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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`NEOCHORD, INC.
`Petitioner
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`v.
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`UNIVERSITY OF MARYLAND, BALTIMORE
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`Patent Owner
`______________
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`Case No. IPR2016-00208
`Patent No. 7,635,386
`______________
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`PATENT OWNER’S REPLY TO PETITIONER’S OPPOSITION TO
`PATENT OWNER’S MOTION TO DISMISS
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`Table of Contents
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`Page
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`I.
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`II.
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`UMB HAS NOT WAIVED SOVEREIGN IMMUNITY .............................. 1
`A. UMB Did Not Waive Immunity by Its Litigation Conduct ................. 2
`B. UMB Did Not Waive Immunity in the Harpoon MLA ....................... 5
`COVIDIEN IS INDISTINGUISHABLE AND CORRECTLY
`DECIDED ....................................................................................................... 6
`A.
`Covidien is not distinguishable ............................................................ 7
`B.
`This Case is Governed by FMC, not Cuozzo ....................................... 7
`C.
`Claims of Constitutional and Statutory Abrogation Are
`Meritless ............................................................................................... 9
`III. CONCLUSION ............................................................................................. 10
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`-i-
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`Table of Authorities
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`Page(s)
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`Cases
`Baum Research and Dev. Co., Inc. v. Univ. of Mass. at Lowell,
`503 F.3d 1367 (Fed. Cir. 2007) ........................................................................ 2, 6
`Biomedical Patent Mgmt. Corp. v. California, Dep’t of Health Servs.,
`505 F.3d 1328 (Fed. Cir. 2007) ............................................................................ 9
`Central Virginia Community Coll. v. Katz,
`546 U.S. 356 (2006) .............................................................................................. 9
`Coll. Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd.,
`527 U.S. 666 (1999) .......................................................................................... 1, 2
`Cuozzo Speed Techs. LLC v. Lee,
`136 S. Ct. 2131 (2016) (Opp’n ) ................................................................... 7, 8, 9
`Edelman v. Jordan,
`415 U.S. 651 (1974) .......................................................................................... 2, 6
`Fed. Mar. Comm’n v. South Carolina State Ports Auth.,
`535 U.S. 743 (2002) ...................................................................................... 1, 7, 8
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`Florida Dep’t of Health & Rehab. Servs. v. Florida Nursing Home
`Ass’n,
`450 U.S. 147 (1981) .............................................................................................. 6
`Florida Dep’t of State v. Treasure Salvors, Inc.,
`458 U.S. 670 (1982) .................................................................................. 2, 3, 4, 5
`Florida Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank,
`527 U.S. 627 (1999) ........................................................................................ 9, 10
`Hill v. Blind Ind. and Servs. of Maryland,
`179 F.3d 754 (1999) .......................................................................................... 4, 5
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`-ii-
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`Table of Authorities
`(continued)
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`Page(s)
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`Lapides v. Bd. of Regents of Univ. Sys. of Georgia,
`535 U.S. 613 (2002) ...................................................................................... 3, 4, 5
`State Contracting & Eng’g Corp. v. State of Florida,
`258 F.3d 1329 (Fed. Cir. 2001) .................................................................... 3, 4, 5
`Vas-Cath, Inc. v. Curators of Univ. of Missouri,
`473 F.3d 1376 (Fed. Cir. 2007) ............................................................................ 3
`Statutes
`Patent Remedy Act ............................................................................................... 9, 10
`Other Authorities
`37 C.F.R. 42.5(c) ........................................................................................................ 5
`Fourteenth Amendment ........................................................................................... 10
`Fed. R. Civ. P. 12(b)(6) .............................................................................................. 2
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`-iii-
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`Petitioner’s Opposition does not dispute (1) that UMB is a sovereign arm of
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`the State of Maryland or (2) that, under Fed. Mar. Comm’n v. South Carolina State
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`Ports Auth., 535 U.S. 743 (2002) (“FMC”), inter partes review (“IPR”)
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`“substantially resembles” civil litigation, just as Covidien found. Petitioner also has
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`no answer to UMB’s showing that it retains substantial rights in the ’386 Patent and
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`that this IPR cannot proceed without UMB. Petitioner simply ignores the dispositive
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`issue of substantial rights and asserts without argument that Harpoon “should be
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`considered . . . the ‘effective patentee’.” Opp’n at 3. Petitioner purports to criticize
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`the Covidien panel for ignoring “binding . . . precedent,” but that precedent has no
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`bearing on the analysis of sovereign immunity. And Petitioner offers arguments for
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`ostensible waiver and abrogation of immunity that are squarely precluded by
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`decisions of the Supreme Court and Federal Circuit. Petitioner’s arguments are
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`meritless. The IPR should be dismissed.
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`I.
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`UMB HAS NOT WAIVED SOVEREIGN IMMUNITY
`Petitioner claims that UMB waived immunity by defending on the merits
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`before “belated[ly]” seeking dismissal, and waived expressly in the Harpoon MLA.
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`The test for waiver of sovereign immunity “is a stringent one.” Coll. Sav. Bank v.
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`Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 675 (1999)
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`(quotation marks and citation omitted). A State waives immunity only if it
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`“voluntarily invokes [the] jurisdiction” of a forum (waiver by litigation conduct), or
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`provides a “clear declaration” that it will submit to jurisdiction (express waiver).
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`Coll. Sav. Bank, 527 U.S. at 675-76. Neither applies here.
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`A. UMB Did Not Waive Immunity by Its Litigation Conduct
`Petitioner concedes at page three of its brief that sovereign immunity “may be
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`raised at any point of the proceedings,” Florida Dep't of State v. Treasure Salvors,
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`Inc., 458 U.S. 670, 683 n.18 (1982), Edelman v. Jordan, 415 U.S. 651, 677-78
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`(1974), yet in the same breath urges that UMB waived the defense by raising it
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`“belated[ly],” and that the issue should be analyzed “in a manner analogous” to an
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`FRCP 12(b)(6) motion. That is not the law of the Supreme Court or Federal
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`Circuit—a fact underscored by the authority Petitioner offers in its support, a law
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`student’s Note and a readily distinguishable 9th Circuit case that simply disagrees
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`with the controlling Supreme Court rule.
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`The rule that sovereign immunity “may be raised at any point of the
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`proceedings,” does not mean that the defense can never be waived by conduct, but
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`rather that the defense is not waived by raising it “late” outside the ordinary
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`procedural course of the case. Treasure Salvors, 458 U.S. at 683 n.18; see, e.g.,
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`Baum Research and Dev. Co., Inc. v. Univ. of Mass. at Lowell, 503 F.3d 1367, 1371
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`(Fed. Cir. 2007). A state waives sovereign immunity through litigation conduct
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`where it affirmatively invokes the jurisdiction of the forum, “voluntarily becom[ing]
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`party to a cause” by filing suit, intervening in a suit, or removing a suit to the forum.
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`2
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`See Lapides v. Bd. of Regents of Univ. Sys. of Georgia, 535 U.S. 613, 619 (2002)
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`(internal quotation marks and citation omitted). That rule exists to prevent
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`“seriously unfair results” from misuse of the privilege for tactical advantage.
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`Lapides, 535 U.S. at 619; Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d
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`1376, 1381-83 (Fed. Cir. 2007) (“the principles of federalism are not designed for
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`tactical advantage”).
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`A State does not waive sovereign immunity when it responds to a lawsuit
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`brought against it and defends on the merits as UMB did here. See Treasure Salvors,
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`458 U.S. at 683 n.18. As the Court held in Treasure Salvors “the fact that the State
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`appeared and offered defenses on the merits does not foreclose consideration of the
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`Eleventh Amendment issue; ‘the Eleventh Amendment defense sufficiently partakes
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`of the nature of a jurisdictional bar’ that it may be raised at any point of the
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`proceedings.” Id. In State Contracting & Eng'g Corp. v. State of Florida, 258 F.3d
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`1329 (Fed. Cir. 2001), the State failed to move to dismiss patent infringement claims
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`on sovereign immunity grounds and engaged in extensive litigation before seeking
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`summary judgment on the merits and immunity. Id. at 1332–33. The Federal Circuit
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`found it “quite clear that those activities do not amount to a waiver,” rejecting any
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`suggestion that the State waived “by defending this litigation.” Id. at 1336 (citing
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`Treasure Salvors, 458 U.S. at 683 n.18).
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` The same result follows in this case. UMB did not voluntarily invoke PTAB
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`3
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`jurisdiction but rather “was brought involuntarily into the case as a defendant.” See
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`Lapides, 535 U.S. at 620. And UMB did not waive immunity merely by “defending
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`this litigation” on the merits before first raising the defense. See Treasure Salvors,
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`458 U.S. at 683 n.18; State Contracting, 258 F.3d at 1332.
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`The correctness of that result is also confirmed by the fact that UMB enjoys
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`no tactical advantage in raising its immunity defense now. See Lapides, 535 U.S. at
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`619-23. UMB filed no previous motions to dismiss, and sought permission to make
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`this motion promptly after the Covidien decision and before any Panel decision
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`touching the merits. Even Petitioner has not suggested that this timing could confer
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`an unfair tactical advantage on UMB. This case does not implicate the “seriously
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`unfair results” that the rules of waiver by conduct are intended to address. See
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`Lapides, 535 U.S. at 620.
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`Petitioner purports to rely on the 9th Circuit’s decision in Hill v. Blind Ind.
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`and Servs. of Maryland, 179 F.3d 754 (1999), where defendant repeatedly sought
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`dismissal on jurisdictional grounds but withheld an immunity defense until the first
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`day of trial. The Hill panel, scenting that defendant’s delay was tactical, held the
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`defense was raised too late. Hill does not govern this proceeding, has never been
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`cited by the Federal Circuit, fails to discuss Treasure Salvors (but expresses open
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`disagreement with the rule there applied) and is readily distinguished. Here, unlike
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`in Hill, UMB had not moved to dismiss on other grounds and it is undisputed that
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`4
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`UMB could gain no unfair tactical advantage from the timing of its motion.
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`Ultimately, Petitioner has not offered an argument for waiver by litigation
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`conduct, but only an argument that UMB should be procedurally defaulted for
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`raising the issue “late.” If a rule of procedural default was applicable, then the Board
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`would have sound reason to excuse UMB’s lateness under 37 C.F.R. 42.5(c).
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`Fundamental principles of federalism deprive the Board of jurisdiction, UMB enjoys
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`no tactical advantage, and Petitioner has articulated no prejudice to its ability to
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`respond to the motion. But UMB cannot be defaulted for failing to raise the issue
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`earlier. Treasure Salvors, 458 U.S. at 683 n.18. The only litigation conduct that
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`supports waiver is the voluntary invocation of the Board’s jurisdiction. Lapides, 535
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`U.S. at 619-20. And it is “quite clear” that UMB’s conduct in merely “defending
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`this litigation” without first raising the defense “do[es] not amount to a waiver.”
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`State Contracting, 258 F.3d at 1336.
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`B. UMB Did Not Waive Immunity in the Harpoon MLA
`Petitioner contends that, notwithstanding UMB’s express reservation of
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`sovereign immunity in the Harpoon MLA, see MLA § 14.6, UMB waived immunity
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`by agreeing that Harpoon may seek USPTO reexamination of the licensed patents.
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`See Opp’n at 6-8. Petitioner misreads the MLA and applicable law. A waiver as to
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`Harpoon, if any, is not a waiver as to Petitioner.
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`A waiver of sovereign immunity may be found “‘only where stated by the
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`5
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`most express language or by such overwhelming implications from the text as [will]
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`leave no room for any other reasonable construction.’” Florida Dep't of Health &
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`Rehab. Servs. v. Florida Nursing Home Ass'n, 450 U.S. 147, 150 (1981) (quoting
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`Edelman, 415 U.S. at 673) (quotation marks and citation omitted).
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`In § 3.7.1 of the MLA, Harpoon agreed to proceed by ex parte reexamination
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`or reissue prior to bringing any Patent Challenge against UMB. Petitioner claims
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`this “makes clear that UMB did not consider Patent Challenges at the USPTO to be
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`subject to sovereign immunity.” Opp’n at 7. To the contrary, in MLA § 3.7.2, UMB
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`expressly reserved the right to demand that Harpoon abandon any Patent Challenge
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`other than “a request for reexamination or reissue under Section 3.7.1.” The MLA
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`was executed in 2013, after the current IPR regime was in effect. UMB’s express
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`reservation in § 3.7.2 therefore encompasses IPRs, and UMB has not waived
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`immunity to IPRs.
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`Still more importantly, even if UMB had waived immunity to a Harpoon IPR,
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`it did not waive as to an IPR brought by Petitioner. Baum, on which Petitioner
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`purports to rely, involved a district court action by a licensee against its licensor
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`based on the contractual waiver of immunity between them. 503 F.3d at 1368-69.
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`No authority permits the panel to construe a waiver of immunity with a contractual
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`counter-party as a waiver of immunity against all comers.
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`II. COVIDIEN IS INDISTINGUISHABLE AND CORRECTLY DECIDED
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`6
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`A. Covidien is not distinguishable
`Petitioner claims that Covidien is not “sufficiently similar” to this case to “be
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`controlling.” Opp’n at 8. But the only non-trivial dissimilarity Petitioner has
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`identified is the timing of the motions to dismiss and, as discussed, the defense of
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`sovereign immunity is not waived by raising it “late.” Petitioner also emphasizes
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`that Covidien is not binding on this Panel. We commend Covidien to the Panel not
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`as binding precedent, but because it is instructive and correctly decided.
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`B.
`This Case is Governed by FMC, not Cuozzo
`As UMB discussed in its opening brief, under FMC, a sovereign has immunity
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`against a federal administrative proceeding if that proceeding “strong[ly]
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`resemble[es]” civil litigation. See FMC, 535 U.S. at 757. The Covidien panel
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`carefully applied the FMC test to IPR, correctly determined that IPR shares the
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`essential characteristics of the Maritime Commission proceeding in FMC, and held
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`that a non-consenting sovereign therefore has immunity against IPR. Notably,
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`Petitioner never suggests any factual distinction between the IPR process and the
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`characteristic processes of civil litigation discussed in FMC.
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`Because Petitioner cannot contest Covidien’s correct application of FMC to
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`IPR, it instead contends that this case is not governed by FMC, but rather by the
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`Supreme Court’s decision in Cuozzo Speed Techs. LLC v. Lee, 136 S. Ct. 2131
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`(2016) (Opp’n at 10-12), a case having nothing to do with sovereign immunity and
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`7
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`one Petitioner willfully misreads. Cuozzo did not hold, state, or imply that IPR fails
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`to strongly resemble a civil lawsuit, which is the only question presented here.
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`In Cuozzo the Court held that Congress authorized the PTO to make its own
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`rule for patent claim construction in IPR, different from the rule applied in district
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`court invalidity proceedings. 136 S. Ct. at 2142. Cuozzo had pointed to the
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`“adjudicatory characteristics” of IPR to argue that Congress intended IPR as a
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`“surrogate” for district court invalidity proceedings and the district court rule should
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`therefore apply. Id. at 2143. The Court acknowledged the adjudicatory character of
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`IPR but rejected Cuozzo’s “surrogate” argument. Id. at 2143-44. In its analysis, it
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`found “most importantly . . . that “the purpose of the [IPR] proceeding is not quite
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`the same as the purpose of district court litigation” and resembles the purpose of ex
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`parte reexamination. Id. at 2144 (emphasis added).
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`Contrary to Petitioner’s contentions, see Opp’n at 10-11, UMB has never
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`argued that inter partes review is a “surrogate” for, nor that it serves the same
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`purpose as a district court invalidity proceeding. Those issues have no bearing on
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`the sovereign immunity question, which asks whether the process of IPR resembles
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`civil litigation. See FMC, 535 U.S. at 757-58. Congress’s purpose in creating IPR,
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`analyzed in Cuozzo, does not speak to the relevant fact that the process of IPR—
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`adversarial, adjudicative and including formal motion practice such as this—
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`overwhelmingly resembles a lawsuit. Cuozzo’s only relevance here is to underscore
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`8
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`again the many respects in which the IPR process strongly resembles the process of
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`civil litigation. See Cuozzo, 136 S. Ct. at 2143.
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`Petitioner, who has ignored Cuozzo’s holding, reasoning and context, purports
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`to criticize the Covidien panel for disregarding Cuozzo’s “binding . . . precedent”
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`and “reaching a different legal conclusion as to the nature of IPR proceedings.”
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`Opp’n at 12. But Covidien reached a “different conclusion” only in the trivial sense
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`that it correctly addressed a different question. Cuozzo’s question and answer have
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`no application to the issue before this Panel.
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`C. Claims of Constitutional and Statutory Abrogation Are Meritless
`In Point IV(B) of its Opposition, Petitioner claims that the Article I Patent
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`Clause exempts patent proceedings from sovereign immunity to the same extent that
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`Bankruptcy Proceedings are exempt under the Bankruptcy Clause and Central
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`Virginia Community Coll. v. Katz, 546 U.S. 356 (2006). Petitioner is wrong. In
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`Florida Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627
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`(1999), the Court held that the Patent Remedy Act unconstitutionally abrogates
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`sovereign immunity in part because “Congress may not abrogate state sovereign
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`immunity pursuant to its Article I powers . . . under the Patent Clause.” Id. at 636.
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`In Biomedical Patent Mgmt. Corp. v. California, Dep’t of Health Servs., 505 F.3d
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`1328 (Fed. Cir. 2007) the Federal Circuit rejected the same argument that Petitioner
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`offers here, holding that Katz had not implicitly over-ruled Florida Prepaid. Id. at
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`9
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`Patent Owner’s Reply to Petitioner’s Opposition
`Case No.: IPR2016-00208 - Atty Docket: HARP-001/02US
`1343. Sovereign immunity thus applies fully to patent proceedings.
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`In Point IV(C) Petitioner appears to argue that (1) Congress abrogated
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`immunity in IPR proceedings in the Patent Remedy Act and (2) the Act has not been
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`held unconstitutional in that respect. Opp’n at 13-14. To the contrary, abrogation
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`requires that Congress “unequivocally express[ ] its intent” to abrogate immunity.
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`Florida Prepaid, 527 U.S. at 635. Here, intent to abrogate is not unequivocally
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`expressed since, among other things, the IPR regime was enacted twenty-years after
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`the Patent Remedy Act, which had already been declared unconstitutional. If there
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`were unequivocal intent, then abrogation would be unconstitutional for reasons
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`stated in Florida Prepaid. Id. at 635-48. To subject a State patent owner to
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`invalidity proceedings could not conceivably be defended as a valid exercise of
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`Congress’s limited power, under § 5 of the Fourteenth Amendment, to remedy
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`violations of constitutional rights, which is the sole source of Congress’s authority
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`to abrogate immunity in patent proceedings. Id.
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`III. CONCLUSION
`The IPR should be dismissed.
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`Respectfully submitted,
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`By: /Erik B. Milch/
`Erik B. Milch, Reg. No. 42,887
`Back-up Counsel for Patent Owner
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`DATE: March 9, 2017
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`COOLEY LLP
`1299 Pennsylvania Ave NW, Suite 700
`Washington, DC 20004
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`10
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`Patent Owner’s Reply to Petitioner’s Opposition
`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:
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` PATENT OWNER’S REPLY TO PETITIONER’S
`OPPOSITION TO PATENT OWNER’S MOTION TO DISMISS
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`is being served via electronic mail on the 9th day of March 2017, upon the counsel
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`of record for the Petitioner as follows:
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`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
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`With a courtesy copy to prps@ptslaw.com.
`
`
`DATE: March 9, 2017
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`COOLEY LLP
`ATTN: Patent Group
`1299 Pennsylvania Avenue NW
`Suite 700
`Washington, DC 20004
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`Tel: (703) 456-8573
`Fax: (202) 842-7899
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`Respectfully submitted,
`COOLEY LLP
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`
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`By: /Erik B. Milch/
`Erik B. Milch
`Reg. No. 42,887
`Back-up Counsel for Patent Owner
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`11
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