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Archived updates for Friday, August 18, 2006

State University Immunity Not Waived by Filing Paralell Suit

In Tegic Communications Corp. v. Board of Regents of the University of Texas System, the Federal Circuit affirmed the dismissal of Tegic's declaratory judgment action against the University of Texas System under the 11th amendment of the U.S. Constitution even though The University brought it's own suit.

Tegic argued that the University explicitly waived its immunity with respect to the patent when it brought suit for infringement against Tegic's customers/licensees in the Western District of Texas.. However, according to the opinion by Circuit Judge Newman,

A declaratory action does not provide any substantive rights; it provides a
procedure for a declaration of legal rights and relations. See Aetna Life Ins.
Co. v. Haworth, 300 U.S. 227, 240 (1937) (the declaratory action is procedural
only). To determine immunity under the Eleventh Amendment it is necessary to
look to the substantive charge, not to the procedure for obtaining relief. Tegic
seeks a declaration of noninfringement and patent invalidity and
unenforceability. The University does not deny that it waived immunity as to
defenses and counterclaims in the Texas district court, but argues that it did
not waive immunity as to Tegic, or in the Washington forum.

We agree with the University that its filing of the Texas action did not
establish waiver as to this separate action. While waiver in the litigation
context focuses on the litigation act, the waiver must nonetheless be "clear."
Lapides, 535 U.S. at 620. In Clark, 108 U.S. at 448, waiver to the "complete
determination" of the litigation was clear from the state's voluntary
intervention in that litigation; in Gardner, 329 U.S. at 574, waiver respecting
the "adjudication" of a claim was clear from the state's filing of that claim;
in Lapides, 535 U.S. at 619, waiver as to the resolution of the "case at hand"
was clear from its voluntary removal of that case to a federal court. And in
Regents of New Mexico, 321 F.3d at 1126, waiver as to compulsory counterclaims
filed by the defending party "in the same forum" was clear from the state's
filing of the suit in that forum, for the state could "surely anticipate" that
such counterclaims, which would otherwise be forever barred, would be asserted.
We discern no similar clear waiver in this case. Although here the University
obviously "made itself a party to the litigation to the full extent required for
its complete determination," Clark, 108 U.S. at 448, it did not thereby
voluntarily submit itself to a new action brought by a different party in a
different state and a different district court.

Tegic argues that under the "customer suit exception" a manufacturer's action
to resolve patent infringement charges against its customers not only receives
preferential treatment over a patent owner's earlier filed suit against the
customers, but benefits from any waiver accompanying the earlier suit. The
customer suit exception is an exception to the general rule that favors the
forum of the first-filed action, Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co.,
342 U.S. 180, 185 (1952); see Kahn v. Gen. Motors Corp., 889 F.2d 1078, 1081
(Fed. Cir. 1989) (holding, on the facts of that case, that it was error to favor
the manufacturer's second-filed suit), but does not override the immunity
provided by the Eleventh Amendment. . . . [Furthermore] the guiding
principles in the customer suit exception cases are efficiency and judicial
economy, and Tegic has not established that it would be more efficient to enable
this declaratory action to proceed in the State of Washington.

Tegic argues that allowing the University to assert immunity in this
declaratory action will give it an unfair litigation advantage. . . . The
district court observed that the University has not used its Eleventh Amendment
immunity adversely against Tegic, but instead the University has committed
itself not to sue Tegic. And to the extent that Tegic's interests may be
impaired by the Texas litigation, Tegic may seek to intervene in that
litigation. See Fed. R. Civ. P. 24(a)(2) (providing for intervention where an
applicant claims an interest in property or transaction that is the subject of
the action, and the disposition of the action may impair the applicant's ability
to protect that interest unless the applicant's interest is adequately
represented by existing parties). Such intervention would benefit from the
University's waiver of "any immunity . . . respecting adjudication" of its
claims, Gardner, 329 U.S. at 574, and would avoid "inconsistency, anomaly, and
unfairness" in litigation. . . .

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