Written by Peter Law and Kerry Taylor, Ph.D.

The PTAB has again addressed sovereign immunity in the context of an IPR. Reactive Surfaces, LTD. petitioned for IPR of U.S. Patents No. 8,394,618 and 8,252,571. The ’618 and ’571 patents are co-owned by Toyota Motor Corporation (Toyota) and the Regents of the University of Minnesota (UMinn). On Feb. 21, prior to institution of either IPR, the Patent Trial and Appeal Board (PTAB) authorized briefing on whether the IPRs should be dismissed based on UMinn’s sovereign immunity. On March 23, 2017, the PTAB instituted trial in IPR2106-01914, and noted that the briefing on the motion to dismiss would continue. Reactive Surfaces LTD., LLP, v. Toyota Motor Corp, Paper 26, at 30-31. On July 13, 2017, the PTAB granted in part the patent owners’ motions to dismiss, finding that the IPR could not proceed against UMinn, but could proceed against Toyota. Reactive Surfaces, IPR2016-01914, IPR2017-00572, Paper 36 at17, Paper 32 at 17.

Patent Owners’ motions argued that UMinn was entitled to assert sovereign immunity as a defense because it is an “arm of the State of Minnesota,” and that the IPRs must be terminated because “the merits of this inter partes review cannot be adjudicated in the absence of the [UMinn] Regents.” Reactive Surfaces responded, arguing that the sovereign immunity is not a defense in IPR, that UMinn is not entitled to assert sovereign immunity, and that the PTAB could proceed without UMinn. Reactive Surface’s arguments are similar to those made by petitioners in two other PTAB cases involving sovereign immunity: Covidien LP v. Univ. of Florida Research Found. Inc., IPR2016-01274, IPR2016-01275, IPR2016-01276, and Neochord, Inc. v. Univ. of Md., Balt., IPR2016-00208, both of which terminated the proceedings on the basis of sovereign immunity.

The PTAB acknowledged the decisions of the previous panels in finding that Eleventh Amendment sovereign immunity can be invoked in an IPR, and stated that “[a]lthough neither of those decisions is binding on us, we find their reasoning persuasive.” The PTAB then determined that Eleventh Amendment sovereign immunity is available in IPR and that UMinn was entitled to assert sovereign immunity as a defense. Accordingly, the PTAB granted in part the Patent Owners’ motions to dismiss, and dismissed UMinn from the proceedings.

However, the PTAB departed from the findings of the prior panel in Neochord, in holding that the IPRs could continue against Toyota, without UMinn present. In making this determination, the PTAB invoked the Federal Circuit’s analysis for determining whether parties are indispensable in sovereign immunity cases. In these cases, which originated in federal district court, the Federal Circuit looked to the joinder factors set out in Fed. R. Civ. P. 19(b).

Although the PTAB explicitly acknowledged that the Federal Rules of Civil Procedure do not apply to IPR, and that there is no analogue to Rule 19(b) in IPR practice, the PTAB applied Rule 19(b) to determine whether the IPR could continue without UMinn. The PTAB concluded that because Toyota and UMinn both hold identical interests and are both represented by the same counsel, Toyota would adequately represent the interests of UMinn in the IPR, and the IPR could proceed in the absence of UMinn.

This case contrasts with the decision in Neochord. Here, the PTAB panel allowed the IPR to continue against a co-owner of a patent also owned by an immune sovereign, whereas in Neochord, the panel determined that the IPR could not continue against the licensee of patent solely owned by a sovereign. After the PTAB dismissed petitions on the basis of sovereign immunity in Covidien and Neochord, a trend seemed to be emerging. However, the PTAB’s decision not to fully dismiss the IPR in this case represents a possibility that this doctrine is not without limits.