Gensetix, Inc. v. Bd. of Regents of the Univ. of Tex. Sys.
| Decision Date | 24 July 2020 |
| Docket Number | 2019-1424 |
| Citation | 966 F.3d 1316 |
| Parties | GENSETIX, INC., Plaintiff-Appellant v. The BOARD OF REGENTS OF the UNIVERSITY OF TEXAS SYSTEM, Plaintiff-Appellee v. Baylor College of Medicine, Diakonos Research Ltd, William K. Decker, Defendants-Appellees |
| Court | U.S. Court of Appeals — Federal Circuit |
Paul Skiermont, Skiermont Derby LLP, Dallas, TX, argued for plaintiff-appellant. Also represented by Sarah Elizabeth Spires; Mieke K. Malmberg, Los Angeles, CA; Christopher Michael Hodge, Oracle Corp., Irving, TX; Imron T. Aly, Schiff Hardin, Chicago, IL.
Peter E. Mims, Vinson & Elkins LLP, Houston, TX, argued for plaintiff-appellee. Also represented by Olin Ray Hebert, III, Austin, TX.
Michael Hawes, Baker Botts, LLP, Houston, TX, argued for defendants-appellees Baylor College of Medicine, Diakonos Research Ltd. Defendant-appellee Baylor College of Medicine also represented by Paul R. Morico.
Gordon Arnold, Arnold, Knobloch & Saunders, L.L.P., Houston, TX, for defendant-appellee Diakonos Research Ltd.
Murray Jules Fogler, Fogler Brar O'Neil and Gray LLP, Houston, TX, for defendant-appellee William K. Decker.
Before Newman, O'Malley, and Taranto, Circuit Judges.
This case involves the interplay of state sovereign immunity under the Eleventh Amendment and required joinder of parties under Rule 19 of the Federal Rules of Civil Procedure. Gensetix, Inc. ("Gensetix") exclusively licensed U.S. Patent Nos. 8,728,806 and 9,333,248 from the University of Texas ("UT"), an arm of the state of Texas. Gensetix then sued Baylor College of Medicine, Diakonos Research Ltd., and William K. Decker (collectively, "Baylor") for infringement of the patents-in-suit, naming UT as an involuntary plaintiff pursuant to Rule 19(a). The District Court for the Southern District of Texas determined that the Eleventh Amendment barred joinder of UT as an involuntary plaintiff. Gensetix, Inc. v. Baylor Coll. of Med. , 354 F. Supp. 3d 759, 766 (S.D. Tex. 2018). The court also concluded that, under Rule 19(b), the suit could not proceed in UT's absence. Id. at 773–74. Accordingly, the court dismissed the suit. This appeal followed. For the reasons stated below, we affirm-in-part, reverse-in-part, and remand.
The patents-in-suit are directed to methods of modifying a patient's immune system to kill cancer
cells. Decker, the named inventor of the patents-in-suit, developed his invention during his employment at the University of Texas MD Anderson Cancer Center. Pursuant to the terms of Decker's employment agreement, the patents-in-suit were assigned to UT.1 In September 2008, UT granted an exclusive license in the patents-in-suit to Alex Mirrow, a third party not relevant to this suit. In January 2014, Mirrow assigned his rights in the exclusive license to Gensetix. UT confirmed Mirrow's assignment of the exclusive license to Gensetix in a June 2014 amendment.
The license agreement provides that, Gensetix, at its own expense, must enforce any patent "covered by the license and is entitled to retain recovery from such enforcement." Gensetix , 354 F. Supp. 3d at 769. UT retained a secondary right to sue if Gensetix fails to file suit against a substantial infringer within six months of knowledge of infringement. Id. The parties agreed to fully cooperate with each other in any infringement suit. And, the parties agreed that nothing in the agreement shall be deemed a waiver by UT of its sovereign immunity. Id. at 772.
In April 2017, Gensetix filed this suit against Baylor, alleging infringement of the patents-in-suit. Gensetix noted that, before filing its complaint, it requested that UT join as a co-plaintiff, but UT declined. Gensetix therefore named UT as an involuntary plaintiff pursuant to Rule 19(a). J.A. 115–16. In its complaint, Gensetix alleged that Decker "continued and continues to use technology that infringes one or more claims of the [p]atents-in-[s]uit ... as part of his work at" Baylor. J.A. 119. Gensetix also alleged that in 2013 and 2014, Decker published content while at Baylor that "gives Gensetix reason to believe" that Decker has practiced methods infringing at least claim 1 of each of the patents-in-suit. Id. According to the complaint, in May 2016, Baylor filed two patent applications, naming Decker as an inventor, which rely on the methods claimed in the patents-in-suit. J.A. 127.
UT filed a motion to dismiss pursuant to Rule 12(b)(1), seeking to dismiss itself from the lawsuit. UT argued that it is a sovereign state entity under Texas law and that, under the Eleventh Amendment, the district court had no subject matter jurisdiction over UT.2 It argued that, pursuant to the license agreement, it had not waived its sovereign immunity, nor did it have the authority to do so because such authority lies only with the Texas Legislature.
Baylor argued that: (1) UT is a necessary party because it owns the patents-in-suit and transferred less than all substantial patent rights to Gensetix; (2) UT cannot be joined as an involuntary plaintiff because, as an entity of the State of Texas, it is entitled to Eleventh Amendment sovereign immunity; and (3) the Rule 19(b) factors weigh in favor of dismissing the suit, rather than proceeding in UT's absence.
The district court granted UT's motion to dismiss. It held that "[t]he purpose of the Eleventh Amendment is to prevent states from being compelled to litigate." Gensetix , 354 F. Supp. 3d at 766 (internal quotation marks omitted). It found that, while "there [were] currently no claims against UT, requiring joinder would, in effect, force UT to pursue claims against its will." Id. Accordingly, the court held that, because "UT did not waive its immunity, initiate [the] suit, or agree to participate in [the] litigation," the Eleventh Amendment prohibited involuntary joinder. Id.
As to whether the infringement suit could proceed in UT's absence, the court held that UT was a "necessary" party under Rule 19(a) because it retained substantial rights in the patents-in-suit.3 Analyzing the applicable Rule 19(b) factors, the district court concluded that UT was an "indispensable" party, and that the suit could not proceed in its absence. Id. at 773–74. Accordingly, the court dismissed the case. Gensetix timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
On appeal, Gensetix argues that the district court (1) erred in holding that sovereign immunity bars coercive joinder of UT pursuant to Rule 19(a) ; and (2) abused its discretion in determining that, under Rule 19(b), the infringement suit should be dismissed rather than proceed in UT's absence.4 We address each argument in turn.
Rule 19(a)(2) requires a court to order a required plaintiff "who refuses to join as a plaintiff" to "be made either a defendant or, in a proper case, an involuntary plaintiff." Fed. R. Civ. P. 19(a)(2). The Eleventh Amendment provides, however, that "[t]he 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. Although the procedural issue of joinder under Rule 19 is not unique to patent law, and we thus review its application under the law of the regional circuit, to the extent the district court assessed the interplay between Rule 19 and the Eleventh Amendment, we review that question using the law of our circuit. Regents of Univ. of N.M. v. Knight , 321 F.3d 1111, 1124 (Fed. Cir. 2003). We therefore apply our law and review the district court's decision on Eleventh Amendment immunity de novo. Id.
On appeal, Gensetix argues that sovereign immunity does not preclude coercive joinder of a sovereign under Rule 19(a)(2). In Gensetix's view, the Eleventh Amendment bars suits brought by private citizens against the state, which is not the case here. Appellant's Br. 41–42 (citing Regents of the Univ. of Cal. v. Eli Lilly & Co. , 119 F.3d 1559, 1564 (Fed. Cir. 1997) (" Regents of UC ")). Gensetix argues that, like Regents of UC , here, there are no claims or counterclaims against UT, thereby making sovereign immunity inapplicable. Id. at 43. Gensetix also contends that both the Supreme Court and our court have consistently held that a patentee who refuses to voluntarily join an infringement action initiated by its exclusive licensee can nonetheless be joined as an involuntary plaintiff. Id. at 39–41 ().
UT responds that sovereign immunity protects it from private party litigation and this protection extends to joinder under Rule 19(a). According to UT, sovereign immunity "controls over the joinder process of Rule 19." UT Br. 14. And, relying on the Supreme Court's decision in Pimentel , 553 U.S. at 869, 128 S.Ct. 2180, UT argues that, where there is a "potential for injury to the interests" of the absent sovereign, the suit must be dismissed. Id. at 15.
Like UT, Baylor argues that the Eleventh Amendment forbids the court from ordering UT to subject its property to federal court adjudication. Baylor Br. 16–17. According to Baylor, a state's property rights cannot be limited or defeated where the state neither brought a claim nor agreed to join the suit. And, like UT, Baylor points to the express language of Section 15.4 of the license agreement as indicative of UT's refusal to waive sovereign immunity. Id. at 18–19. We agree that sovereign immunity is to be applied more broadly than the face of its text.
Gensetix's attempt to limit the Eleventh Amendment to its text—i.e. , to cas...
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