energy Group, LLC (2018).  In discussing the IPR initiation proceedings, the brief asserts that "[e]nduring even the preliminary proceeding is the kind of costly indignity from which sovereign immunity is intended to shield the States."  Analogizing this situation with declaratory judgment actions, the brief states that "even the Federal Circuit recognizes that states are immune from declaratory judgment actions despite this discretion [i.e., the court's discretion whether to initiate a declaratory judgment action]," citing Tegic Commc'ns Corp. v. Bd. of Regents of the Univ. of Tex. Sys., 458 F.3d 1335, 1339-40 (2006).

Turning to specifics, the brief notes that "nothing about the Board's power to approve or decline institution can erase the fact that 'Congress chose to structure a process in which it's the petitioner, not the Director, who gets to define the contours of the proceeding,"' citing SAS.  "[T]he petitioner is master of its complaint and normally entitled to judgment on all of the claims it raises," according to SAS as in civil litigation, nor is the Board able to consider grounds of unpatentability of its own or consider whether the claims are novel or obvious on the basis of any art or argument other than what is raised by the IPR petitioner, by statute and rule.  35 U.S.C. § 316; 37 C.F.R. §§ 42.51-.53, 42.63-.65.  The indignities Minnesota complains of arise at IPR initiation according to the brief, making the fact that the Board can maintain an IPR, once instituted, much less significant (particularly because of the Federal Circuit's reliance on this ability).

The brief also challenges the Federal Circuit's reasoning that Minnesota had surrendered its sovereign immunity because patents are granted by the U.S. government, against which States have waived their immunity, based on the Court's FMC decision.  "A suit falls within the scope of States' consent to suit by the United States only if the suit 'is commenced and prosecuted against a State in the name of the United States by those who are entrusted with the constitutional duty to "take Care that the Laws be faithfully executed,"'" citing Alden.  And the "plan of the [constitutional] convention" involved State's consent to be sued by the United States in federal court (indeed, limited to the Supreme Court), not agency tribunal according to the brief, citing Franchise Tax Bd. v. Hyatt, 139 S. Ct. 1485, 1495 (2019).

Finally, the brief addresses the argument that IPRs are proceedings in rem.  Even if correct, this isn't dispositive, according to the brief, and the Court itself has held to the contrary.  Minnesota disagrees with the very premise, stating that IPRs are in personam proceedings not proceedings in rem, citing Return Mail.  The "essential feature" of in rem proceedings, that they are "one against the world," is missing in IPRs according to the brief.  The brief illustrates this point in the case where the Board decides that the petitioner has not established that the challenged claims are invalid:

That judgment does not settle the question finally and for everyone.  It bars only the petitioner from making the same claim in future proceedings.  35 U.S.C. § 315(e).  The rest of the world is free to raise the same challenge to the patent before the PTAB or a court, see id., and others frequently do.

Also notable about the Federal Circuit's argument in this regard is that "the panel was unable to identify any other case in which a dispute over entitlement to a patent or other government franchise has been treated as an in rem proceeding for any purpose, much less as a ground for setting aside sovereign immunity."

Minnesota implores the Court to grant its cert petition because "[t]he PTAB, the Department of Justice, and the States have acknowledged the broad importance of the question presented."  The reality is that "[s]tate universities are issued thousands of patents every year, and many hold portfolios that generate millions of dollars in much-needed revenues for the States and their educational institutions."  Challenging patents, including university patents, by IPR proceedings "ha[s] become increasingly common" and is "made particularly attractive to infringement defendants by their lower standard of proof for unpatentability."  And because IPRs tend to be filed attendant to a State bringing a patent infringement suit, the challenged patents will be the State's "most important patents" because they are "the ones valuable enough to warrant the cost of bringing infringement litigation."  Returning to its constitutional theme, the brief asserts that:

Sovereign immunity is a critical element of the Constitution's structural protection of liberty through the division of power between States and the Federal Government.  See Alden, 527 U.S. at 751.  The Federal Circuit's disregard for that essential feature of the constitutional order in the patent context is bad enough.  But if left unreviewed, the precedent established here will provide a template for further incursions on States' immunity and evasion of the constitutional limits on Congress's powers of abrogation.

This case is "an excellent vehicle" for the Court to consider the question.  In view of the Court's refusal to grant cert in the St. Regis case, "no further percolation [of the issue] can be expected"; if the Court does not consider the question here it will not get another opportunity, according to Minnesota's brief

It is reasonable to believe that Minnesota should have no reason to fear that the Court will not be receptive.  The Court has granted cert in several cases involving the PTAB and IPR proceedings that have far less constitutional implications than this one.  Questions involving Federalism, states' rights, and the extent to which State sovereignty can be abrogated by the Federal government should be like mother's milk to the Court; while it is foolhardy to make any predictions, failure to grant cert would be an uncharacteristic and surprising action by the Court.