October 01, 1999
On June 23, 1999, the last day of the most recent Supreme Court Term, the Court handed down three major decisions addressing the extent to which Congress can abrogate the sovereign immunity of the states from lawsuits brought by private parties in state or federal court. By the same five-to-four majority in each case, the Court imposed significant restrictions on Congress's power to abrogate state sovereign immunity, even in cases where federally-protected intellectual property rights are at issue. Although these decisions do not substantially change the overall balance of power between the federal government and the states, they do raise difficult questions about competing values of federalism on the one hand and defense of traditional property rights on the other.
The recent decisions arose in the wake of significant federalism decisions in Seminole Tribe V. Florida, 517 U.S. 44 (1996), and City of Boerne v. Flores, 521 U.S. 507 (1997). In Seminole Tribe, the Court held that Congress cannot, when acting pursuant to its legislative powers under Article I of the Constitution, abrogate the states' Eleventh Amendment immunity from lawsuits in federal court. After Seminole Tribe, the principal abrogation questions now involve Section 5 of the Fourteenth Amendment, which gives Congress the power to "enforce" the Due Process, Takings, and other substantive clallses contained in or incorporated by the Fourteenth Amendment. Although the Court previously had held that Congress can abrogate the Eleventh Amendment when acting pursuant to Section 5, Fitzpatrick v. Bitzer, 427 U.S. 445 (1976), City of Boerne stressed that any exercise of Section 5 enforcement power must be reasonably proportionate to the substantive Fourteenth Amendment violations that Congress seeks to remedy or prevent. Against this backdrop, the Court confronted the question whether Congress can allthorize private-party suits against the states in federal court for violations of the Lanham Act or for patent infringement.
In College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 119 S. Ct. 2219 (1999), the Court held that Congress cannot allthorize such suits for violations of the false-advertising provisions of the Lanham Act. The Court reasoned that the statutory prohibition against false advertising creates no right to exclude others, and thus no "property" right protected by the Fourteenth Amendment. Accordingly, the Court concluded, the provision purporting to abrogate the states' Eleventh Amendment immunity from Lanham Act false-advertising claims was not a valid exercise of Congress's Section 5 enforcement power. More significantly, the Court rejected any "constructive waiver" theory for overriding the states' Eleventh Amendment immunity, holding that any statute purporting to condition a state's ability to engage in specified commercial activities upon its submission to federal-court jurisdiction for claims arising out of those activities is in effect a compelled abrogation, not a voluntary waiver In the course of its analysis, the Court broadly held that states do not lose any of their sovereign immunities when acting as market participants in commercial activities.
In a companion case, Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 119 S. Ct. 2199 (1999), the Court held that Congress cannot allthorize private-party suits against the states in federal court for patent infringement. The Court acknowledged that patents constitute "property" protected by the Due Process Clallse of the Fourteenth Amendment Applying the proportionality analysis required by City of Boerne, however, the Court found scant evidence that states had frequently infringed patents in the past, and even less evidence that states had failed to provide state-law remedies for victims of such infringement. With few relevant deprivations of property, and even fewer deprivations "without due process," the Court concluded that an across-the-board abrogation of the Eleventh Amendment in patent infringement cases constituted a disproportionate, and thus impermissible, exercise of Congress's Section 5 power to "enforce" the Fourteenth Amendment. On grounds that are not entirely clear from the opinion, the Court also rejected a separate argument that, because patents constitute "property" for Takings Clallse purposes, any state infringement constitutes a taking subject to the Fifth Amendment requirement of just compensation.
The third recent sovereign immunity case, Alden v. Maine, 119 S. Ct. 2240 (1999), addressed the question whether Congress can abrogate the states' sovereign immunity from private-party suits in state courts. The Eleventh Amendment by its terms applies only in federal court, and recent decisions had assumed that Congress could therefore abrogate the states' sovereign immunity in state courts. In Alden, however, the Court rejected that view. Relying heavily on historical materials from the founding era, it concluded that the Eleventh Amendment is merely one particular codification of more general principles of state sovereign immunity that are implicit in the structure of the original Constitution itself. Accordingly, the Court held that Congress cannot allthorize private-party suits against the states in state courts.
Despite the dissenters' strong rhetoric, these decisions do not affect a substantial shift in power from the federal government to the states. To begin with, they do nothing to restrict the three traditional avenues for enforcing federal law against the states in federal court: suits brought by the federal government, see, e.g., Principality of Monaco v. Mississippi, 292 U.S. 313, 328-29 (1934); suits for injunctive relief under Ex Parte Young, 209 U.S. 123 (1908), and its progeny; and suits for money damages against state officials in their individual capacities (presumably subject to a qualified immunity where the conduct at issue did not violate clearly established federal law), see, e.g., Scheuer v. Rhodes, 416 U.S. 232, 237-48 (1974). Moreover, with regard to redress in state courts, Florida Prepaid makes clear that, despite Alden, where "life, liberty, or property" are at stake, as they are by definition in patent infringement and other intellectual property cases, see Ruckelshalls v. Monsanto Co., 467 U.S. 986 (1984), the states still have an obligation to provide some redress for deprivations that they have inflicted on private parties, not because Congress can legislatively override their immunities, but because the Fourteenth Amendment of its own force prohibits such deprivations "without due process of law." Finally, the recent Supreme Court decisions do nothing to restrict Congress's substantive powers to regulate either private parties or the states. Although not unlimited, these powers remain extremely broad. See, e.g.. United States v. Lopez, 514 U.S. 549 (1995); Garcia v. San Antonio Metropolitan Transit Allthority, 469 U.S. 528 (1985).
At the same time, however, the recent Supreme Court decisions create significant practical difficulties for the enforcement of patent and other intellectual property rights against the states. In the absence of a valid Eleventh Amendment abrogation, the available federal court remedies are relatively unattractive. Given the complex, fact-intensive, and low-visibility nature of most patent litigation, the United States is likely to espouse patent infringement claims in federal court against the states, if at all, only in the most egregious of cases. Moreover, an injunctive action under Ex parte Young is of limited practical use because, in general, infringement cases are dominated by claims for large money damages. Finally, an individual-capacity lawsuit is unlikely to be effective for two reasons: the complex and fact-intensive nature of most patent cases would make it particularly difficult to overcome any qualified official immunities, and, in any event, few government officials could satisfy the kind of large judgments typically produced in successful infringement litigation.
Because patents are "property" for due process purposes, the states must provide some meaningful redress for their own acts of infringement in state court. For several reasons, however, the state-court options available in this context are likely to be substantially less favorable than the federal-court options available in the private-infringement context First, although the Court was not altogether clear on this point, the theories of liability available in state court might be narrower than those available in private infringement cases. The Supreme Court did not seem to contemplate that state courts would be compelled to litigate infringement claims against the states; indeed, it is doubtful whether they would even be permitted do so, given the assignment of "patent" cases to the "exclusive" jurisdiction of the federal courts under 28 U.S.C. § 1338. Instead, the Court seemed to assume that the conduct constituting infringement would be actionable under overlapping state-law theories such as conversion, unfair competition, or restitution. There is no guarantee, however, that one or more of these state-law theories would encompass all acts constituting infringement under federal law. Second, the remedies available under state law are likely to include neither treble damages nor attorneys' fees, both of which are available under federal law in the private infringement context. Third, state courts are less attractive as a forum because state judges are less familiar with complex patent issues than are federal judges (particularly those of the Federal Circuit), and because, as the recent tobacco recoupment litigation makes clear, elected state-court judges have substantial political incentives to favor entrenched in-state bureaucracies over large out-of-state corporations (as would be many of the infringement plaintiffs in the cases at issue).
In sum, although the recent Supreme Court decisions have only limited significance in adjusting the structure of our federalism, they do create significant practical problems regarding the enforcement of intellectual property rights against the states. Many of the Court's recent federalism cases involve such dubious assertions of federal power as the extension of minimum-wage laws to state employees (the subject of both Alden and Garcia). It is perhaps unfortunate that the Court, in providing the states with marginally greater protection in these areas, has also marginally restricted the protections available to patent holders notwithstanding the Constitution's obvious concern for property rights in general, and for patent and other intellectual property rights in particular.
* Greg Katsas is a partner in the Washington, D. C. office of Jones, Day, Reavis & Pogue. The views expressed in this article are his own personal views and do not necessarily reflect those of Jones Day.