UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`
`
`
`NEOCHORD, INC.
`Petitioner
`
`v.
`
`UNIVERSITY OF MARYLAND, BALTIMORE
`
`Patent Owner
`______________
`
`Case No. IPR2016-00208
`Patent No. 7,635,386
`______________
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`
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`PATENT OWNER’S MOTION TO DISMISS
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`
`
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`
`
`
`NEOCHORD, INC.
`Petitioner
`
`v.
`
`UNIVERSITY OF MARYLAND, BALTIMORE
`
`Patent Owner
`______________
`
`Case No. IPR2016-00208
`Patent No. 7,635,386
`______________
`
`
`
`PATENT OWNER’S MOTION TO DISMISS
`
`
`
`
`
`
`Table of Contents
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`
`Page
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`FACTUAL BACKGROUND ................................................................................... 1
`A. UMB Is an Instrumentality of the State of Maryland .......................... 2
`B. UMB’s 11th Amendment Immunity is Preserved by Statute .............. 4
`C. UMB Has the Substantial Rights of an Owner of the Patent ............... 4
`THE INTER PARTES REVIEW MUST BE DISMISSED BECAUSE UMB
`HAS SOVEREIGN IMMUNITY FROM SUIT ............................................ 7
`A.
`Sovereign Immunity is a Bar to Inter Partes Review ........................... 7
`B. UMB is a Sovereign Arm of the State of Maryland .......................... 10
`C.
`Inter Partes Review Cannot Proceed Without UMB ......................... 13
`CONCLUSION ....................................................................................................... 15
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`
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`
`i
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`
`
`Table of Authorities
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`
`Page(s)
`
`
`Cases
`Abbott Labs. v. Diamedix Corp.,
`47 F.3d 1128 (Fed. Cir. 1995) ............................................................................ 14
`Alfred E. Mann Foundation for Science Research v. Cochlear Corp.,
`604 F.3d 1354 (Fed. Cir. 2010) ............................................................................ 3
`Bickley v. Univ. of Maryland,
`527 F. Supp. 174 (D. Md. 1981) ......................................................................... 10
`Covidien v. Univ. of Fla. Research Found., Inc.,
`Nos. 2016-01274 – 2016-01276 (PTAB Jan. 25, 2017) ..............................passim
`Edelman v. Jordan,
`415 U.S. 651 (1974) .............................................................................................. 8
`Fed. Mar. Comm’n v. South Carolina State Ports Auth.,
`535 U.S. 743 (2002) .............................................................................................. 8
`
`Florida Dep’t of Health & Rehab. Servs. v. Florida Nursing Home
`Ass’n,
`450 U.S. 147 (1981) .............................................................................................. 6
`Kovats v. Rutgers, The State Univ.,
`822 F.2d 1303 (3d Cir. 1987) ............................................................................. 12
`Maryland Stadium Authority v. Ellerbe Becket Inc.,
`407 F.3d 255 (4th Cir. 2005) ............................................................................ 2, 3
`Palotai v. Univ. of Maryland Coll. Park,
`959 F. Supp. 714 (D. Md. 1997) ......................................................................... 10
`Regents of the Univ. of California v. Doe,
`519 U.S. 425 (1997) ............................................................................................ 10
`Seminole Tribe of Florida v. Florida,
`517 U.S. 44 (1996) ................................................................................................ 8
`
`
`
`
`
`ii
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`
`
`
`
`Table of Authorities
`(continued)
`
`Page(s)
`
`
`Stern v. Bd. of Regents, Univ. Sys. of Maryland,
`846 A.2d 996 (Md. 2004) ................................................................................... 12
`Tegic Commc’ns Corp. v. Bd. of Regents of Univ. of Texas Sys.,
`458 F.3d 1335 (Fed. Cir. 2006) .......................................................................... 10
`Vas-Cath, Inc. v. Curators of the Univ. of Missouri,
`473 F.3d 1376 (Fed. Cir. 2007) ............................................................................ 9
`Virginia Office for Prot. & Advocacy v. Stewart,
`563 U.S. 247 (2011) .............................................................................................. 7
`Statutes
`Maryland Tort Claims Act ......................................................................................... 4
`Md. Code Ann., Agric. § 2-102 (a) ............................................................................ 2
`Md. Code Ann., Educ.
`§ 12-101 et seq. (2016) ......................................................................................... 1
`§ 12-102(a)(2) ..................................................................................................... 12
`§ 12-104(i) ............................................................................................................ 4
`§ 12-104(i)(4) ........................................................................................................ 4
`§ 12-104(f) ............................................................................................................ 3
`§ 12-104(g) ............................................................................................................ 3
`§ 12-105(b)(2) ....................................................................................................... 3
`Tex. Gov’t Code § 441.101(3) ................................................................................... 1
`Other Authorities
`United States Constitution Eleventh Amendment ............................................passim
`
`iii
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`
`
`Listing of Exhibits
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`
`
`Exhibit
`2013
`2014
`2015
`
`2016
`
`2017
`
`Description
`Affidavit of Susan Gillette
`Declaration of Erik B. Milch
`Redacted Master License Agreement between University
`of Maryland, Baltimore and Harpoon Medical, Inc. dated
`August 22, 2013
`Redacted First Amendment to License Agreement
`between University of Maryland, Baltimore and Harpoon
`Medical, Inc. dated April 1, 2014
`Redacted Second Amendment to License Agreement
`between University of Maryland, Baltimore and Harpoon
`Medical, Inc. dated December 4, 2015
`
`iv
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`
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`
`
`Pursuant to this Panel’s Order of February 15, 2017, Patent Owner
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`University of Maryland, Baltimore (“UMB”) respectfully submits this brief in
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`support of its motion to dismiss the pending inter partes review proceeding on
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`grounds of state sovereign immunity and based upon the accompanying affidavits,
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`exhibits and prior proceedings herein.
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`
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`UMB is an arm of the State of Maryland and is entitled to assert sovereign
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`immunity as a defense to inter partes review of U.S. Patent No. 7,635,386 (“the
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`’386 patent”). Because UMB has not waived its sovereign immunity, the PTAB
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`lacks jurisdiction to maintain these proceedings.
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`FACTUAL BACKGROUND
`The University System of Maryland (the “USM”) and its constituent
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`institutions and campuses, as numerous federal and state decisions have found, are
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`legal instrumentalities and alter egos of the State of Maryland (“State”). See
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`generally Md. Code Ann., Educ. § 12-101 et seq. (2016) (establishing the USM).
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`The ’386 patent is, by statute, “the property of the State.”1 Id. § 12-105(b)(2). Its
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`invalidation would deprive the State of Maryland of licensing revenue which is
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`also State property and would impair USM’s performance of its public functions.
`
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`1 The ’386 patent was assigned by the sole inventor, James S. Gammie, to UMB.
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`The assignment is recorded with the USPTO at Reel/Frame 037222/0840.
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`1
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`A. UMB Is an Instrumentality of the State of Maryland
`USM operates “constituent institutions” and “campuses” located throughout
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`the State, each “under the jurisdiction of the Board of Regents.” Id. § 12-101(b)(6).
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`The University of Maryland is a “constituent institution” of USM, consisting of
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`two campuses: the University of Maryland, College Park and Patent Owner, the
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`University of Maryland, Baltimore. Id. § 12-101(b)(6)(i). State statute provides
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`specifically that USM is “an instrumentality of the State,” “a public corporation,”
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`and “an independent unit of State government” carrying out an “essential public
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`function.” Id. § 12-102(a)(2)-(4). USM is established “to improve the quality of
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`education, to extend its benefits and to encourage the economical use of the State's
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`resources.” Id. § 12-101(a). The University of Maryland is further charged to
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`“improve and enhance . . . [r]esearch, technology, technology transfer, and
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`commercialization for economic development.” Id. § 12-303(2)(i).
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`USM is governed by a seventeen-member Board of Regents, all of whom are
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`directly appointed by the Governor with the advice and consent of the Maryland
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`Senate. Id. § 12-102 (c); Md. Code Ann. Agric. § 2-102 (a). The State, through its
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`executive and legislative branches retains not merely oversight authority but “a
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`veto over most of [USM’s] actions.” Maryland Stadium Authority v. Ellerbe
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`2
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`Becket Inc., 407 F.3d 255, 264 (4th Cir. 2005) (describing the significant actions
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`over which the State has a veto).2
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`
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`USM operates under strict State fiscal controls. By statute “[a]ll property of
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`[USM] is the property of the State.” Md. Code Ann., Educ. § 12-105(b)(2). All
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`USM revenues must be deposited either “[i]n the State Treasury” or “[a]s the State
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`Treasurer directs.” Id. § 12-105(d)(1). The Board of Regents makes an annual
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`non-binding “recommendation” to the Legislature for budget appropriations on
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`behalf of USM’s constituent institutions. Id. § 12-105(a). USM may not spend
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`revenues in excess of fiscal year estimates without an approved budget
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`amendment. Id. § 12-105(d)(2). At fiscal year-end it must report unexpended
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`balances and may spend them only through an appropriation or budget amendment.
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`2 For example, the Board of Public Works (“BPW”) must approve any contract for
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`the sale or purchase of real property, Md. Code Ann., Educ. § 12-104(g), or for
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`services or capital improvements over $1,000,000. Md. Code Ann. State Fin and
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`Proc. § (11-203(e)(3)(ii). The Governor and General Assembly must approve the
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`creation, merger or closure of any USM constituent institution, Md. Code Ann.
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`Educ. § 12-104(f), and the Legislature must pre-approve any project for which
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`USM seeks to issue revenue bonds and the amount of any bond issue. Id. § 19-
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`102(a)(2), (d)(1). The BPW and the members of the General Assembly have
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`oversight authority to inquire into USM operations at any time. Id. § 12-105(e).
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`3
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`Id. § 12-105(3). Its operations are audited annually by the Legislative Auditor. Id.
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`§ 12-105(f).
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`
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`As a constituent campus of USM, Patent Owner operates under all of the
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`same statutory restrictions applicable to USM as a whole. (Aff. of S. Gillette ¶¶ 2-
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`7.) Revenues generated by UMB are the property of the State of Maryland, are
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`deposited in the State Treasury or as directed by the State Treasurer and, as
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`described, may only be expended pursuant to an appropriation contained in a
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`budget bill or an approved budget amendment. (Id.)
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`B. UMB’s 11th Amendment Immunity is Preserved by Statute
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`Under subsection 12-104(i) of the Maryland Education Article, USM is
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`subject to the Maryland Tort Claims Act, which provides for limited waiver, in
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`state court, of USM’s sovereign immunity from suit. Notably, that section
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`provides: “nothing in this subsection shall be construed to waive or abrogate the
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`immunity of the University System of Maryland under the Eleventh Amendment to
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`the United States Constitution.” Md. Code Ann., Educ. § 12-104(i)(4).
`
`C. UMB Has the Substantial Rights of an Owner of the Patent
`Under a Master License Agreement (“MLA”) between UMB and Harpoon
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`Medical Inc. (“Harpoon”) UMB granted Harpoon an exclusive license for certain
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`intellectual property including the ’386 patent (among other Patent Rights) and
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`related Inventions and Licensed Products. (MLA, Ex. 1 to Decl. of Erik Milch).
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`4
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`The licenses are terminable for non-payment of royalties or other uncured material
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`breach. (MLA § 10.2.) Under the MLA UMB retains substantial rights in the ’386
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`patent, including the following:
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` UMB and University affiliates may use the Inventions, practice the ’386
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`patent, and make and use Licensed Products for non-commercial purposes
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`including for research, teaching, education and patient care. (MLA § 3.2.1.)
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` UMB may license the Inventions, ’386 patent and Licensed Products to
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`government agencies, universities, educational institutions and non-profits
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`for non-commercial purposes. (MLA § 3.2.2.)
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` UMB may publish scientific findings relating to the Inventions, ’386 patent
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`and Licensed Products. (MLA § 3.2.3.)
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` Harpoon may grant sublicenses, on specified terms, but must pay UMB pay
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`pass-through royalties on any sublicense granted. (MLA §§ 3.4.1, 5.5.)
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` UMB shares in any recovery in an action for patent infringement (MLA §
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`9.2.3.)
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` UMB must pre-approve any settlement or similar disposition of a claim that
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`materially limits the scope, validity or enforceability of the ’386 patent.
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`(Approval may not be unreasonably withheld.) (MLA § 9.4.2.)
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` Harpoon has a first right to enforce the ’386 patent, to be exercised within
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`three months, after which UMB may bring suit against an infringer.
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`5
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`Harpoon may seek to prevent such a suit only if it determines, in good faith,
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`that the suit would adversely affect Harpoon, and notifies UMB accordingly.
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`(MLA § 9.5.1.)
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` UMB may respond to legal actions if Harpoon fails to respond, may
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`intervene in any action involving the Inventions and ’386 patent, and may
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`participate through counsel of its choosing, if it reasonably determines that
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`failure to intervene would adversely affect UMB. (MLA § 9.5.2, 9.5.3.)
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`The MLA also expressly reserves UMB’s sovereign immunity from suit.
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`Section 14.6 of the MLA provides:
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`No provision of this Agreement shall constitute or be
`construed as a limitation, abrogation, or waiver of any
`defense or limitation of liability available to the State of
`Maryland or its units (including without limitation USM
`and University [UMB]), officials, or employees under
`Maryland or Federal law, including without limitation the
`defense of sovereign immunity or any other
`governmental immunity.3
`
`
`3 In oral argument Petitioner speculated that UMB might have waived sovereign
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`immunity in its license agreement with Harpoon. This provision of the MLA
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`shows that UMB has not waived immunity. See Florida Dep't of Health & Rehab.
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`Servs. v. Florida Nursing Home Ass'n, 450 U.S. 147, 150 (1981).
`
`6
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`THE INTER PARTES REVIEW MUST BE DISMISSED BECAUSE UMB
`HAS SOVEREIGN IMMUNITY FROM SUIT
`In the recent decision in Covidien L.P. v. University of Florida Research
`
`Foundation, Inc., a PTAB panel considered the novel question whether 11th
`
`Amendment sovereign immunity was a bar to inter partes review of patents owned
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`by a research foundation affiliated with the University of Florida. Covidien v.
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`Univ. of Fla. Research Found., Inc., Nos. 2016-01274 – 2016-01276 (PTAB Jan.
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`25, 2017) (“Covidien”). The Covidien panel held, in a carefully reasoned opinion,
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`that sovereign immunity applied to inter partes review, the foundation was an arm
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`of the State of Florida, and that the petitions must, therefore, be dismissed. This
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`panel should hold similarly and dismiss the instituted inter partes review against
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`UMB. UMB is indisputably a sovereign arm of the State of Maryland and it is the
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`owner of the ’386 patent. To continue with inter partes review under these
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`circumstances and over UMB’s objection would impermissibly abrogate UMB’s
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`sovereign immunity.
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`A.
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`Sovereign Immunity is a Bar to Inter Partes Review
`Sovereign immunity, guaranteed to the States by the 11th Amendment of the
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`United States Constitution, “is the privilege of the sovereign not to be sued without
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`its consent.” Virginia Office for Prot. & Advocacy v. Stewart, 563 U.S. 247, 253
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`(2011). “While state sovereign immunity serves the important function of
`
`shielding state treasuries[,] . . . preserving the States’ ability to govern in
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`7
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`accordance with the will of their citizens, [its] central purpose is to accord the
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`States the respect owed them as joint sovereigns.” Fed. Mar. Comm'n v. South
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`Carolina State Ports Auth. (“FMC”), 535 U.S. 743, 765 (2002) (internal quotation
`
`marks and citations omitted). Sovereign immunity, therefore, “does not merely
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`constitute a defense to monetary liability, or even to all types of liability. Rather, it
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`provides an immunity from suit,” applicable “regardless of whether a private
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`plaintiff’s suit is for monetary damages or some other type of relief.” Id.; see
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`Seminole Tribe of Florida v. Florida, 517 U.S. 44, 58 (1996) (“[T]he relief sought
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`by a plaintiff suing a State is irrelevant to the question whether the suit is barred by
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`the Eleventh Amendment.”)4
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`The 11th Amendment immunizes the States from private suit in federal or
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`state court, and also in certain administrative proceedings. FMC, 535 U.S. at 753-
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`61. Under FMC, sovereign immunity is a bar to administrative proceedings that
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`have a “strong resemblance” or “similari[ty]” to civil litigation, and so would
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`impinge on the same dignitary interests that the 11th Amendment protects. Id. at
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`757, 760. As the Supreme Court explained, just as Congress is prohibited from
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`“exercising its Article I powers to abrogate state sovereign immunity in Article III
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`4 Sovereign immunity is “in the nature of a jurisdictional bar” and may properly
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`be raised at any point in the proceedings and for the first time on appeal. Edelman
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`v. Jordan, 415 U.S. 651, 677-78 (1974).
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`8
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`judicial proceedings,” it may not use “those same Article I powers to create court-
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`like administrative tribunals where sovereign immunity does not apply.” Id. at 761.
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`In Vas-Cath, Inc. v. Curators of the Univ. of Missouri, the Federal Circuit
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`applied FMC to interference proceedings before the PTO. It found that the
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`“contested interference proceedings in the PTO bear ‘strong similarities’ to civil
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`litigation and the administrative proceeding can certainly be characterized as a
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`lawsuit.” 473 F.3d 1376, 1382 (Fed. Cir. 2007).
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`The Covidien panel undertook a thorough comparative analysis of inter
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`partes review and civil litigation correctly determining that, under FMC and Vas-
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`Cath, inter partes review is so similar to civil litigation as to trigger 11th
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`Amendment immunity. Covidien at 17-27. In sum, “inter partes reviews are
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`contested cases between patent owner and a petitioner in which the petitioner bears
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`the burden of proof and initiates the proceeding by filing a petition requesting a
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`trial.” Id. at 19-20 (internal quotation marks omitted). They proceed by means of
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`rule-governed discovery—including compulsory process—formal motion practice,
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`and hearings subject to the Federal Rules of Evidence, under the authority and
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`supervision of impartial APJs who make factual findings and issue a final written
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`decision on the petitioner’s claim for relief. See id. at 17-25. A proceeding
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`commenced by the service of pleadings on the patent owner, with formal discovery
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`and motion practice, concluding in trial and decision before a panel of judges, can
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`9
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`certainly be “characterized as a lawsuit.” Vas-Cath, 473 F.3d at 1382. And it is
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`exactly the type of “court-like” proceeding that would have been recognized at the
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`founding of our federal system, as an affront to the dignity of a Sovereign State.
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`See FMC, 535 U.S. at 753-61.
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`This panel should follow Covidien’s careful and correct analysis of these
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`issues and should hold that sovereign immunity applies in inter partes review.
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`B. UMB is a Sovereign Arm of the State of Maryland
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`Sovereign immunity applies to the State and to any “instrumentality” or
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`
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`“arm” of the State. See Regents of the Univ. of California v. Doe, 519 U.S. 425,
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`429 (1997). Numerous federal decisions have found that state universities, and
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`USM and its constituent institutions specifically, are sovereign arms of the state.
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`E.g. Maryland Stadium Auth., 407 F.3d at 262-65 (applying 11th Amendment
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`analysis to hold that USM is an alter ego of the State for purposes of diversity
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`jurisdiction); Palotai v. Univ. of Maryland Coll. Park, 959 F. Supp. 714, 716 (D.
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`Md. 1997) (University of Maryland, College Park is an “an arm of the State
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`partaking of the State's Eleventh Amendment immunity”); Bickley v. Univ. of
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`Maryland, 527 F. Supp. 174, 182 (D. Md. 1981) (University of Maryland is an arm
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`of the state). The general proposition that a state university is an arm of the state is
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`so uncontroversial that, in the Federal Circuit, no litigant has ever argued the
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`contrary. See, e.g., Tegic Commc'ns Corp. v. Bd. of Regents of Univ. of Texas Sys.,
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`10
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`458 F.3d 1335, 1340 (Fed. Cir. 2006) (noting that it was undisputed that “[t]he
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`University of Texas System is deemed to be an arm of the State of Texas, see Tex.
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`Gov't Code § 441.101(3)”). And, as the Fourth Circuit observed, even prior to its
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`thorough analysis of the issue in Maryland Stadium Auth. there was already
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`“overwhelming precedent” for the proposition that USM was an arm of the state.
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`Maryland Stadium Auth., 407 F.3d at 263.
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`
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`Arm-of-the-state analysis typically focuses on four principal factors: (1) the
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`responsibility of the state treasury for any judgment imposed on the entity, (2) the
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`entity’s degree of operational autonomy from the state, (3) its involvement in local
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`as opposed to statewide concerns and (4) its treatment as a matter of state law. Id.
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`at 261-62.5 As the Fourth Circuit has explained, the first factor looks to whether a
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`judgment “would interfere with the fiscal autonomy and political sovereignty of
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`the [state].” Id. at 263-64 (internal quotation marks and citation omitted). If such
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`5 We rely on the Fourth Circuit’s formulation because that Court has specifically
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`addressed USM’s status as an arm of the State of Maryland, USM lies within the
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`Fourth Circuit, and the Federal Circuit has never formulated its own independent
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`test. For reasons noted in Maryland Stadium Auth., state universities are at the
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`core of the arm of the state doctrine, and jurisdictional variations in the specific
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`formulation of the doctrine would have no effect on the outcome here, which is
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`supported by “overwhelming precedent.” 407 F.3d at 263.
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`11
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`interference would occur then the entity is an arm of the state for 11th Amendment
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`purposes. See id. at 261, 262 n.11. And such interference occurs when university
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`funds are “held in the Treasury or restricted as to use,” and “subject to [State] audit
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`and budget planning.” Id. at 264 (internal quotation marks and citation omitted.)
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`
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`For all of the reasons set forth in Maryland Stadium Auth., UMB is
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`indisputably an arm of the state. Money judgments against or in favor of UMB
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`affect the State Treasury because they affect funds deposited with the State
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`Treasury and are subject to State audit and budgetary controls. See id. Moreover,
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`while a money judgment is not at issue in this proceeding, the ’386 patent and
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`associated licensing revenue are property of the State and patent invalidation
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`would deprive the State of those revenues. Further, as the Fourth Circuit has
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`explained, the remaining three factors would also require that UMB be deemed an
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`arm of the State. UMB is subject to substantial State control and oversight, it has a
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`statewide educational mission, and it is recognized in state statutory and decisional
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`law as a sovereign instrumentality and alter-ego of the State. Id. at 264-65; see
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`Md. Code Ann., Educ. §§ 12-102(a)(2) (USM is an instrumentality of the State),
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`104(i)(4) (reserving 11th Amendment Immunity); Stern v. Bd. of Regents, Univ.
`
`Sys. of Maryland, 846 A.2d 996, 1001-03 (Md. 2004).6
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`6 Kovats v. Rutgers, The State Univ., 822 F.2d 1303 (3d Cir. 1987), referenced by
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`Petitioner at oral argument, is not to the contrary. As the Fourth Circuit has noted
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`12
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`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
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`C.
`
`
`Inter Partes Review Cannot Proceed Without UMB
`As Covidien held, “Eleventh Amendment immunity bars the institution of an
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`inter partes review against an unconsenting state that has not waived sovereign
`
`immunity.” Covidien at 27. Petitioner suggested in oral argument that this
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`analysis would be different if the patent owner were not a real party in interest. To
`
`the contrary, absent waiver, no procedural mechanism exists under PTAB rules
`
`that could permit inter partes review to proceed where the registered patent owner
`
`is a non-consenting sovereign entity.
`
`In any event, UMB is not a mere nominal owner of the ’386 patent, but its
`
`real owner. Notwithstanding the license UMB granted to Harpoon, UMB remains
`
`“the owner of the patents in suit because it retained substantial rights in the patents,
`
`including the right to sue for infringement if [Harpoon] declines to do so,” see
`
`Alfred E. Mann Foundation for Science Research v. Cochlear Corp., 604 F.3d
`
`1354, 1357 (Fed. Cir. 2010) (“AMF”), the right to license the patents for non-
`
`commercial use in furtherance of UMB’s public purposes, and the right to veto
`
`Rutgers “involves a somewhat unique situation,” due to its legacy as a private
`
`university. For example, unlike USM and UMB, whose property belongs to the
`
`State of Maryland, Rutgers owned private, income-producing assets from which it
`
`could fund judgments independently of the State, and had sole discretionary
`
`control of its accounts (even those containing state funds). Id. at 1309, 1311.
`
`13
`
`
`
`
`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`
`settlement terms that would adversely affect its patent rights. Under these
`
`circumstances, to ignore UMB’s objection to suit and invalidate its patents would
`
`impermissibly abrogate its sovereign immunity.
`
`
`
`A patent owner may grant an exclusive license on terms that are “tantamount
`
`to an assignment of the patents to the . . . licensee.” Id. at 1359. This effective
`
`assignment happens only if the owner transfers “all substantial rights.” Id. In
`
`AMF, the Federal Circuit held that an exclusive license did not transfer all
`
`substantial rights, where the patent owner retained the option to initiate
`
`infringement litigation in the event the licensee failed to do so. It also relied on
`
`Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1132 (Fed. Cir. 1995) to reject the
`
`argument that the patent owner’s enforcement rights were rendered illusory by the
`
`licensee’s right to sublicense to an infringer. As the AMF Court explained, a right
`
`to sublicense does not negate a licensor’s enforcement rights, where its licensee is
`
`required to pay pass-through sub-licensing revenue. See AMF, 604 F.3d at 1362.
`
`
`
`Under AMF, UMB remains the owner of the ’386 patent at least because it
`
`retains a substantial secondary right to sue for infringement (MLA § 9.5), backed
`
`by the right to sublicensing royalties. Harpoon thus “holds substantially less than
`
`the complete right to sue” (MLA §§ 3.4.1, 5.5), which was the dispositive issue in
`
`AMF. Id. at 1362-63. Here, moreover, UMB also retains still more substantive
`
`and fundamental rights that the AMF patent owner had given up. Most
`
`14
`
`
`
`
`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`
`importantly, UMB may continue to license the patents for non-commercial use
`
`(MLA § 3.2) and UMB’s approval is required before Harpoon may enter into any
`
`settlement that “materially limits the scope, validity, or enforceability of patents
`
`included in the Patent Rights.” (MLA § 9.4.2). Cf. AMF, 604 F.3d at 1357 (noting
`
`that AMF had no veto over the terms of settlement by its licensee).
`
`Moreover, the MLA expressly provides that UMB’s entry into the license is
`
`not a waiver of its sovereign immunity from suit. Under these circumstances,
`
`where there is no PTAB rule permitting institution of inter partes review without
`
`including Patent Owner UMB, UMB has retained substantial rights as patent
`
`owner, and UMB has validly asserted that it is immune from suit, inter partes
`
`review may not proceed.
`
`CONCLUSION
`The inter partes review should be dismissed.
`
`
`
`
`
`DATE: February 23, 2017
`
`COOLEY LLP
`ATTN: Patent Group
`1299 Pennsylvania Avenue NW
`Suite 700
`Washington, DC 20004
`
`Tel: (703) 456-8573
`Fax: (202) 842-7899
`
`
`Respectfully submitted,
`COOLEY LLP
`
`
`
`
`By: /Erik B. Milch/
`Erik B. Milch
`Reg. No. 42,887
`Back-up Counsel for Patent Owner
`
`15
`
`
`
`
`Patent Owner’s Motion to Dismiss
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`
`
`CERTIFICATE OF SERVICE UNDER 37 C.F.R. § 42.6
`I hereby certify, pursuant to 37 C.F.R. Section 42.6, that a complete copy of:
`
` PATENT OWNER’S MOTION TO DISMISS
`
` EXHIBIT 2013 THROUGH EXHIBIT 2017
`
`are being served via electronic mail on the 23rd day of February 2017, upon the
`
`counsel of record for the Petitioner as follows:
`
`Brad D. Pedersen
`pedersen@ptslaw.com
`Eric H. Chadwick
`chadwick@ptslaw.com
`Chad W. Wickman
`wickman@ptslaw.com
`Patterson Thuente Pederson, P.A.
`80 South 8th Street, Suite 4800
`Minneapolis, MN 55402
`
`With a courtesy copy to prps@ptslaw.com.
`
`
`DATE: February 23, 2017
`
`COOLEY LLP
`ATTN: Patent Group
`1299 Pennsylvania Avenue NW
`Suite 700
`Washington, DC 20004
`
`Tel: (703) 456-8573
`Fax: (202) 842-7899
`
`
`Respectfully submitted,
`COOLEY LLP
`
`
`
`
`By: /Erik B. Milch/
`Erik B. Milch
`Reg. No. 42,887
`Back-up Counsel for Patent Owner
`
`16
`
`
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