University of Utah v. Max-Planck-Gesellschaft

No Exclusive Supreme Court Jurisdiction in Inventorship Dispute Where State Officials, Not State, Were Named Defendants

12-1540

August 19, 2013

Decision

Last Month at the Federal Circuit - September 2013

Judges: Moore (dissenting), Reyna (author), Wallach

[Appealed from: D. Mass., Judge Saris]

In University of Utah v. Max-Plank-Gesellschaft zur Forderung der Wissenschaften e.V., Nos. 12-1540, -1541, -1661 (Fed. Cir. Aug. 19, 2013), the Federal Circuit affirmed the district court’s denial of a motion to dismiss by four named officials (“Named Officials”) of the University of Massachusetts (“UMass”), holding that the Supreme Court’s exclusive jurisdiction was not triggered, that the claims were not barred by sovereign immunity, and that UMass was not an indispensable party.

The University of Utah (“UUtah”), believing that its employee, Dr. Brenda Bass, should have been named as a sole or joint inventor of U.S. Patent Nos. 7,056,704 and 7,078,196 (collectively “the Tuschl patents”), requested correction of the inventorship of the Tuschl patents under 35 U.S.C. § 256. Originally, UUtah named as defendants a number of non-State defendants, including Max-Planck-Gesellschaft zur Forderung der Wissenschaften e.V. (“Max-Planck”), and also named UMass as a defendant. UMass moved to dismiss, arguing that because UUtah and UMass were both arms of the State, the dispute between them fell within the exclusive original jurisdiction of the Supreme Court. UUtah subsequently amended its complaint and replaced UMass with the four named UMass Named Officials, noting that its intent in making this amendment was to avoid the Supreme Court’s exclusive jurisdiction.

The Named Officials moved to dismiss, arguing that the case fell within the exclusive original jurisdiction of the Supreme Court and that UUtah’s claims were barred by sovereign immunity. In rejecting the Named Officials’ arguments, the district court ruled that the case did not fall within the exclusive original jurisdiction of the Supreme Court because UUtah had chosen to sue state officials, not the State itself, and also reasoned that correction of inventorship was not a core sovereign interest sufficient to make this a dispute between States. The district court also dismissed the Named Officials’ argument that UMass was an indispensable party, because neither UMass nor defendants would be prejudiced by a judgment rendered in UMass’s absence because UMass’s interests would be adequately represented by the existing defendants, including the Named Officials, and that the remedy—an order directing the PTO to correct inventorship—would provide adequate relief whether or not UMass was joined.

On appeal, the Federal Circuit first held that this case was not a conflict between States subject to the exclusive jurisdiction of the Supreme Court because UMass was not a real party in interest. The Court, relying on 28 U.S.C. § 1251(a), noted that when a State sues another State, the Supreme Court’s jurisdiction is not only original, but exclusive. In contrast, when a State sues the citizens of another State, the Supreme Court’s original jurisdiction is concurrent with the district courts, as specified by 28 U.S.C. § 1251(b)(3). The Supreme Court’s exclusive and concurrent original jurisdiction is obligatory only in appropriate cases, and in determining whether a case is “appropriate,” the Court noted that it is proper to look beyond the named parties and determine the real party in interest.

Specifically, the Court noted that a State is a real party in interest if it is a mandatory or indispensable party such that the decree would operate directly against it and adequate relief cannot be granted without it, such as, for example, a judgment that would expend itself on the State’s treasury, or an injunction against or compelling state administration. Conversely, the Court noted that “a State with ‘some interest of hers [ ] more or less affected by the decision’ but not directly affected by the court’s decree is not a real party in interest.” Slip op. at 9 (alteration in original) (quoting Cunningham v. Macon & Brunswick R.R. Co., 109 U.S. 446, 451, 452 (1883)).

The Court determined that UMass was not a real party in interest because there was no core sovereign interest of Massachusetts at stake, as the only issue with respect to UMass in the case was inventorship. The Court held that States cannot be inventors because they cannot perform the mental act of conception, and therefore a State has no core sovereign interest in inventorship. The Court dispensed with UMass’s concern for its ownership interest in the Tuschl patents by characterizing a State’s ownership of patent rights as “not akin to State ownership of water rights, natural resources, or other property issues that ‘implicate serious and important concerns of federalism’ and rise to the level of core sovereign interests.” Id. at 13-14 (quoting Conn. ex rel. Blumenthal v. Cahill, 217 F.3d 93, 99

(2d Cir. 2000)). The Court further reasoned that UMass was not a real party in interest because a judgment ordering the PTO to correct inventorship would not compel or restrain UMass from acting.

Next, the Court considered whether sovereign immunity barred UUtah’s suit, and held that sovereign immunity was inapplicable because it applied only to suits by citizens against a State.

Finally, the Court considered whether UMass was an indispensable party for the action to proceed. The Court first considered the factors under Fed. R. Civ. P. 19(b): (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 by (A) protective provisions in the judgment, (B) shaping the relief, or (C) other measures; (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. As to the first factor of potential prejudice, the Court found no error in the district court’s determination that there was little risk of prejudice because UMass’s interests were adequately represented by the other defendants, and therefore the second factor had little weight. As to the third factor regarding adequacy of the judgment in UMass’s absence, the Court found no error with the district court’s determination that an order directing the PTO to correct inventorship would not be insufficient in the absence of UMass. Finally, as to the fourth factor regarding adequate remedy, the Court agreed with the district court that the possibility that the Supreme Court would accept original jurisdiction only slightly weighs against UUtah because of the uncertainty regarding whether the Supreme Court would accept such a case. Accordingly, the Court affirmed the district court’s rulings.

Judge Moore dissented, asserting that the case “is a dispute about ownership, plain and simple.” Moore Dissent at 3. Judge Moore noted that § 1251(a) contains uncompromising language that the Supreme Court has original and exclusive jurisdiction over all controversies between two or more States, that the majority’s “core sovereign interests” test is at odds with the plain language of the statute, and that there is no basis to limit the statute in such a way. Judge Moore further argued that the majority improperly stripped the Supreme Court of its discretion to decide which controversies it will hear. Judge Moore noted that the existence of the Supreme Court’s exclusive jurisdiction and its discretion to exercise that jurisdiction are separate concepts. But Judge Moore noted that the “core sovereign interest” test has roots in opinions that address whether the Supreme Court will decide to exercise its jurisdiction over a dispute, not whether the Court’s exclusive original jurisdiction over the controversy exists, and that the majority’s conflation of these two concepts strips the Supreme Court of its discretion to decide if a case is sufficiently serious to exercise jurisdiction over it.

Judge Moore further asserted that the majority is incorrect in its determination that UMass is not the real party in interest because the effect of the judgment to correct inventorship will restrain UMass by, for example, preventing UMass from exploiting the Tuschl patents or the technologies they cover. Finally, Judge Moore also pointed out that the majority erred in not finding UMass an indispensable party, because it would be nonsensical to suggest that all patent owners must be joined in a suit seeking to invalidate the patent, i.e., in a DJ action, but they need not be joined in a suit over patent ownership. Since there is no other party that represents UMass’s interest, Judge Moore stated that UMass is an indispensable party.

Summary authored by Sulay D. Jhaveri, Esq.