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Monday, December 12, 2005

More on State Takings of IP

Further to my post last week regarding Will Baude's interesting questions on whether a state can take patents and other intellectual property, Mark Janis and Bill Hines at Iowa Law pointed me to Matthew S. Bethards's article Condemning a Patent:  Taking Intellectual Property By Eminent Domain, 32 AIPLA Q.J. 81(2004).  Bethards raises some interesting issues about state power to take federally created IP, among them the possibility that such a taking would be invalid based on Commerce Clause grounds:

A state's attempt to take a patent by eminent domain would likely run afoul of the commerce clause by impermissibly burdening interstate commerce. Interestingly, the violation of the commerce clause is what finally prevented the City of Oakland from acquiring the Raiders. The use of eminent domain will not violate the commerce clause if interstate commerce is only incidentally and indirectly burdened.

Under one view, making this determination requires a state or local government to show that eminent domain is the least burdensome alternative to achieve legitimate local public interests. The court purportedly applied this test in denying the City of Oakland's attempt to condemn the Raiders. Another view of the commerce clause is labeled as "anti-protectionist" because it considers local regulations that favor or protect instate businesses illegitimate and unconstitutional. Under this theory, the City of Oakland may have prevailed because it made no attempt to take away business from another state or improve local competitive conditions. The standard would still preclude the condemnation of an entire patent because such condemnation has significant interstate effects. Nevertheless, the taking of a patent license might pass muster under the anti-protectionist view.

Bethards also discusses the issue of whether a state would be immune from a patent infringement lawsuit:

In 1992, Congress attempted to eliminate state and local governments' patent infringement immunity through the Patent and Plant Variety Protection Remedy Clarification Act(hereinafter Patent Remedy Act). However, in 1999, the U.S. Supreme Court ruled the Patent Remedy Act unconstitutional under the Eleventh Amendment.  In that case,the patentee invented a financing methodology that a Florida state-created entity allegedly infringed. The state of Florida never consented to suit for patent infringement. The Court noted that "[t]he underlying conduct at issue here is state infringement of patents and the use of sovereign immunity to deny patent owners compensation for the invasion of their property rights." The patentee argued that this state action constituted a taking of property compensable under the Fifth Amendment, but the Supreme Court refused to consider the argument because neither the statute nor its legislative history indicated that Congress contemplated the Fifth Amendment's just compensation clause when enacting the Patent Remedy Act. Rather, the Court invalidated the statute because Congress exceeded its power to enforce the guarantees of the Fourteenth Amendment's due process clause by not showing a pattern of consistent infringement by the states.

Nevertheless, if a state infringes a patent, the patentee is not without a remedy. It has been suggested that state claims of conversion, unfair competition, or waiver would be effective. However, similar to a patentee's remedy against the federal government taking a patent license in the Court of Federal Claims, a takings claim for payment of just compensation in state court would be the most effective.

Ben Barros

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