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News / Sep 08, 2019

Federal Circuit Affirms Sovereign Immunity Does Not Prevent Venue Transfer

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Article by Clyde Shuman 

The U.S. Court of Appeals for the Federal Circuit had held that state sovereign immunity principles asserted by a plaintiff do not permit it to bring a patent infringement suit in an otherwise improper venue. In Board of Regents v. Boston Scientific Corp., case number 18-1700, the Court affirmed the lower court’s transfer of the lawsuit from the Western District of Texas to the District of Delaware, noting that Boston Scientific has no ties to Texas. The Court said that state sovereign immunity does not vitiate jurisdictional requirements; moreover, sovereign immunity does not apply here, as it is meant to protect defendants, not plaintiffs.

According to the Court, “When a state voluntarily appears in federal court, as UT [i.e., Regents] has done here, it ‘voluntarily invoke[s] the federal court's jurisdiction.’ It logically follows that the state must then abide by federal rules and procedures — including venue rules — like any other plaintiff.” The Court continued, “Indeed, it would be “anomalous or inconsistent” for UT to both invoke federal question jurisdiction and then to assert sovereignty to defeat federal jurisdiction.”

By way of background, UT (as assignee), along with an exclusive licensee of two of UT’s patents directed to implantable drug-releasing biodegradable fibers, sued Boston Scientific for patent infringement in November 2017, in the Western District of Texas. Although conceding that Boston Scientific is a Delaware corporation with a principal place of business in Massachusetts, UT argued that “[v]enue is proper in the Western District of Texas because UT has sovereign immunity and this Court has personal jurisdiction over [Boston Scientific].” Relying on state sovereignty as the basis for venue, UT explained (in its Complaint):

Venue is proper in the Western District of Texas because UT is an arm of the State of Texas, has the same sovereign immunity as the State of Texas, it would offend the dignity of the State to require it to pursue persons who have harmed the State out-side the territory of Texas, and the State of Texas cannot be compelled to respond to any counterclaims, whether compulsory or not, outside its territory due to the Eleventh Amendment.

Boston Scientific moved to dismiss the Complaint for improper venue, or alternatively, to transfer the case to the District of Delaware. Boston Scientific noted that it does not own or lease any property or maintain a business address in the Western District of Texas. While Boston Scientific has approximately forty-six employees in the Western District of Texas, they all maintain home offices and do not work in spaces that are owned, leased, or controlled by Boston Scientific.

In granting Boston Scientific’s motion and transferring the case, the lower court judge found that Boston Scientific “does not maintain a ‘regular and established place of business’ in the Western District of Texas.” The lower court rejected UT’s sovereign immunity arguments, noting that “[t]here is no claim or counterclaim against [UT] that places it in the position of a defendant.”

On appeal, the Federal Circuit rejected UT’s argument that a sovereign entity can sue a nonresident in a forum where there is personal jurisdiction over the defendant, and that the sovereign entity’s right to choose a forum is not abrogated by federal patent law.

The Court (as did the lower court) also rejected UT’s argument that it never consented to litigation in Delaware, so sovereign immunity blocks it from having to litigate in that forum. As noted, the Court held that sovereign immunity protects only defendants not plaintiffs. This echoed the lower court’s saying that “[s]overeign immunity is a shield; it is not meant to be used as a sword.”

The Federal Circuit took the unusual step of hearing UT’s appeal of the lower court’s transfer order under the collateral order doctrine, citing the Supreme Court's opinion in Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy Inc., 506 U.S. 139 (1993). Per the Court, the lower court “conclusively determined” that sovereign immunity does not apply, the transfer order was not “tentative, informal or incomplete” and UT will not be able to bring raise the order in Delaware, and thus would be unreviewable from a final judgment.

 

 

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