The plenary power of states to infringe intellectual property under the cloak of sovereign immunity.

• Author: Valentine, Daniel P.

Introduction

The Eleventh Amendment to the United States Constitution immunizes the states from suits that are brought in federal court by citizens of foreign nations and other states. (2) Although this may seem like a straightforward limitation on the jurisdiction of the federal courts, its scope has been evolving for over two centuries. Part I of this note discusses State Contracting & Engineering Corp. v. Florida (3) [State Contracting I] in which a Florida district court, and subsequently the Court of Appeals for the Federal Circuit, (4) concluded that Florida was immune from suit for patent infringement. Part II reviews the history and development of state sovereign immunity jurisprudence, with emphasis placed upon recent Supreme Court cases addressing the issue in the context of patent and copyright infringement. Part III presents several unsuccessful attempts by Congress to overcome the sovereign immunity hurdle and subject states to suit in federal courts for intellectual property infringement. And finally, Part IV concludes by presenting several alternatives to traditional patent and copyright infringement suits that aggrieved parties, such as the plaintiffs in the State Contracting case, may use to protect their intellectual property rights from state infringement.

1. The State Contracting Facts and Procedural History

   In 1989, State Paving Corp., a Florida construction company, entered into a contract with the State of Florida to construct highway sound barrier walls. (5) During construction, State Paving devised a new method of constructing the sound barrier walls and proposed the new method to the State of Florida in a Value Engineering Change Proposal (VECP). (6) The State of Florida agreed to the VECP, and the parties signed a supplemental agreement to govern its use. (7) In June of 1990, State Paving submitted patent applications, (8) and in 1997 it assigned its rights in the applications to State Contracting & Engineering Corp. (State Contracting). (9)

   Unbeknownst to State Paving, the State of Florida began using the VECP data in bid requests for other projects. (10) When State Paving learned of this in 1992, it notified "potential bidders [of those projects], advising them of the pending patent application and seeking a patent royalty." (11) At the same time, State Paving also sought additional compensation from the State of Florida for the continued use of the VECP technology in these other projects that did not involve State Paving. (12) In 1997, after negotiations proved unsuccessful, State Contracting and State Paving filed suit in the District Court for the Southern District of Florida against the State of Florida and seven private contractors, based on claims of patent infringement, unconstitutional takings, breach of contract, and Lanham Act violations. (13) Although the proceedings were temporarily stayed (14) pending the Supreme Court's rulings in the Florida Prepaid cases, (15) twin cases dealing with sovereign immunity in a patent infringement suit, (16) the district court eventually granted the summary judgment motions of the defendants on all counts. (17) State Contracting then appealed the rulings to the Federal Circuit. (18)

   In its first review of the case, the Federal Circuit affirmed the summary judgment on the patent infringement and Lanham Act claims against the State of Florida based on sovereign immunity (19) and also affirmed the summary judgment on the takings and breach of contract claims. (20) The Federal Circuit did, however, reinstate the patent infringement claims against the contractors and remanded the case. (21) In affirming the district court's sovereign immunity determination, the Federal Circuit, citing recent Supreme Court rulings, (22) noted that "Florida enjoys sovereign immunity with respect to the patent infringement and Lanham Act claims unless Florida has waived sovereign immunity." (23) The Federal Circuit further noted that "any waiver of sovereign immunity ... must be express and voluntary, and cannot be implied or constructive." (24) In State Contracting, there was no express waiver by Florida. (25) In addition, the implied waiver arguments based on Florida's defense of the litigation (26) and filing of a counterclaim did not satisfy the 'express and voluntary' requirement. (27) To have held otherwise would imply that Florida had waived sovereign immunity even though it believed such a defense was unavailable at the time of the filing. (28)

   On remand, the district court denied the contractors' motion to dismiss for lack of standing based on their allegation that State Paving's patent assignment to State Contracting was not valid. (29) The contractors then stipulated to "literal infringement of both ... patents, subject to their affirmative defenses." (30) In the end, "the district court ruled as a matter of law that the contractors' infringement was not willful, that the asserted patent claims were not invalid, and that the contractors did not have a valid defense of laches." (31) State Contracting then appealed the willfulness determination, and the contractors cross-appealed by challenging the standing, laches, patent validity, and damages determinations. (32) The Federal Circuit affirmed the district court's findings with the exception of validity, for which it remanded the case for a second time to determine obviousness relative to the prior art. (33) Shortly thereafter, the issues became moot following the parties' agreement to dismiss the action. (34)

2. Sovereign Immunity Under the Eleventh Amendment

   1. The Catalyst for Passage of the Eleventh Amendment

      Shortly after the ratification of the Constitution, an early Supreme Court case spurned the passage of the Eleventh Amendment. In 1793 in Chisholm v. Georgia, the Court found that a private citizen of South Carolina could sue Georgia in federal court. (35) Nearly a century later, the Supreme Court retrospectively observed that its decision in Chisholm "created such a shock of surprise throughout the country that, at the first meeting of Congress thereafter, the Eleventh Amendment to the Constitution was almost unanimously proposed, and was in due course adopted." (36)

   2. The Supreme Court's Sovereignty Interpretations

      The Eleventh Amendment effectively overruled the Chisholm decision. (37) The wording of the Eleventh Amendment states that the jurisdiction of the federal courts "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." (38) Yet in spite of its wording, subsequent "judical interpretation has broadened the Amendment's scope far beyond its text." (39) An early expansion of Eleventh Amendment sovereign immunity occurred in the 1890 case of Hans v. Louisiana. (40) In Hans, the Supreme Court initially conceded that "where the jurisdiction depends alone upon the character of the parties, a controversy between a state and its own citizens is not embraced" by the Eleventh Amendment's text. (41) Yet the Court, after recognizing the circumstances surrounding the drafting of the U.S. Constitution and passage of the Eleventh Amendment, (42) concluded that federal jurisdiction does not extend to suits against a state by its own citizens, unless the state consents to the suit. (43) In so holding, the Court recognized that the Eleventh Amendment was "an affirmance of original constitutional design ... [which] preserve[s] absolute state sovereign immunity from suits brought by individuals without a state's consent." (44)

      Nearly seventy-five years later, the Supreme Court addressed the issue of state consent when it rendered its decision in Parden v. Terminal Railway of Alabama State Docks Department. (45) In Parden, the issue was whether the State of Alabama was subject to federal railroad regulations as a result of its ownership of a railroad that was regulated by Congress. (46) The Court held that "the States surrendered a portion of their sovereignty when they granted Congress the power to regulate commerce;" (47) therefore, when a State operates a railroad in interstate commerce, it does so "in subordination to [Congress's] power to regulate interstate commerce." (48) The holding in Parden created the implied waiver exception, which states that "when a State leaves the sphere that is exclusively its own and enters into activities subject to congressional regulation, it subjects itself to that regulation as fully as if it were a private person or corporation." (49)

      A dozen years after Parden, the Court in Fitzpatrick v. Bitzer again questioned the scope of the Eleventh Amendment. (50) But unlike Parden, where Congress's legislative power was grounded in the Commerce Clause, the Fitzpatrick case asked whether Eleventh Amendment sovereign immunity may be "asserted in the context of legislation passed ... under [section] 5 of the Fourteenth Amendment." (51) In its analysis, the Court began by turning to its opinion in a late Ninteenth Century case, Ex parte Virginia, (52) that dealt with the Civil War Amendments. (53) In Fitzpatrick, Justice Strong, writing for the Court, observed that the Thirteenth and Fourteenth Amendments were intended to be ... limitations of the power of the States and enlargements of the power of Congress. ... The prohibitions of the Fourteenth Amendment are directed to the States, and they are to a degree restrictions of State Power. ... Indeed, every addition of power to the general government involves a corresponding diminution of the governmental powers of the States. It is carved out of them. ... [T]he Constitution now expressly gives authority for congressional interference and compulsion in the cases embraced within the Fourteenth Amendment. (54)

      Embracing this nearly 100-year-old declaration, the Court held that the enforcement provisions of the Fourteenth Amendment limit the Eleventh Amendment. (55) In so...