College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd.

• Decision Date: 30 June 1998
• Docket Number: No. 97-1246,97-1246
• Citation: 47 USPQ2d 1161,148 F.3d 1343
• Parties: COLLEGE SAVINGS BANK, Plaintiff-Appellee, and United States, Plaintiff-Appellee, v. FLORIDA PREPAID POSTSECONDARY EDUCATION EXPENSE BOARD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1343

148 F.3d 1343

47 U.S.P.Q.2d 1161

COLLEGE SAVINGS BANK, Plaintiff-Appellee, and United States, Plaintiff-Appellee, v. FLORIDA PREPAID POSTSECONDARY EDUCATION EXPENSE BOARD,

Defendant-Appellant.

No. 97-1246.

United States Court of Appeals,

Federal Circuit.

June 30, 1998.

Kevin J. Culligan, Fish & Neave, New York City, argued for plaintiff-appellee College Savings Bank. Of counsel on the brief were Steven C. Cherny and Robert W. Morris. Also of counsel was Arnold B. Calmann Saiber, Schlesinger, Satz & Goldstein, Newark, New Jersey.

Michael S. Raab, Civil Division, Appellate Staff, U.S. Department of Justice, Washington, DC, argued for plaintiff-appellee United States. With him on the brief were Frank W. Hunger, Assistant Attorney General, and Mark B. Stern. Of counsel was Michael E. Robinson.

Anne S. Mason, Mason & Associates, Clearwater, Florida, argued for defendant-appellant. With her on the brief was Joseph C. Mason, Jr. Of counsel was Louis F. Hubener, Assistant Attorney General, Office of the Attorney General, The Capitol, Tallahassee, Florida.

Edward V. Filardi, White & Case, New York City, for amicus curiae New York Intellectual Property Law Association. Of counsel on the brief was Charles P. Baker, Fitzpatrick, Cella, Harper & Scinto, New York City.

Joseph R. Re, Knobbe, Martens, Olson, & Bear, Newport Beach, California, for amicus curiae American Intellectual Property Law Association. With him on the brief was Michael K. Friedland.

Gerald P. Dodson, Arnold, White & Durkee, Menlo Park, California, for amicus curiae Regents of the University of California. With him on the brief were Emily A. Evans, and Richard L. Stanley, Houston, Texas. Of counsel on the brief was P. Martin Simpson, Jr., University of California, Office of Technology Transfer, Alameda, California.

Toni Hunter, Chief, General Litigation Division, Capitol Station, Austin, Texas, for amicus curiae the Commonwealth of Pennsylvania, Commonwealth of Virginia, State of Kansas, State of Louisiana, State of Nevada, State of Oklahoma, and State of Texas.

Before CLEVENGER, RADER, and BRYSON, Circuit Judges.

CLEVENGER, Circuit Judge.

This case requires us to determine whether the Eleventh Amendment bars a federal suit for patent infringement against a nonconsenting state. The district court held that it did not and denied Florida Prepaid Postsecondary Education Expense Board's (Florida Prepaid's) motion to dismiss for lack of subject matter jurisdiction. Because Congress clearly expressed its intent to abrogate state sovereign immunity for patent infringement suits brought in federal courts, and because Congress abrogated state immunity pursuant to a valid exercise of power, we affirm the district court's decision denying Florida Prepaid's motion to dismiss. Consequently, we do not reach College Savings Bank's (College Savings') arguments that Florida Prepaid waived its sovereign immunity either by participating in the patent system or by failing to raise the sovereign immunity defense earlier in the litigation.

I Procedural Posture

College Savings is a New Jersey chartered savings bank located in Princeton, New Jersey. Since 1987, College Savings has sold a certificate of deposit contract known as the CollegeSure TM CD. The purpose of the CollegeSure TM CD is to help individuals save money for the cost of college education expenses. College Savings guarantees returns sufficient to fund the uncertain future cost of education. The CollegeSure TM CD is administered using an apparatus and methods disclosed in College Savings' U.S. Patent No. 4,722,055. Florida Prepaid, a body corporate of the State of Florida, administers a similar investment program aimed at aiding individuals in funding the cost of Florida public colleges and universities. ¹ See Fla. Stat. § 240.551(1), (3). College Savings claims that, in the course of administering its investment program, Florida Prepaid has directly and indirectly infringed College Savings' patent.

On November 7, 1994, College Savings brought an infringement action against Florida Prepaid in the United States District Court for the District of New Jersey pursuant to the Patent and Plant Variety Protection Remedy Clarification Act (Patent Remedy Act), § 2, 35 U.S.C. §§ 271(h), 296 (1994), which explicitly provides that states may be sued for patent infringement in the federal courts. Pendente lite, the Supreme Court handed down its decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), which overruled Pennsylvania v. Union Gas Co., 491 U.S. 1, 109 S.Ct. 2273, 105 L.Ed.2d 1 (1989), and held that Congress could not abrogate the sovereign immunity of the states when acting pursuant to its plenary power to regulate commerce under Article I of the Constitution. See Seminole Tribe, 517 U.S. at 72-73, 116 S.Ct. 1114. In light of the Court's ruling in Seminole Tribe, Florida Prepaid moved to dismiss College Savings' claim as barred by the Eleventh Amendment. Florida Prepaid argued that the Patent Remedy Act was an unconstitutional attempt by Congress to use its Article I powers under the Patent Clause, U.S. Const. art. I, § 8, cl. 8, to abrogate state sovereign immunity and to enlarge the federal courts' Article III jurisdiction, which Seminole Tribe proscribed. College Savings objected, contending that, in enacting the Patent Remedy Act, Congress was acting pursuant to its enforcement power under section 5 of the Fourteenth Amendment, see Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976). The use of this power was not only unaffected but was also expressly sanctioned by the Supreme Court's opinion in Seminole Tribe, claimed College Savings. See 517 U.S. at 71-72 n. 15, 116 S.Ct. 1114 ("[M]any of those cases arose in the context of a statute passed under the Fourteenth Amendment, where Congress' authority to abrogate is undisputed."). The United States intervened as of right under 28 U.S.C. § 2403(a) (1994) to defend the constitutionality of the Patent Remedy Act.

The district court denied Florida Prepaid's motion to dismiss, because it concluded that Congress had unambiguously abrogated the states' sovereign immunity in the Patent Remedy Act and had acted pursuant to a valid exercise of power under the Fourteenth Amendment. Florida Prepaid took this appeal over which we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) (1994). See Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993) (holding that, pursuant to the collateral order doctrine and 28 U.S.C. § 1291, a state may appeal from a district court order denying it Eleventh Amendment immunity); see also Swint v. Chambers County Comm'n, 514 U.S. 35, 41-42, 115 S.Ct. 1203, 131 L.Ed.2d 60 (1995) ("The collateral order doctrine is best understood not as an exception to the final decision rule ... but as a practical construction of it.") (quoting Digital Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 867, 114 S.Ct. 1992, 128 L.Ed.2d 842 (1994)) (internal quotation marks omitted).

II The Eleventh Amendment

We follow the regional circuit's standard of review regarding issues not pertaining to patent law. See, e.g., Molins PLC v. Quigg, 837 F.2d 1064, 1066, 5 USPQ2d 1526, 1527 (Fed.Cir.1988). Under the law of the Third Circuit, the regional circuit encompassing New Jersey, our review of a dismissal on sovereign immunity grounds is plenary. See Blanciak v. Allegheny Ludlum Corp., 77 F.3d 690, 699 (3d Cir.1996).

The Eleventh Amendment provides: "The Judicial power of the United States 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." U.S. Const. amend. XI. The Eleventh Amendment confirms that "each State is a sovereign entity in our federal system" and that " 'it is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent.' " Seminole Tribe, 517 U.S. at 54, 116 S.Ct. 1114 (quoting The Federalist No. 81, at 487 (Alexander Hamilton) (Clinton Rossiter ed., 1961)). This immunity is not absolute, however, as Congress, in limited circumstances is empowered to abrogate it. See Fitzpatrick, 427 U.S. at 456, 96 S.Ct. 2666.

Determining whether Congress has abrogated the states' constitutionally secured immunity from suit in federal court is a two-step inquiry. The first step is to discern whether Congress has unequivocally expressed its intent to abrogate immunity. See Seminole Tribe, 517 U.S. at 55, 116 S.Ct. 1114. The second step is to examine whether, in purporting to abrogate immunity, Congress overstepped its constitutional authority. See id. We dispense swiftly with the first step of the inquiry before turning our attention to the second, more arduous step.

III Intent to Abrogate

Given the importance to our constitutional structure of the Eleventh Amendment's grant of sovereign immunity, a court will not assume that Congress has intended to use its awesome power to abrogate this immunity absent "unmistakably clear" statutory language to that effect. Dellmuth v. Muth, 491 U.S. 223, 227-28, 230, 109 S.Ct. 2397, 105 L.Ed.2d 181 (1989) ("[E]vidence of congressional intent [to abrogate state sovereign immunity] must be both unequivocal and textual."); see Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 242-43, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985). There is no dispute that the Patent Remedy Act is replete with language sufficient to satisfy this requirement. See 35 U.S.C. §§ 271(h), 296 (1994). Before passage of the Patent Remedy Act, Title 35 stated only that "whoever" without authority made, used, or sold a patented invention infringed the patent. See 35 U.S.C. § 271(a) (1988). After the Supreme Court's decision in Atascadero, which affirmed that "Congress may abrogate the States' constitutionally secured...