Pennington Seed, Inc. v. Produce Exchange No. 299

Decision Date09 August 2006
Docket NumberNo. 05-1440.,05-1440.
PartiesPENNINGTON SEED, INC. and AgResearch Limited, Plaintiffs-Appellants, v. PRODUCE EXCHANGE NO. 299, Allied Seed, L.L.C., and FFR Cooperative, Defendants, and University of Arkansas, Gary C. George, B. Alan Sugg, John A. White, and Charles P. West, Defendants-Appellees.
CourtU.S. Court of Appeals — Federal Circuit

Mark Murphey Henry, Henry Law Firm, of Fayetteville, Arkansas, argued for plaintiffs-appellants. With him on the brief was Nathan P. Chaney.

T. Scott Varady, Office of the General Counsel, University of Arkansas, of Fayetteville, Arkansas, argued for defendants-appellees. With him on the brief was William Reid Kincaid.

Before RADER, SCHALL, and GAJARSA, Circuit Judges.

Opinion for the Court filed by Circuit Judge GAJARSA.

Concurring Opinion filed by Circuit Judge SCHALL.

GAJARSA, Circuit Judge.

Pennington Seed, Inc. and AgResearch Limited (collectively "Pennington"), the patentees, originally filed suit against the University of Arkansas ("the University")1 for infringement and conversion of U.S. Patent No. 6,111,170 ("the '170 patent"). The United States District Court for the Western District of Missouri dismissed the Original Complaint due to the University's Eleventh Amendment immunity. Pennington Seed, Inc. v. Produce Exch. No. 299, No. 04-4194-CV-C (W.D.Mo. Nov. 29, 2004) ("November Order"). Concurrent with that dismissal, the court granted Pennington's motion to file its First Amended Complaint against Gary George, the Chairman of the Board for the University System; B. Alan Sugg, President of the University System; John White, Chancellor of the University of Arkansas at Fayetteville; and Charles West, a professor at the University (collectively "the University Officials") for infringement of the '170 patent, deprivation of federal rights, and conversion. The district court subsequently dismissed the First Amended Complaint based on Eleventh Amendment immunity and lack of personal jurisdiction. Pennington Seed, Inc. v. Produce Exch. No. 299, No. 04-4194-CV-C (W.D. Mo. June 1, 2005) ("June Order"). Pennington now appeals the court's dismissal of both complaints. We affirm.

I. BACKGROUND

The '170 patent claims a type of non-toxic fescue grass that does not adversely affect livestock that graze upon it. AgResearch developed the grass and received the '170 patent on August 29, 2000. It then licensed the patent to Pennington, which markets it as MAXQ.

As alleged in the First Amended Complaint, all the University Officials reside in Arkansas. Pennington alleged in the Original Complaint and First Amended Complaint that the University and all four of the University Officials "are actively growing, marketing, offering for sale, promoting and selling a product containing" Pennington's patented product. It further alleged that the University and University Officials "infringed and continue to infringe . . . the claims of the '170 patent." In addition to the infringement allegations, the First Amended Complaint alleged a deprivation of federal patent rights against the University Officials in their "capacity as employees of the University of Arkansas."

On September 17, 2004, the University filed a motion to dismiss the Original Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1), (b)(2), (b)(3) and (b)(6). The November Order granted the University's motion and dismissed the complaint for failure to state a claim upon which relief can be granted because the Eleventh Amendment barred the action against the University in federal court.

On February 4, 2005, the University Officials filed another motion to dismiss the First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), (b)(2), (b)(3) and (b)(6). The June Order granted the motion and dismissed George, Sugg, and White because Pennington's First Amended Complaint failed to allege a causal connection between those "official[s] and the enforcement or threatened enforcement of an act," under Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), and failed to establish personal jurisdiction by minimum contacts with the State of Missouri. June Order at 5, 7-8. The court dismissed Pennington's claims against West because the allegations failed to establish personal jurisdiction by minimum contacts with the State of Missouri.

Pennington filed a timely appeal in this court, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II. DISCUSSION
A. Standard of Review

We review personal jurisdiction issues in a patent infringement case under Federal Circuit law. See Silent Drive, Inc. v. Strong Indus., 326 F.3d 1194, 1201 (Fed.Cir.2003). Likewise, questions of Eleventh Amendment immunity for patent infringement claims are reviewed under Federal Circuit law. See Regents of the Univ. of N.M. v. Knight, 321 F.3d 1111, 1123-24 (Fed.Cir.2003) ("[T]he question of Eleventh Amendment waiver is a matter of Federal Circuit law.").

A district court's grant of a motion to dismiss for lack of subject matter jurisdiction and personal jurisdiction is a question of law that we review de novo. See Xechem Int'l, Inc. v. Univ. of Tex. M.D. Anderson Cancer Ctr., 382 F.3d 1324, 1326-27 (Fed.Cir.2004); Elecs. for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348-49 (Fed.Cir.2003). In reviewing the decision, we accept a plaintiff's well-pleaded factual allegations as true and draw all reasonable inferences in its favor. See id. at 1349. In a complaint involving state officials, we must determine the capacity in which an official has been sued from the course of proceedings below. See Kentucky v. Graham, 473 U.S. 159, 167 n. 14, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985).

B. Eleventh Amendment Immunity
1. Abrogation of State Immunity

The Eleventh Amendment to the United States Constitution limits the judicial authority of the federal courts and prevents citizens from bringing suit against a state in a federal court without its consent. Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 267-68, 117 S.Ct. 2028, 138 L.Ed.2d 438 (1997); see also Hans v. Louisiana, 134 U.S. 1, 17, 10 S.Ct. 504, 33 L.Ed. 842 (1890). While Congress may abrogate, under certain circumstances, a state's Eleventh Amendment immunity under Section 5 of the Fourteenth Amendment, see Tennessee v. Lane, 541 U.S. 509, 518, 124 S.Ct. 1978, 158 L.Ed.2d 820 (2004), it may not do so under its Article I Commerce Clause power in patent cases, see Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 647-48, 119 S.Ct. 2199, 144 L.Ed.2d 575 (1999).

In Florida Prepaid, the Supreme Court held that Congress did not have the authority under Article I, Section 8 of the Constitution to abrogate state sovereign immunity. The amendment to the Patent Act that abrogated state sovereign immunity, 35 U.S.C. §§ 271(h), 296(a) ("Act"), did not reflect any Congressional findings upon which Congress could base the abrogation of the Eleventh Amendment sovereign immunity of the states pursuant to the Fourteenth Amendment. The Act merely served as a uniform remedy for patent holders against states instead of a remedy for constitutional violations, such as where a state provides inadequate or no state court remedies. Fla. Prepaid, 527 U.S. at 646-47, 119 S.Ct. 2199. The infringement of a patent by a state may be actionable in federal courts "only where the State provides no remedy, or only inadequate remedies, to injured patent owners for its infringement of their patent." Id. at 643, 119 S.Ct. 2199. The Act's legislative history in Florida Prepaid, however, provided no factual premise that Congress was attempting to remedy Fourteenth Amendment violations. Id. at 642, 119 S.Ct. 2199. The Court noted that the State of Florida provided various alternative remedies to recover for patent infringement, such as a legislative remedy through a claim for payment or a judicial remedy through a takings or conversion claim against the state. Id. at 644 n. 9, 119 S.Ct. 2199. Congress's failure to consider these available state remedies and their constitutional adequacy provided inadequate support for Congressional abrogation of the state's Eleventh Amendment sovereign immunity under Section 5 of the Fourteenth Amendment. The Supreme Court has reasoned that Section 5 of the Fourteenth Amendment is designed to remedy existing and widespread conditions of unconstitutional behavior by the states and cannot be used to prevent perceived abuses, absent particularized findings of state violations of constitutionally protected rights. Id. at 637-41, 119 S.Ct. 2199; see also Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 81, 120 S.Ct. 631, 145 L.Ed.2d 522 (2000) (rejecting the Age Discrimination in Employment Act's grant of jurisdiction because Congress lacked the authority under Section 5 of the Fourteenth Amendment to abrogate state sovereign immunity where the remedy failed the proportionality and congruence test of City of Boerne v. Flores, 521 U.S. 507, 520, 117 S.Ct. 2157, 138 L.Ed.2d 624 (1997)).

Pennington submits that the University and the University Officials are subject to suit under the Eleventh Amendment because "the State of Arkansas provides no adequate remedies to patent infringement." Pennington relies on our decision in Xechem that it purports to be a "template" for our court to abrogate state immunity for patent infringement under the Fourteenth Amendment.2

In Xechem, we noted that Florida Prepaid requires a showing "that the state action `left [the patentee] without a remedy under state law,'" 382 F.3d at 1332; however, such a showing is predicated upon Congress's abrogation of Eleventh Amendment sovereign immunity. As specifically explained in Florida Prepaid, it is the Congress, not this court, that can abrogate Eleventh Amendment sovereign immunity for patent infringement, pursuant to Section 5 of the Fourteenth Amendment, if there is a showing that state remedies were insufficient and violated due process. 527 U.S. at...

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