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Board of Regents of University of Texas System v. Boston Scientific Corp.

United States Court of Appeals, Federal Circuit

September 5, 2019

BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM, TISSUEGEN, INC., Plaintiffs-Appellants
v.
BOSTON SCIENTIFIC CORPORATION, Defendant-Appellee

          Appeal from the United States District Court for the Western District of Texas in No. 1:17-cv-01103-LY, Judge Lee Yeakel.

          Michael W. Shore, Shore Chan DePumpo LLP, Dallas, TX, argued for plaintiffs-appellants. Also represented by Alfonso Chan, Chijioke E. Offor; Andrew M. Howard, Howard & Spaniol, PLLC, Dallas, TX; Russell J. DePalma, Russell J. DePalma PLLC, Irving, TX.

          John Nilsson, Arnold & Porter Kaye Scholer LLP, Washington, DC, argued for defendant-appellee. Also represented by Matthew Wolf, Andrew Tutt.

          Before Prost, Chief Judge, Reyna and Stoll, Circuit Judges.

          STOLL, CIRCUIT JUDGE

         The Board of Regents of the University of Texas System (UT) and TissueGen Inc. sued Boston Scientific Corporation (BSC) for patent infringement in the Western District of Texas. The district court determined that venue was improper and transferred the case to the District of Delaware. UT, acting as an arm of the State of Texas, appeals the district court's transfer order on several grounds relating to its rights as a sovereign entity.

         We hold that, as a threshold matter, we have jurisdiction to hear this appeal under the collateral order doctrine. On the merits, we conclude that the state sovereignty principles asserted by UT do not grant it the right to bring suit in an otherwise improper venue. We affirm.

         Background

         The Board of Regents is the governing body for the University of Texas System, which includes eight universities and six health institutions. The Board's nine regents are appointed by the Governor of Texas and confirmed by the Texas Senate, and its authority to govern the University of Texas System is delegated to it by the Texas Legislature. It is undisputed that UT is an arm of the State of Texas.

         UT is the assignee and exclusive owner of patents resulting from research conducted at the University of Texas System. Its portfolio includes U.S. Patent Nos. 6, 596, 296 and 7, 033, 603 (the "patents-in-suit"), which are directed to implantable drug-releasing biodegradable fibers. Dr. Kevin Nelson, co-inventor of the patents-in-suit, developed the claimed technology at the University of Texas at Arlington and founded TissueGen Inc. as a vehicle for commercializing his inventions. UT exclusively licensed the patents-in-suit to TissueGen, which then commercialized its ELUTE® fiber product. According to UT, ELUTE® fiber is intended to replace standard fibers in medical devices like implantable stents, and it is capable of delivering therapeutic agents directly to the site of implantation.

         In November 2017, UT and TissueGen sued BSC for patent infringement in the Western District of Texas. See Compl., Bd. of Regents, the Univ. of Tex. Sys. v. Boston Sci. Corp., No. 1:17-cv-1103 (W.D. Tex. Nov. 20, 2017), ECF No. 1. UT alleged that several BSC stent products infringed the patents-in-suit. In its complaint, UT conceded that BSC is a Delaware corporation with a principal place of business in Massachusetts. It asserted that "[v]enue is proper in the Western District of Texas because UT has sovereign immunity and this Court has personal jurisdiction over [BSC]." Id. ¶ 7. Relying on state sovereignty as its hook for venue, UT explained:

Venue is proper in the Western District of Texas because UT is an arm of the State of Texas, has the same sovereign immunity as the State of Texas, it would offend the dignity of the State to require it to pursue persons who have harmed the State outside the territory of Texas, and the State of Texas cannot be compelled to respond to any counterclaims, whether compulsory or not, outside its territory due to the Eleventh Amendment.

Id. ¶ 10. UT further emphasized that it did not waive its sovereign immunity and did not "consent[] to any suit or proceeding filed separate from this action." Id. ¶ 2.

         BSC filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(3) for improper venue. It requested that the case be dismissed or, in the alternative, transferred to the District of Delaware. BSC noted that it does not own or lease any property or maintain a business address in the Western District of Texas. BSC disclosed that it has approximately forty-six employees in the Western District of Texas, all of whom maintain home offices and do not work in spaces that are owned, leased, or controlled by BSC.

         The district court granted BSC's motion and transferred the case to the District of Delaware. See Bd. of Regents, the Univ. of Tex. Sys. v. Boston Sci. Corp., No. 1:17-cv-1103 (W.D. Tex. Mar. 12, 2018), ECF No. 27 ("Order"). It explained that "28 U.S.C. § 1400(b)[] is the 'sole and exclusive provision controlling venue in patent infringement actions, '" and that venue is proper under this section where a defendant resides or has a regular and established place of business. Id. at 2 (quoting TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514, 1519 (2017)). Applying this court's decision in In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017), the district court found that BSC "does not maintain a 'regular and established place of business' in the Western District of Texas." Id. It rejected UT's sovereign immunity arguments, explaining that "[s]overeign immunity is a shield; it is not meant to be used as a sword . . . There is no claim or counterclaim against The Board of Regents that places it in the position of a defendant." Id. at 3 (citing Regents of the Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559, 1565 (Fed. Cir. 1997)). The district court held that venue was improper under § 1400(b), as there was no dispute that BSC, a Delaware corporation, does not reside in the district. Accordingly, it transferred the case to the District of Delaware pursuant to 28 U.S.C. § 1406. Id. at 3-4. UT appeals the district court's transfer order.

         Discussion

         I

         We first address whether we have appellate jurisdiction over UT's appeal. Transfer orders are interlocutory and generally cannot be appealed immediately. We conclude, however, that we have jurisdiction here. Because UT challenges the district court's transfer order based on state sovereignty, we hold that this case falls within the small class of orders excepted from the final judgment rule by the collateral order doctrine.

         Section 1295(a)(1) of Title 28 grants this court jurisdiction over any "appeal from a final decision of a district court of the United States . . . in any civil action arising under . . . any Act of Congress relating to patents." Under the final judgment rule, a party may not appeal "until there has been a decision by the district court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Robert Bosch, LLC v. Pylon Mfg. Corp., 719 F.3d 1305, 1308 (Fed. Cir. 2013) (en banc) (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373 (1981)). "Appeal is thereby precluded 'from any decision which is tentative, informal or incomplete,' as well as from any 'fully consummated decisions, where they are but steps towards final judgment in which they will merge.'" Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 142 (1993) (quoting Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)). A transfer order is not a final judgment. It "is interlocutory and thus not immediately appealable, but appealable only incident to a final judgment in a case (or a partial judgment pursuant to Fed.R.Civ.P. 54(b)) or as a certified question pursuant to 28 U.S.C. § 1292(b)." FDIC v. Maco Bancorp, Inc., 125 F.3d 1446, 1447 (Fed. Cir. 1997).

         The collateral order doctrine provides a "narrow exception" to the final judgment rule. Amgen Inc. v. Hospira, Inc., 866 F.3d 1355, 1358-59 (Fed. Cir. 2017). An order that is not final will be immediately appealable under this doctrine if it "fall[s] in that small class which finally deter-mine[s] claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated." Puerto Rico, 506 U.S. at 143 (quoting Cohen, 337 U.S. at 546). "To come within the 'small class' of . . . [collateral order doctrine decisions], the order must conclusively determine the disputed question, [2] resolve an important issue completely separate from the merits of the action, and [3] be effectively unreviewable on appeal from a final judgment." Id. at 144-45 (quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 468 (1978)); see also Cohen, 337 U.S. at 546.

         The Supreme Court has held that States and State entities may invoke the collateral order doctrine to immediately appeal an order denying a claim of sovereign immunity. In Puerto Rico, the Puerto Rico Aqueduct and Sewer Authority (PRASA)-an arm of the Puerto Rican government-sought to upgrade Puerto Rico's waste treatment plants and contracted with Metcalf & Eddy Inc. to assist with the task. 506 U.S. at 141. PRASA withheld payments on the contract due to alleged overcharging by Metcalf, and Metcalf sued PRASA in the District of Puerto Rico for breach of contract in response. Id. PRASA then moved to dismiss the case on grounds that sovereign immunity under the Eleventh Amendment prohibited the suit. Id. The district court denied the motion, PRASA appealed, and the First Circuit dismissed the appeal for lack of jurisdiction. Id. at 141-42. The First Circuit explained that its precedent barred States from taking an immediate appeal on a claim of sovereign immunity. Id. at 142.

         The Supreme Court reversed. It determined that decisions denying claims of sovereign immunity by a State or its arms fall within the "small class" of decisions covered by the collateral order doctrine. Id. at 144-45. The Court explained that such decisions satisfy the three elements of the doctrine as set forth in Cohen and Coopers & Lybrand. Id. It emphasized that the Eleventh Amendment confers on States the privilege not to be sued, and that decisions denying sovereign immunity "purport to be conclusive determinations that [States] have no right not to be sued in federal court." Id. at 145. The Court noted that resolving the issue of sovereign immunity "generally will have no bearing on the merits of the underlying action," and that the value of sovereign immunity to a State "is for the most part lost once litigation proceeds past motion practice." Id. Accordingly, the Court held that "States and state entities that claim to be 'arms of the State' may take advantage of the collateral order doctrine to appeal a district court order denying a claim of Eleventh Amendment immunity." Id. at 147; see also Univ. of Minn. v. LSI Corp., 926 F.3d 1327, 1331 n.2 (Fed. Cir. 2019) ("It is well-established that decisions denying sovereign immunity are appealable as collateral orders, and the 'ultimate justification is the importance of ensuring that the States' dignitary interests can be fully vindicated.'" (quoting Puerto Rico, 506 U.S. at 146-47)).

         Here, UT challenges the district court's transfer order on several grounds. It argues that the U.S. Constitution's Original Jurisdiction Clause ensures that a State cannot be forced to sue in a court located in another State. See Appellant's Br. 11-17. UT also argues that the Eleventh Amendment confirms that a State is entitled to control where it litigates against a private party. See id. at 18-21. Finally, it asserts that it did not consent to jurisdiction or waive its sovereignty rights in Delaware, and that the patent venue statute does not abrogate those rights. See id. at 26-36. UT generally invokes its rights as a state sovereign to challenge the district court's transfer order-an order denying the application of the Eleventh Amendment. See Order at 3. We thus hold that, based on the Supreme Court's reasoning and analysis in Puerto Rico, the collateral order doctrine likewise applies here.

         As in Puerto Rico, the district court's order satisfies all three elements of the collateral order doctrine. See 506 U.S. at 144-45. The first element is met because the order "conclusively determine[d]" that State sovereignty principles do not apply. Id. at 144. There is nothing "tentative, informal or incomplete" about the transfer order regarding this issue. Cohen, 337 U.S. at 546. As soon as the case proceeds in Delaware, UT is subject to suit there, and the issue of whether state sovereignty principles apply is conclusively determined in the negative. Contrary to BSC's argument, UT cannot simply "raise its sovereignty arguments in a 'different room, '" because UT's asserted right to not litigate in ...


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