Commercialization of the state university: why the Intellectual Property Protection Restoration Act of 2003 is necessary.

• Author: Quigley, Traci Dreher

INTRODUCTION

At first blush, major state universities and colleges appear to be well-balanced with their private counterparts: Each contains strong academic programs with Nobel Laureates and other notable scholars in their research labs and lecture halls; each fields large numbers of strong sports teams; and each benefits from the current federal intellectual property rights regime, whereby valuable patents, copyrights, and trademarks have been claimed. Despite this apparent parity, however, state universities have a surprising economic advantage over private universities--state universities can profit from their Eleventh Amendment immunity against damage claims for intellectual property infringement. Private institutions are not similarly immune.

This disparate treatment of intellectual property rights is particularly important because of several recent cases involving universities (both public and private) against private entities. Two noteworthy examples include litigation by the University of Rochester against G.D. Searle & Co. (Pharmacia) for the alleged infringement of the University's patent on the Cox-2 enzyme (1) and John Madey's claim against Duke University concerning the alleged infringement of his patents on laboratory equipment. (2) Since the universities in both of these cases are private entities, neither case involved sovereign immunity. However, had either school been a state university, the cases would have involved an additional layer of complexity.

Since the early 1990s, there have been numerous congressional attempts to remedy the imbalances caused by the Eleventh Amendment's sovereign immunity. (3) Of these, two laws were found unconstitutional by the Supreme Court, (4) and several other proposals have died on the congressional floor. Undaunted, Senator Patrick Leahy of Vermont has submitted a bill, the Intellectual Property Protection Restoration Act of 2003, (5) to rectify the unfairness of the existing doctrine of sovereign immunity as applied to the federal intellectual property rights regime. Although it has undergone significant alterations since it was initially proposed in 1999, (6) the Intellectual Property Protection Restoration Act should be supported and adopted by all those concerned with intellectual property rights.

In this Comment, I argue that the tightening of permitted behavior under the intellectual property statutes, when coupled with the current incentives and priorities of universities, requires a change to the state universities' immunity from damages in infringement cases. Part I briefly summarizes the relationship between universities and intellectual property rights. Historically, both public and private universities understood that they were subject to the same set of intellectual property laws, including monetary damages for infringement. Part II reviews the development and evolution of state sovereign immunity case law, with particular emphasis on cases involving intellectual property. The lesson from recent cases is that state universities are unequivocally immune from intellectual property damage remedies. The importance of state university immunity is considered in Part III, which presents several reasons why such immunity is not appropriate. Part 1V discusses possible solutions, including Senator Leahy's proposal, which are currently being debated by legislators and vetted by scholars. Finally, Part V analyzes and recommends the adoption of Senator Leahy's bill and explains why state universities and other interested parties should support it.

1. UNIVERSITIES AND INTELLECTUAL PROPERTY

   "A university should be a place of light, of liberty, and of learning." (7) These words, spoken by Benjamin Disraeli to the House of Commons in 1873, continue to resonate today. American universities--both public and private--are the sanctuaries of great minds, innovative ideas, and intellectual opportunity.

   It is unsurprising, then, that universities have parlayed these strengths into intellectual property rights and economic benefits. Current data suggests that universities hold over 22,500 patents, with 13,000 of these held by public universities and colleges. (8) The United States Patent and Trademark Office (USPTO) has calculated that at least 2.5% of all issued utility patents are currently owned by state academic institutions. (9) Furthermore, four-year state colleges and universities have registered over 32,000 monographs with the United States Copyright Office since 1978, (10) and it has also been estimated that they own over 2700 trademarks. (11) The monetary value of this intellectual property is realized through licensing and technology transfer arrangements, whereby a university licenses its intellectual property to another entity. In fiscal year 2002, according to the Association of University Technology Managers, public and private universities received almost one billion dollars in gross license income from their intellectual property. (12)

   Such lucrative licensing opportunities illustrate the increasing importance and utility of university research to private enterprise that the Bayh-Dole Act (13) was meant to foster. (14) As a result of the Act, public-private collaborations have developed and commercialized novel technologies like enhanced cellular voice quality and improved commodity products such as cleaner electricity. (15) Indeed, in this cooperative environment, it was rare for patent infringement suits to be brought against academic institutions, since most technologies were made available to academic researchers under reasonable terms--e.g., at low cost and with acceptable restrictions on use. (16)

   Another reason that such suits were few and far between was the parity between universities and commercial patent-holders with regard to damage remedies in infringement suits. As described by the USPTO, (17) the Copyright Office, (18) congressional Investigators, (19) and even the National Association of College and University Attorneys, (20) everyone shared the belief that state universities (as well as other state entities) were subject to intellectual property infringement suits and remedies. The consequence was implicit but sweeping: All intellectual property holders were assured the protection of their invention, creation, or trademark against any possible infringer, including a state university. It was widely understood that if a state entity infringed upon a patent, copyright, or trademark, the holder could seek not only injunctive but also monetary relief.

   This bedrock of understanding was shaken to its core in 1999, when the Supreme Court ended its decade-long erosion of private individuals' rights against intellectual property infringement by state entities.

2. EVOLUTION OF SOVEREIGN IMMUNITY DOCTRINE

   A. Common Law Development and Revolution

   Understanding the historical development of sovereign immunity is important to any analysis of the Supreme Court's recent decisions regarding state immunity in the intellectual property regime. (21) The Supreme Court's decision in Chisholm v. Georgia (22) was the impetus for a constitutional amendment regarding the scope of state sovereign immunity. In Chisholm, a South Carolina creditor brought suit against the State of Georgia for repayment of debt. (23) In its ruling for Chisholm, the Court held that the Constitution provided the federal judiciary with jurisdiction over all cases arising between a state and citizens of another state. (24) In response, Congress passed and the states ratified the Eleventh Amendment, which restored sovereign immunity for the states against out-of-state private litigants. (25)

   A century after adoption of the Eleventh Amendment, the Supreme Court heard its second seminal case concerning private suits against a state. In Hans v. Louisiana, (26) the plaintiff sued the State of Louisiana for refusing to redeem his bond coupons. (27) The plaintiff, a citizen of Louisiana, contended that the Eleventh Amendment did not apply because it only prevented suits based on diversity of citizenship, not suits where the plaintiff was a citizen of the defendant state. (28) The Court rejected the plaintiffs argument, holding that the Eleventh Amendment prohibited all private suits against a state. (29) Indeed, the Court reached back further than the origins of the Eleventh Amendment to the early writings of Alexander Hamilton and other "great defenders of the Constitution" who criticized the idea of allowing a non-consenting state to be sued by any individual. (30) Following Hans, a state was immune from private actions unless it consented to the suit.

   Obtaining consent was made easier after Parden v. Terminal Railway of Alabama State Docks Department, (31) which acknowledged that there could be implied waivers of sovereign immunity. In Parden, employees of the state-run railway brought suit under the Federal Employers' Liability Act (FELA) (32) for damages caused by work-related personal injury. (33) The State of Alabama argued that it was immune from liability under the Eleventh Amendment and rejected the employee claims. (34) After considering prior case law, including Hans, the Court ruled for the employees, holding that the Commerce Clause implicitly waived state sovereign immunity regarding the regulation of commerce. The Court stated that "[b]y empowering Congress to regulate commerce ... the States necessarily surrendered any portion of their sovereignty that would stand in the way of such regulation.... [I]t must follow that application of [FELA] to such a railroad cannot be precluded by sovereign immunity." (35)

   Parden's impact on the sovereign immunity doctrine was relatively short-lived, however, because it was overruled by the Supreme Court in 1985. In Atascadero State Hospital v. Scanlon, (36) the Court held that implied waivers of state immunity would not be recognized. (37) Plaintiff Scanlon brought the suit for monetary damages under section 504 of the...