06/18/19

Taking Patent Rights: Sovereign Immunity & the Fourteenth Amendment in Patent Validity & Inventorship Challenges

Taking Patent Rights: Sovereign Immunity & the Fourteenth Amendment in Patent Validity & Inventorship Challenges

Connor J. Hansen

The Fourteenth Amendment provides that “No State shall . . . deprive any person of . . . property without due process of law” and has been interpreted to incorporate the Takings Clause of the Fifth Amendment: “nor shall private property be taken for public use, without just compensation.” Collectively, the Fourteenth Amendment and the Takings Clause, prohibit a state from depriving property owners of all economically beneficial use of their property without providing compensation for that deprivation.

A patent “confers upon the patentee an exclusive property in the patented invention which cannot be appropriated or used by the government itself, without just compensation, any more that it can appropriate or use without compensation land which has been patented to a private purchaser.” Patent rights “fall squarely within both classical and judicial definitions of protectable property” that may be taken. This is largely because the right to exclude others concomitant with patent rights is “one of the most essential sticks in the bundle of rights that are commonly characterized as property.” When a sovereign owns an invalid patent or a patent to which it is not entitled, it has the right to exclude all others, even those who are the rightful owner of the patent or those who developed the prior art that would render the patent invalid, from practicing the claimed innovation. Other parties are also precluded from obtaining patent rights for the subject matter encompassed in the sovereign patent. The state has effectively appropriated from those parties the entire bundle of exclusionary rights conferred by a patent. 

Yet, sovereign entities are able to assert immunity from federal actions challenging the validity or inventorship of the patent. The doctrine of sovereign immunity is embodied in the Eleventh Amendment: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” The Eleventh Amendment has consistently been held to prohibit any suit against an unconsenting sovereign in federal courts or in administrative proceedings that are sufficiently similar to federal court adjudication. “The preeminent purpose of state sovereign immunity is to accord States the dignity that is consistent with their status as sovereign entities.” In effect, it is the state treasury that is immune and in any suit that “is in essence one for the recovery of money from the state, the state is the real, substantial party in interest and is entitled to invoke its sovereign immunity.” This means agencies, public universities, and other sovereign entities are able to assert immunity.

Sovereign entities have used their immunity to avoid patent validity and inventorship challenges in federal court and administrative proceedings before the Patent and Trademark Office (PTO). When sovereign immunity is so used, patents that might otherwise be invalidated for failure to meet statutory requirements of patentability are allowed to remain in force, which stifles competition and creates anticompetitive conditions contrary to general principles of the free market economy. Even more bothersome, sovereign immunity allows sovereigns to retain ownership of patent rights that would otherwise be granted to private parties or that preclude full exploitation of a private party’s competing patent rights. These private parties have been deprived of their constitutionally protected patent rights in contravention of the Takings Clause but are precluded from obtaining constitutionally mandated just compensation due to the use of sovereign immunity to avoid the only proceedings that can provide those required remedies.

This Article argues that sovereign immunity should not and cannot be used to deny access to the only sources of compensation for a party with an interest in a sovereign-owned patent. It begins by outlining the general principles behind U.S. patent law including: the requirements for obtaining a patent, how sovereigns obtain patent rights, the ways in which an individual can challenge the validity or inventorship of a patent, and use of sovereign immunity to avoid such challenges. Next, this Article shows that use of immunity amounts to a taking of property under established principles of the Takings Clause jurisprudence. Finally, this Article argues that states are abdicating their constitutional duty to provide just compensation for taking property rights from individuals by using sovereign immunity to avoid patent challenges and should be prohibited from doing so because there are no alternative means for the individuals to obtain compensation.

100 J. Pat. & Trademark Off. Soc’y 619 (2019)

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