Understanding Issues That Affect Our Industry
AUTM keeps a watchful eye on ongoing public policy issues that affect our industry. These include:
State sovereign immunity is a longstanding constitutional right derived from the 11th Amendment to the U.S. Constitution. The amendment states:
"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.”
State sovereign immunity is used by many state entities, including state universities, for a variety of legal matters. But in recent years, several cases have developed surrounding this right for states and Native American tribes as it relates to the ability to bring patent review actions against patents at the U.S. Patent and Trademark Office.
For example, the University of Minnesota filed a complaint against Ericsson over five patents held by the university, which Ericsson claimed in an inter partes review (IPR) challenge are invalid. The University raised sovereign immunity to Patent Trial and Appeals Board (PTAB) during the IPR. PTAB dismissed the sovereign immunity claim stating that since the University filed the lawsuit they consented to federal jurisdiction, which includes the PTAB. The university has now appealed that ruling, arguing that it did not waive its right to claim sovereign immunity at the Patent Office when it went to court to claim its patents had been infringed. That decision by the PTAB has also been appealed.
In another sovereign immunity case, not involving a State, but an Indian tribe, the St. Regis Mohawk Tribe claimed sovereign immunity against an IPR of a patent transferred to the tribe by Allergan. The claim was rejected by the PTAB, which has now been appealed to the Federal Circuit. The Federal Circuit issued a stay on the case until a hearing is held on the issue in June 2018.
Under the Bayh-Dole Act passed by Congress in 1980, there are a few situations under 35 U.S.C. 203 that allow the federal government to “march in” and recover a patent previously issued for an invention or drug developed with federal funding. Those exceptions are:
- When a patent holder is merely sitting on a patent and not developing the technology;
- When it is necessary to alleviate health, safety, or public use needs which are not reasonably satisfied by the owner or licensee (An example might be a patent for a drug that is needed to fight an epidemic, and where the patent holder simply cannot meet the demand for the drug in question); or
- When the owner or exclusive licensee does not substantially manufacture the product in the U.S. or received a waiver from the Federal agency.
However, in recent years a number of advocacy groups have called on the National Institutes of Health, in particular, to march in on a patented drug in order to allow others to manufacture it, based solely on the price for the drug in question being deemed “unreasonable.” So far, NIH has resisted taking such action.
AUTM remains concerned that if march-in rights are used for such a purpose, the incentive to provide early-stage funding at the beginning of the innovation of the drug or technology could be severely curtailed if the investor believes the patent could later be taken back by the government. While universities that develop drugs or technologies do not set prices for the ultimate product of that innovation, they remain concerned about the misapplication of this remedy.