Does Sovereign Immunity Protect States from Being Plaintiffs?: A Discussion of Gensetix, Inc. v. Baylor College of Medicine

“University of Texas MD Anderson Cancer Center” by quotlumen is licensed under CC BY-NC-ND 2.0 

Mike Chernoff, Associate Member, University of Cincinnati Law Review

I. Introduction

The Eleventh Amendment allows states to claim sovereign immunity from lawsuits.[1] However, it is unclear whether this immunity extends to states who are plaintiffs. This scenario occurred in a patent infringement case involving the University of Texas that recently presented oral arguments to the Federal Circuit.[2] In this case, the court must consider the lengths to which sovereign immunity may extend to protect a state’s interest when the state has an agreement with another party.

II. Sovereign Immunity

The Eleventh Amendment states that the judiciary “. . . shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”[3] This Amendment was created in response to Chisholm v. Georgia, a Supreme Court decision that allowed federal courts to hear disputes between private citizens and states.[4] The principles set forth in the Eleventh Amendment are also found in The Federalist No. 81.[5] In that publication, Alexander Hamilton argued that the sovereign nature of the states provides reason to avoid lawsuits when, he stated, “It is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent.”[6] The Supreme Court echoed these calls for respecting the sovereignty of the states as motivation for the Eleventh Amendment in Blatchford v. Native Village of Noatak and Circle Village, stating that:

[W]e have understood the Eleventh Amendment to stand not so much for what it says, but for the presupposition of our constitutional structure which it confirms: that the States entered the federal system with their sovereignty intact; that the judicial authority in Article III is limited by this sovereignty, and that a State will therefore not be subject to suit in federal court unless it has consented to suit, either expressly or in the “plan of the convention.”[7]

The Supreme Court affirmed the belief that states are sovereign beyond the limits of the Eleventh Amendment in Alden v. Maine by stating “the sovereign immunity of the States neither derives from nor is limited by the terms of the Eleventh Amendment.”[8]

While the Eleventh Amendment only bars lawsuits by citizens of another state, the Supreme Court has held that the Eleventh Amendment also stops private citizens from bringing suits against their own state.[9] The sovereign immunity given to states by the Eleventh Amendment also extends to these public universities because state public universities are an arm of the state’s government.[10] Although sovereign immunity may extend to a broad range of suits, this right may be waived by the state and allow a federal court to oversee the suit.[11]

III. Patent Infringement Lawsuits

Patents offer protection to “whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”[12] If a patented invention is made, used, offered for sale, or imported into the United States during the life of the patent by anyone other than the patent owner or someone who is authorized by that patent owner, then the patent has been infringed.[13] A patentee may bring a civil action against an infringer.[14] “Patentee” includes the person to whom the patent was issued and all successors in title to the patentee.[15]

A patent owner may grant permission to another entity to make, use, sell, or import the patented invention via a license.[16] When a patent owner grants a license to a third party, the patent owner continues to have property rights over the patented invention.[17] However, the Federal Circuit held that there may not be multiple separate owners with standing to sue for infringement.[18] When a patent owner transfers all “substantial rights” of a patent, a licensee has standing to sue for infringement because the license functions as an assignment of the patent to the licensee.[19] Otherwise, the patent owner would retain their standing to sue as the holders of the substantial rights of the patent.[20] Examples of substantial rights of a patent include: the right to freely license the patent, the right to receive a portion of the recovery in infringement suits, and the right to control the licensee’s activities.[21] However, the right to sue is “the most important consideration.”[22]

IV. The University of Texas’s Sovereign Immunity Claim

Recently, the University of Texas used sovereign immunity to avoid patent litigation as a plaintiff. The conflict began when Professor William Decker invented methods of modifying patients’ immune systems to kill cancer cells while he was employed at The University of Texas MD Anderson Cancer Center.[23] As Professor Decker invented the patented methods in the scope of his employment at the MD Anderson Cancer Center, the University of Texas (“UT”) retained title to those patents.[24] UT granted an exclusive license to Alex Mirrow to commercialize the patented methods.[25] Mirrow later assigned his rights in the patented methods to Gensetix; UT subsequently confirmed the assignment.[26] After inventing the methods, Professor Decker left his employment at the MD Anderson Cancer Center and began a role with the Baylor College of Medicine (“BCM”).[27]

Gensetix alleged that Professor Decker continued to practice the methods contained in the patents owned by UT and assigned to Gensetix.[28] Gensetix alleged that several abstracts published by Professor Decker in 2013 and 2014 describe use of the patented methods.[29] Gensetix claimed to have contacted Professor Decker and BCM in an attempt to enforce its patent rights and to acquire intellectual property right based on improvements or new inventions that stemmed from the use of the patented methods.[30] Although Gensetix sought financial backing from Fannin Innovation in response to BCM’s positive reception to the idea of assigning these rights to Gensetix, Professor Decker and BCM entered into a licensing agreement with Diakonos, a competing research company.[31] Gensetix paid Professor Decker to continue research, but Gensetix alleged that Professor Decker interfered with negotiations between Gensetix and BCM by disparaging Gensetix and independently soliciting Diakonos.[32]

Gensetix filed a complaint against Professor Decker, BCM, and Diakonos for infringing on the method patents assigned to Gensetix by UT and for civil conspiracy.[33] Gensetix also claimed that Professor Decker breached his contract with Gensetix, tortuously interfered with the agreements between Gensetix and BCM and Fannin Innovation, and was subject to promissory estoppel for the alleged agreement that Gensetix and Professor Decker had agreed upon.[34] In the lawsuit, Gensetix named UT as an involuntary plaintiff.[35] However, UT asserted sovereign immunity from suit under the Eleventh Amendment as an arm of the State of Texas.[36] UT also moved that the case should be dismissed for lack of subject matter jurisdiction.[37] Gensetix argued that sovereign immunity does not apply because no claims have been asserted against UT.[38] However, the District Court for the Southern District of Texas stated that the issue on this question was not one of subject matter jurisdiction, but whether the Eleventh Amendment bars UT from being joined as an involuntary plaintiff in a patent suit.[39]

The district court first considered whether the sovereign immunity would apply to UT in this situation. Gensetix relied on the Federal Circuit’s holding in Regents of the University of California v. Eli Lilly & Co.[40] In Eli Lilly, the University of California (“UC”), who owned the patent, voluntarily joined its licensee in a case for patent infringement in the Northern District of California.[41] The defendant sought to transfer venue to the Southern District of Indiana, but UC objected, stating they only waived their sovereign immunity rights with regard to California federal district courts.[42] The Federal Circuit ruled that the Eleventh Amendment did not apply because there were claims or counterclaims against UC.[43] The district court in Gensetix, Inc. v. Baylor Coll. Of Med. distinguished the cases because UC voluntarily joined its lawsuit whereas UT was clear that it will not voluntarily join its suit.[44] Thus, the district court ruled that involuntary joinder of UT was barred by the Eleventh Amendment.[45]

Next, the district court considered whether Gensetix had standing to bring the patent infringement suit without UT as a plaintiff. This was decided by determining which party was the holder of the “substantial rights” of the patents. According to the licensing agreement between Gensetix and UT, Gensetix must enforce the patent at its own expense and is entitled to retain recovery from this enforcement.[46] If Gensetix did not sue within six months of receiving knowledge of alleged infringement, then UT would have gained the right to sue for infringement.[47] At that time, UT would have had complete control over litigation.[48] Other factors that were considered in deciding standing included UT’s rights to license the patents to other entities and termination provisions that may allow the patent rights to revert back to UT.[49] In light of these factors, the district court held that UT owned the substantial rights of the patent and, therefore, Gensetix did not have standing to bring suit without UT as a plaintiff.[50]

Finally, the district court held that UT’s presence was necessary and that the suit could not proceed with their absence.[51] During the court’s Rule 19 analysis for the required joinder of a party, the court considered the prejudicial effects that may be placed on the parties without UT present in this suit. The court stated that without UT in the suit, UT may not have been able to protect the rights it has retained that are associated with its patents in the event the patents are declared invalid.[52] UT would also have been required to protect BCM from the risk of multiple lawsuits by different rights holders of the patents, according to the court.[53] Due to these risks of prejudice, the court ruled that UT was a necessary party and the case was dismissed without its waiver of sovereign immunity.[54]

Gensetix sought an appeal on the necessity of UT as a party and on the immunity claim by UT.[55] Oral arguments were made to the Federal Circuit on February 4, 2020.

V. Discussion

As a state, Texas has the right to choose when to apply sovereign immunity, regardless of its position in the lawsuit. Gensetix could have used contract negotiations to ensure that they would have been able to bring this lawsuit without UT and avoided UT’s sovereign immunity claim.

The underlying reasons for the Eleventh Amendment support the notion that state sovereign immunity should extend to suits where the state is not a defendant. Alexander Hamilton and the Supreme Court shared the view that a state’s sovereign immunity is paramount to maintaining the sovereignty that the states are afforded by the Constitution.[56] These underlying principles of state sovereign immunity do not bind the state to only use this benefit in cases where the state is a defendant. As a sovereign, the state may choose not to bring a suit in any situation it so chooses. While this application of sovereign immunity may prejudice those attempting to join the state in the suit, it does not hamper justice any more than a state claiming sovereign immunity as a defendant. The state has the right to select when to use this privilege. The state’s sovereignty is not affected by its position in the lawsuit and the state of Texas chose to claim this privilege in Gensetix.

Had the original licensing agreement contained different language, UT may not have been necessary as a party in the lawsuit. Gensetix had the opportunity to ensure this result in the early stages of developing the original license agreement. At the time that a prospective licensee is negotiating with a state institution for the licensing of a patent, the prospective licensee could negotiate favorable terms in order to avoid a situation such as this one. Based on the district court’s analysis, there are certain factors that will weigh in favor of requiring the state to be a party to the lawsuit for the lawsuit to continue. All these factors are items that may be negotiated in a licensing agreement. These factors include whether: the licensor retained the right to sue, the licensor retained the right to freely license the patent, and the licensee may sublicense.[57] Gensetix did not negotiate these terms to put themselves in a position to control the substantial rights of the patent. Gensetix’s failure to ensure a favorable position in the contract should not negate UT’s right to sovereign immunity that is guaranteed by the Eleventh Amendment.

Due to these reasons, the district court was right to grant the dismissal of the lawsuit. The state of Texas is within its rights to avoid participation in this lawsuit and the terms of the contract did not guarantee Gensetix the ability to sue without UT joining the lawsuit.

VI. Conclusion

The rights of a state must always be considered when a contract is formed between a private individual or business and a public entity. The University of Texas applied its sovereign privilege to avoid a lawsuit. The Federal Circuit should respect the sovereign rights of Texas and uphold this right by affirming the dismissal of the Gensetix case.


[1] U.S. Const. amend. XI.

[2] Notice of Appeal at 1, Gensetix, Inc. v. Baylor Coll. of Med., 354 F. Supp. 3d 759, 763 (S.D. Tex. 2018) No. 4:17-cv-01025.

[3] U.S. Const. amend. XI.

[4] The 11th Amendment: Correcting the Supreme Court in action, Interactive Constitution Made By National Constitution Center (Feb. 07, 2020),https://perma.cc/4E53-GB5D.

[5] The Federalist No. 81 (Alexander Hamilton).

[6] Id.

[7] Blatchford v. Native Village of Noatak, 501 U.S. 775, 779 (1991).

[8] Alden v. Maine 527 U.S. 706, 713 (1999).

[9] See Hans v. Louisiana, 134 U.S. 1 (1890).

[10] See Regents of the Univ. of Cal. v. Doe, 519 U.S. 425 (1997).

[11] Idaho v. Coeur D’Alene Tribe, 521 U.S. 261, 267 (1997).

[12] 35 U.S.C.S, § 101 (Lexis 2019).

[13] 35 U.S.C.S. § 271 (Lexis 2019).

[14] 35 U.S.C.S. § 281 (Lexis 2019).

[15] 35 U.S.C.S. § 100(d) (Lexis 2019).

[16] Frequently Asked Questions: Patents, World Intellectual Property Organization, https://perma.cc/YX6L-9QY5 (last visited Feb. 13, 2020).

[17] Id.

[18] Alfred E. Mann Found. for Sci. Research v. Cochlear Corp., 604 F.3d 1354, 1359 (Fed. Cir. 2010).

[19] Id. at 1358-59.

[20] Id. at 1359.

[21] Id. at 1360-61.

[22] Id. at 1361.

[23] Gensetix, Inc. v. Baylor Coll. of Med., 354 F. Supp. 3d 759, 763 (S.D. Tex. 2018).

[24] Id.

[25] Id.

[26] Id.

[27] See id.

[28] Id.

[29] Id.

[30] Id.

[31] Id.

[32] Id.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] Id. at 764.

[38] Id.

[39] Id.

[40] Id. (citing Regents of the Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559 (Fed. Cir. 1997)).

[41] Gensetix, 354 F. Supp. 3d at 765.

[42] Id.

[43] Id.

[44] Id.

[45] Id. at 766.

[46] Id. at 769.

[47] Id.

[48] Id. at 770.

[49] Id.

[50] Id. at 771.

[51] Id. at 774.

[52] Id.

[53] Id.

[54] Id. at 774-75.

[55] Notice of Appeal at 1, Gensetix, Inc. v. Baylor Coll. of Med., 354 F. Supp. 3d 759, 763 (S.D. Tex. 2018) No. 4:17-cv-01025.

[56] See The Federalist No. 81 (Alexander Hamilton); Blatchford v. Native Village of Noatak, 501 U.S. 775, 779 (1991); Alden v. Maine 527 U.S. 706, 713 (1999).

[57] Alfred E. Mann Found. for Sci. Research v. Cochlear Corp., 604 F.3d 1354, 1360-61 (Fed. Cir. 2010).