The Eleventh Amendment generally provides that state governments cannot be sued in federal court by the citizens of another state. In Seminole Tribe v. Florida, the Court made it clear that Congress could not circumvent the Eleventh Amendment restriction on the Article III power of federal courts by relying solely on Congress' Article I power. However, the Fourteenth Amendment empowers Congress to deter or remedy Constitutional violations. Accordingly, Congress can authorize actions against state governments in federal courts as an exercise of its remedial powers under Section 5 of the Fourteenth Amendment.
In City of Boerne v. Flores, the Court set forth a two-part test for determining the validity under the Fourteenth Amendment of legislation authorizing actions against state governments. First, the legislation must be congruent with the ends sought -- the remedy or prevention of a perceived Constitutional violation. Second, legislation must be proportional to a remedial or preventative purpose, otherwise it is an attempt at a substantive change in the Constitutional protections. Only by meeting both of these measures, congruence and proportionality, can a congressional act be remedial in nature and a proper exercise of congressional authority.
The Florida Prepaid Decision
Because the Patent Clause is an Article I power, that clause is an inadequate basis for creating jurisdiction of federal courts for infringement by state actors. Thus, the validity of the Patent Remedy Act, which subjects states to federal court jurisdiction for patent infringement, turns on whether it is a proper exercise under Section 5 of the Fourteenth Amendment. The Supreme Court addressed this precise question in Florida Prepaid.
The Court analyzed the Patent Remedy Act under the standards set forth in City of Boerne. It found neither congruence nor proportionality in the congressional record supporting the Patent Remedy Act.
Congressional findings in the passage of the Patent Remedy Act included little if any evidence that patent infringement by state actors was a common or intentional activity. In determining the remedial nature of the Patent Remedy Act, the Court judged "with reference to the historical experience." The Court noted that even the Federal Circuit, in upholding the Patent Remedy Act, only cited eight patent infringement actions against state actors in a 100-year period--an inadequate basis for the sweeping legislation of the Patent Remedy Act.
Moreover, Congress made no findings concerning a lack of state law remedies. That state actors infringed was of itself inadequate; a taking without due process of law is the critical issue. In other words, patent infringement alone does not violate the Constitution -- only violation without any or adequate state law remedies could result in a deprivation of property without due process. Significantly, Congress also neglected to consider the element of intention. Negligent injury to property does not support a "deprivation" as understood from the Due Process Clause. (2)
Thus, the lack of historical violation of patent rights and the overbroad scope of congressional coverage under the Patent Remedy Act made it clear that the Act could not stand as a valid exercise of the Fourteenth Amendment's Section 5 power.
Implications of Florida Prepaid
The Court's reasoning with respect to the Patent Remedy Act appears likely to apply with equal force to Section 511 of the Copyright Act, which permits infringement actions against the states. However, Florida Prepaid does not mean that state governments can infringe patents, copyrights, and trademarks with impunity.
1. Alternative Potential Forms of Relief Despite the elimination of patent infringement actions against state actors under Florida Prepaid, several other avenues for relief still exist for patent holders. These avenues include proceeding under a state law cause of action or seeking prospective injunctive relief in federal court under the doctrine of Ex parte Young. While both courses of action appear available, each has limitations and potential difficulties.
-- State Law Cause of Action. In Florida Prepaid, the Court suggested patentees might advance a takings or conversion claim in state court. This, of course, depends upon the availability of such actions under state law. While patents are property, it is not clear that takings or conversion actions would provide relief.
The Fifth Amendment Takings Clause applies to the states. Infringement of a patent by a state actor, however, might not rise to a level cognizable under current takings law to support compensation. Even if such an infringement is deemed a taking, state actors are only held to payment of "just compensation." The patent law remedies of enhanced damages and attorneys' fees would likely not apply. By way of example, infringement in the federal government context equates to an eminent domain action.
State laws vary in the law of conversion, and in many instances conversion or trespass to chattels is not recognized under common law for intangible property. (3) Frequently, for such actions to lie, the intangible rights must be incorporated into some tangible form. The Restatement (Second) of Torts § 242 specifically addresses conversion of intangible rights. This section, however, limits its coverage to the kind of rights that are represented by and merged into a document, such as a debenture or mortgage note. (4) Moreover, many states have common law holding that federal law preempts actions based on patents or copyrights. Such decisions would require rethinking in light of Florida Prepaid in the case of state actors.
One open question of significance in any state court action relating to a patent would be the propriety of patent claim construction and arguments for noninfringement and invalidity.
-- Ex parte Young. The doctrine of Ex parte Young remains viable after Seminole but must be applied on a case-by-case basis. Under this doctrine, state officials can be enjoined from actions that violate the federal constitution. The Ex parte Young Court reaffirmed the doctrine "that a suit against individuals, for the purpose of preventing them, as officers of the state, from enforcing an unconstitutional enactment, to the injury of the rights of the plaintiff, is not a suit against the state within the meaning of [the Eleventh] Amendment." However, this exception does not extend to financial liability for past violations. The important distinction is "between prospective relief on one hand and retrospective relief on the other." (5) Thus, a patentee would bring an action for prospective injunctive relief against the state official responsible for infringement. This, of course, would not allow for any money damages.
-- Waiving Immunity. Justice Scalia stated in College Savings that a state could waive immunity by consenting to suit. Consent must be explicit, as College Savings expressly overruled the theory of constructive waiver from Parden, which was already weakened by subsequent decisions.
2. Actors within the Scope of Immunity. Not all governmental and public bodies are within the scope of Eleventh Amendment immunity, as this immunity is limited to states and state instrumentalities. Political subdivisions of states, such as counties, municipalities, school boards, and other types of municipal boards, do not receive the benefit of immunity. Thus, while Florida Prepaid may affect the liability of state universities for patent and copyright infringement, it should not affect the liability of primary schools and public libraries. Moreover, the Eleventh Amendment provides no immunity from an action against a state actor in the courts of another state if an adequate basis for personal jurisdiction exists under International Shoe and its progeny.
In Florida Prepaid the Court invalidated the Patent Remedy Act, making state actors immune from patent infringement actions in federal court. While the Court did not directly address the Copyright Remedy Act, the same standards will apply, and that act may well also be invalidated. Rightsholders still have recourse under state law, but this alternative relief probably is limited. For example, under Ex parte Young, the state official can be sued only for injunctive relief in his individual capacity.
1) 1999 U.S. LEXIS 4376 (June 23, 1999), 525 U.S. ___ (1999). In a companion case, College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 1999 U.S. LEXIS 4375 (June 23, 1999), 525 U.S. ___ (1999) ("College Savings"), the Court affirmed the Third Circuit decision holding that College Savings' Lanham Act claims were barred by Eleventh Amendment immunity.
2) See Florida Prepaid, at *30 (quoting Daniels v. Williams, 474 U.S. 327, 328 (1986)).
3) See, e.g., Yost v. Early, 87 Md. App. 364, 388 (Md. Ct. Spec. App. 1991) (stating that Maryland conversion law requires the "exercise of unauthorized dominion and control to the complete exclusion of the rightful possessor," and thus not applying to intangible property actions); Miles, Inc. v. Scripps Clinic & Research Found., 810 F. Supp. 1091, 1098 (S.D. Cal. 1993) (holding no action for conversion of the right to commercialize a cell line under a three-part test: (1) an interest capable of precise definition, (2) an interest capable of exclusive possession, and (3) a legitimate claim to exclusive ownership) (quoting S.S. Rasmussen & Assoc. v. Kalitta Flying Serv., 958 F.2d 896, 903 (9th Cir. 1992)).
4) See § 242 cmt. f. The rights in patents and copyrights have not been addressed in respect of this document merger requirement and may not qualify for conversion actions under the Restatement view.
5) Quern v. Jordan, 440 U.S. 332, 337 (1979) (holding that the district court remedy constituted impermissible retrospective relief against a state).