Xechem Intern. v. Tex. M.D. Anderson Cancer Ctr.

• Decision Date: 31 August 2004
• Docket Number: No. 03-1406.,03-1406.
• Citation: 382 F.3d 1324
• Parties: XECHEM INTERNATIONAL, INC., Plaintiff-Appellant, v. THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER and Board of Regents of the University of Texas System, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

382 F.3d 1324

XECHEM INTERNATIONAL, INC., Plaintiff-Appellant, v. THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER and Board of Regents of the University of Texas System, Defendants-Appellees.

No. 03-1406.

United States Court of Appeals, Federal Circuit.

August 31, 2004.

Appeal from the United States District Court for the Southern District of Texas, Ewing Werlein, Jr., J.

COPYRIGHT MATERIAL OMITTED

John P. Luther, Law Office of John P. Luther, of Kent, WA, argued for plaintiff-appellant.

David L. Parker, Fulbright & Jaworski L.L.P., of Austin, TX, argued for defendants-appellees. With him on the brief were Marcy Hogan Greer and Robert E. Hanson, Jr.

Before PAULINE NEWMAN, GAJARSA, and LINN, Circuit Judges.

PAULINE NEWMAN, Circuit Judge.

Xechem International, Inc., a biopharmaceutical company, brought suit against the University of Texas M.D. Anderson Cancer Center and the Board of Regents of the University of Texas System (collectively "the University") in the United States District Court, raising several federal and state counts arising from a collaborative project between Xechem and the University. In response to the complaint the University asserted its Eleventh Amendment and state immunity from suit, and the United States District Court for the Southern District of Texas granted the University's motion to dismiss on the pleadings, Fed.R.Civ.P. 12(b)(6).¹ The only issue on appeal is whether the University is subject to suit in federal court to obtain correction of the inventorship of United States Patents No. 5,877,205 and 6,107,333, the patents flowing from the project.

We affirm the dismissal, for Supreme Court precedent controls the arguments raised by Xechem with respect to waiver or abrogation of the University's Eleventh Amendment immunity.

Standards of Review

The University's motion to dismiss was brought under Fed.R.Civ.P. 12(b)(6) (dismissal for failure to state a claim upon which relief can be granted). When dismissal is on the pleadings, the plaintiff's well-pleaded factual allegations are accepted as true and all reasonable factual inferences are drawn in its favor. See Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994) (on motion to dismiss on the pleadings, disputed material facts are viewed in the light most favorable to the complainant).

Dismissal under Rule 12(b)(6) receives plenary appellate review. Boyle v. United States, 200 F.3d 1369, 1371 (Fed. Cir.2000); Young v. AGB Corp., 152 F.3d 1377, 1379 (Fed.Cir.1998). Matters of constitutional law and interpretation also receive plenary review. Arbon Steel & Serv. Co. v. United States, 315 F.3d 1332, 1334 (Fed.Cir.2003); Florida Sugar Mktg. & Terminal Assoc., Inc. v. United States, 220 F.3d 1331, 1333 (Fed.Cir.2000).

BACKGROUND

The basic facts are generally undisputed: Xechem and the University in 1995 entered into a Sponsored Laboratory Study Agreement, with financial and technical support by Xechem, for the purpose of developing a pharmaceutical formulation that would enhance the solubility and thereby the effectiveness of the cancer drug paclitaxel. The persons principally involved in the project were Dr. Ramesh C. Pandey, president and CEO of Xechem; Dr. Luben K. Yankov, a scientist employed by Xechem; and Dr. Borje S. Andersson and Dr. Elias Anaissie, scientists employed by the University.

The complaint states that a successful formulation was developed, and that Xechem prepared a patent application naming Dr. Pandey of Xechem and Dr. Andersson of the University as joint inventors, and in early 1996 sent the draft application to the University. The University objected to the designation of inventorship, and on June 28, 1996 the University filed a patent application in the United States Patent and Trademark Office, naming Dr. Andersson as sole inventor. On November 13, 1996 Dr. Pandey wrote to the University as follows:

Further to our conversation of today, as you have requested I am now forwarding you this letter in which I recognize Dr. Borge S. Andersson, as the sole inventor of the above referenced patent application.

I look forward to receiving Dr. Andersson's comments of the Draft Patent Application and to wrap-up the licensing negotiations concerning the subject matter of the application.

On August 18, 1997 Xechem and the University entered into a Patent and Technology License Agreement whereby Xechem received the exclusive worldwide license to manufacture and market these paclitaxel formulations, and Xechem agreed to pay certain continuing sums and a royalty. Xechem also agreed to pay the costs of obtaining the patents in the United States and foreign countries. The University's patent application issued as the '205 patent on March 2, 1999, and a divisional application, also naming Dr. Andersson as sole inventor, issued as the '333 patent on August 22, 2000. Both patents were assigned by Dr. Andersson to the University.

On February 15, 2000 Xechem was notified that the University considered the License Agreement to have terminated automatically no later then December 31, 1998, due to Xechem's alleged insolvency, and that any use of this technology by Xechem was deemed to be patent infringement. Xechem then filed suit in federal court, presenting several counts sounding in tort and contract and also seeking correction of inventorship and a declaration of non-infringement. Xechem stated that Dr. Pandey made a mistake when he acquiesced in the naming of Dr. Andersson as sole inventor, and asked the court to determine the correct inventorship. Apparently upon the University's claim of sovereign immunity from state as well as federal action, the state law tort and contract counts were withdrawn by Xechem. This appeal relates only to the dismissal, on Eleventh Amendment grounds, of the inventorship correction claim.

DISCUSSION

The University of Texas is deemed to be an arm of the State of Texas, see Tex.Code § 441.101(3), and Xechem does not dispute that the University is properly accorded Eleventh Amendment immunity.² See Regents of the Univ. of New Mexico v. Knight, 321 F.3d 1111, 1124 (Fed.Cir.2003) (recognizing the status of a state university as an arm of the state).

The Supreme Court has addressed Eleventh Amendment immunity as it pertains to violation of federal patent and trademark laws. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627, 119 S.Ct. 2199, 144 L.Ed.2d 575 (1999) and College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999) the Court invalidated the legislative abrogation of state immunity from suit under these laws. In Florida Prepaid the Court ruled that the Eleventh Amendment was violated by the Patent and Plant Variety Protection Remedy Clarification Act of 1992, Pub.L. 102-560, 106 Stat. 4230 (codified at 35 U.S.C. §§ 271(j), 296). In College Savings the Court reached the same result with respect to abrogation of immunity by the Trademark Remedy Clarification Act of 1992, Pub.L. 102-542, 106 Stat. 3567 (codified at 15 U.S.C. §§ 1051, 1114, 1122). The Court held that Eleventh Amendment immunity may be abrogated "only where the State provides no remedy, or only inadequate remedies, to injured patent owners for its infringement of their patent could a deprivation of property without due process result," thereby invoking the Fourteenth Amendment. Florida Prepaid, 527 U.S. at 643, 119 S.Ct. 2199. The Court also referred to lack of a "pattern of patent infringement by the States," id. at 640, 119 S.Ct. 2199, in suggesting that legislative remedy had not been shown to be necessary.

The Court stressed the exclusive role of the Fourteenth Amendment³ in abrogation of Eleventh Amendment immunity in Tennessee v. Lane, ___ U.S. ___, 124 S.Ct. 1978, 158 L.Ed.2d 820 (2004), where the Court sustained abrogating legislation against constitutional challenge, holding that "Title II [of the Americans with Disabilities Act] unquestionably is valid § 5 legislation as it applies to the class of cases implicating the accessibility of judicial services." ___ U.S. at ___, 124 S.Ct. at 1993. The Court stated:

Title II—unlike RFRA [the Religious Freedom Restoration Act of 1993, held unconstitutional in City of Boerne v. Flores, 521 U.S. 507, 117 S.Ct. 2157, 138 L.Ed.2d 624 (1997)], the Patent Remedy Act [held unconstitutional in Florida Prepaid, 527 U.S. at 647-48, 119 S.Ct. 2199], and the other statutes we have reviewed for validity under § 5—reaches a wide array of official conduct in an effort to enforce an equally wide array of constitutional guarantees.

___ U.S. at ___, 124 S.Ct. at 1992. Although sustaining the authority of Congress under the Fourteenth Amendment to abrogate the states' immunity, the Court made clear that the issues resolved in Florida Prepaid were not being reopened. In Tennessee v. Lane the Court explained that Florida Prepaid had "further defined the contours of Boerne's `congruence and proportionality' test," ___ U.S. at ___, 124 S.Ct. at 1987, and reiterated that suits against states for patent infringement had not been shown to raise Fourteenth Amendment issues.

Xechem argues that the Eleventh Amendment does not bar an action to correct inventorship under 35 U.S.C. § 256, because the correction of inventorship will change the ownership of the patents, thereby raising property issues cognizable under the due process clause of the Fourteenth Amendment. Xechem also argues that correction of inventorship does not require participation or consent of the owner of the patent, and thus can proceed in federal court despite the University's objection. Xechem further argues that because the University's employee Dr. Andersson applied for and was granted these patents by the United States Patent and Trademark Office, a federal agency, the University consented to federal jurisdiction, at least for correction of the identity of the applicant. Xechem...