11th Circuit Finds That University Can Be Subjected to Injunction to Prevent Continuing Infringement

In National Association of Boards of Pharmacy v. Board of Regents of the University System of Georgia, 97 U.S.P.Q.2D 1931 (11th Cir. 2011), the National Association of Boards of Pharmacy (hereinafter “NABP”) owns copyrighted tests which it uses to accredit pharmacists.  Professor Flynn Warren of the University of Georgia offered a review course for these tests, and used actual questions from the tests in his review course.  After receiving a tip, the NABP confirmed that Professor Warren was using the actual copyrighted questions, after which Professor Warren and the University of Georgia agreed to cease and desist using the copyrighted questions.  Subsequently, NABP again determined that Professor Warren was again gathering copyrighted test questions for use in his course in violation of agreement previously reached.  To confirm their suspicions, the NABP purchased a copy of Professor Warren’s course materials for $100, and after confirming that 150 questions were copied from the NABP test, the NABP was forced to replace the 150 questions with new questions. Continue reading

Federal Circuit Finds Declaratory Judgment Not Available Against Field of Use Licensee Where Patent Owner Could Not Be Joined

In A123 Systems, Inc. v. Hydro-Quebec, 626 F.3d 1213 (Fed. Cir. 2010), Hydro-Quebec (HQ) is a licensee of U.S. Patent Nos. 5,910,382 and 6,514,640, which are owned by the Board of Regents for the University of Texas System (UT).  The license gives HQ an exclusive license within a specified field of use.  HQ had threatened suit against A123 for infringement of these patents, whereby A123 filed a Declaratory Judgment against HQ in the District of Massachusetts claiming non-infringement on August 14, 2006.  HQ moved to dismiss alleging that UT was a necessary party and could not be joined due to Eleventh Amendment immunity, and filed its own suit with UT in the Northern District of Texas.  A123 further filed a reexamination request for the patents, which resulted in the Texas action being stayed and the Massachusetts was dismissed without prejudice while the reexamination continued.  On conclusion of the reexamination, A123 motioned to reopen the Massachusetts action, which HQ opposed on the grounds that the Massachusetts action would be dismissed for failure to join UT as a necessary party.  The District Court denied’ A123’s motion, agreeing with HQ that the Massachusetts action would be dismissed and yielded jurisdiction to the later-filed action in the Northern District of Texas.

On appeal, A123 argued that the license conferred sufficient rights to HQ as to not require the joinder of UT, and further, that Rule 19 of the Federal Rules of Civil Procedure would allow the suit to continue even without UT.  On the issue of the license, A123 noted that HQ had held itself as an exclusive licensee having the right to enforce the patents, and had even brought suit against another party, Valence Technology, Inc. as this exclusive licensee.  In response, HQ argues that the suit against Valence Technology was within its exclusive field of use, and even assuming arguendo that HQ had made incorrect assertions about its rights, such assertions do not affect UT’s actual rights under the license.  The Federal Circuit agreed with HQ, noting testimony confirming that the license allowed UT the right to license in other fields of use, and that HQ’s statements in the other suit were consistent with this interpretation.  As such, since HQ did not receive all substantive rights in relation to the technology at issue with A123, A123 could not bring a Declaratory Judgment action against HQ without the participation of UT.

Having decided that UT was a necessary party, the Federal Circuit noted that UT could not be forced to join the Massachusetts action due to the sovereign immunity conferred by the Eleventh Amendment in light of College Savings Bank v. Florida Prepaid Postsecondary Education, 537 U.S. 666 (1999).  While A123 had relied upon a market participation theory, the Federal Circuit confirmed that this theory was rejected by the Supreme Court and by Federal Circuit precedent even where the same subject matter was brought by the state in another forum.  As such, despite being a necessary party, UT could not be joined in Massachusetts without its consent.

A123 next argued that Rule 19 allows a suit to be maintained despite the non-joinder of a necessary party except where party is indispensible, and that the District Court had not specifically found UT to be indispensible.  In reviewing this argument, the Federal Circuit noted that the court is required to review with to allow a suit to proceed without a necessary, but not indispensible, party.  Dainippon Screen Mfg. Co., Ltd. v. CFMT, Inc., 142 F.3d 1266, 1272 (Fed. Cir. 1998); Vaupel Textilmaschi-nen KG v. Meccanica Euro Italia SPA, 944 F.2d 870, 876 n.1 (Fed. Cir. 1991).  The factors as to whether a party is indispensible are set forth in Rule 19(b) as follows:

[T]he court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed. The factors for the court to consider include:

(1) the extent to which a judgment rendered in the person’s absence might prejudice that person or the existing parties;

(2) the extent to which any prejudice could be lessened or avoided . . . ;

(3) whether a judgment rendered in the person’s absence would be adequate; and

(4) whether the plaintiff would have an adequate remedy if the action were dismissed for nonjoinder.

 

Citing to In re Olympic Mills Corp., 477 F.3d 1, 8-9 (1st Cir. 2007), A123 largely contended that only the first factor was relevant, and in weighing the first factor in favor of A123 was warranted as both UT and HQ share a common goal in defending the patents, and therefore there would be no prejudice to UT should it not be joined.  In rejecting this argument, the Federal Circuit first noted that the District Court did address the first factor, and noted that both parties did not have identical interests since HQ’s interest was in ensuring a claim construction that was consistent with its field of use, whereas UT’s interest was for the entire patent.  Thus, there was a risk to UT which was not ameliorated by the similar, but not identical, interests of HQ versus UT.

The Federal Circuit also reviewed the record and noted that the plaintiff, A123, does have an adequate remedy based upon the Texas action as all defenses available in Massachusetts would also be available in the Texas action to which UT had waived its sovereign immunity.  Thus, on balance, the Federal Circuit found that the Rule 19(b) weighed in favor of UT being labeled an indispensible party, and affirmed the dismissal on those grounds.

Significance for Technology Companies

While the Supreme Court’s decision in MedImmune, Inc. v. Genentech Inc., 549 U.S. ___; 81 USPQ2d 1225 (2007) did broaden the standard for bring declaratory judgments, it is apparent that this standard remains confused where a sovereign entity is involved.  While some courts have allowed suits to be maintained where the Federal Government refused to be joined under Rule 19 as in Sourceone Global Partners LLC. V. KGK Synergize, Inc., Civ. Case No. 08 C 7403 (N.D. Il. May 13, 2009), A123 Systems shows that Rule 19 does not always allow such suits to be maintained where the non-joining sovereign is amendable to suit in another jurisdiction.  Thus, prior to bringing such a declaratory judgment action involving a sovereign actor, plaintiffs need to account for the uncertainties involved in Rule 19 in case the sovereign entity refuses to be joined.

 

Federal Circuit Finds Patent Enforcement By A University Against Customers Insufficient to Waive Sovereign Immunity To Allow the Supplier To File An Independent Action Against University

 

In Tegic Communications v. Bd. of Regents of the Univ. of Texas System, 458 F.3d 1335 (Fed. Cir. 2006), Tegic Communications filed a declaratory judgment in the Western District of Washington against the Board of Regents of the University of Texas System (“the University”) due to the University’s enforcement of U.S. Patent No. 4,674,112 in the Western District of Texas against 48 cellular-telephone companies.  Tegic Communications alleged that, since it supplied allegedly infringing software to 39 of 48 these companies, Tegic Communications was under a reasonable apprehension of suit.  Relying on Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 US 627, 51 USPQ2d 1081 (1999), the District Court dismissed the complaint as the University was immune under the Eleventh Amendment from patent infringement claims and had not waived its sovereign immunity for such claims by bringing suit against the 39 companies.   The Federal Circuit affirmed the District Court’s dismissal. Continue reading

Federal Circuit Finds Mere Response To RFP Does Not Constitute Offer To Sell Infringing Device

In FieldTurf Intr., Inc. et al. v. SprinTurf, Inc. et al. and SportFields LLC and Orion, 433 F.3d 1366, 77 U.S.P.Q.2D 1468 (Fed. Cir. 2006), the Federal Circuit affirmed a summary judgment of non-infringement in favor of SportFields LLC and Orion (collectively “SportFields”) and reversed summary judgment in favor of SportFields on its counterclaims of intentional interference with prospective economic advantage and unfair competition, and vacated the award of attorney fees. Continue reading