California, through its University of California system, already holds more patents than any other state, and its profitable arsenal only stands to grow as UC campuses receive stem cell grants in the coming years. Its lawyers play tough. The university wrangled $200 million from Genentech Inc. to settle a patent lawsuit over human growth hormone in 1999, and in 2006 Monsanto Co. agreed to pay it $185 million to settle patent claims on bovine growth hormone. "California is the king of patent litigation," says IP practitioner Andrew Dhuey. The "sovereign immunity" granted by the Eleventh Amendment to the U.S. Constitution lets states sue for infringement, but protects them from being sued.
This situation really riles Dhuey, who runs a solo law practice in Berkeley. For years, on behalf of his client Biomedical Patent Management Corp., he has been fighting to make California stand on more level legal ground with the bioscience companies with which it deals. Recently Dhuey got one step closer to that goal. The U.S. Supreme Court is considering a writ of certiorari on behalf of Biomedical Patent; the company was denied by lower courts millions in royalties that it says it is owed by California. In April the Court asked the U.S. solicitor general's office to offer its opinion on the case, a move that many Court watchers say increases the odds that the Court will decide to hear it.
Dhuey hired Andrew Pincus, a top-tier appellate specialist at Mayer Brown, to prepare the writ and (they hope) to argue the case. But Dhuey has trod an interesting and mostly successful path to this juncture. A graduate of UC Hastings in San Francisco, Dhuey left the firm that is now Pillsbury Winthrop as a third-year associate in 1995 to pursue a solo practice helping individual inventors enforce their patents. He was hired by geneticist Mark Bogart, who had devised a new way of testing fetuses for Down syndrome, a test that is now administered, along with others, to a majority of the pregnant women in the U.S. (BPMC is a closely held corporation owned mostly by Bogart.)
Dhuey embarked on a licensing campaign for BMPC in 1996. By the end of 1997, all of the nation's major labs had agreed to pay royalties, according to Dhuey. The tests cost between $75 and $90, of which Bogart got about $5. Bogart's patent expired in 2006. But he is still pursuing the last holdout, despite long legal odds-getting royalties from the California Department of Health.
Dhuey sued the state on behalf of BPMC in 1998, but voluntarily dropped the case while awaiting relevant Supreme Court decisions. Both were 5-to-4 votes strengthening sovereign immunity, though they didn't answer Dhuey's specific argument: that California has litigated itself out from behind its sovereign shield because of its aggressive patent enforcement. In 2006 Dhuey filed the present lawsuit in federal court in San Francisco.
BPMC's writ has been supported by an amicus brief from the U.S. Chamber of Commerce and a software industry group. The current system "creates gross inequalities," wrote Baker Botts partner Jeffrey Lamken. States can exploit the "in terrorem effect of a threatened damages suit, to extract licensing agreements from private parties, secure in the knowledge that those parties cannot challenge the validity of the state's patent."
If the Court accepts the case, Pincus will cross swords with Karin Schwartz, a lawyer with the California Department of Public Health, formerly with Munger, Tolles & Olson. Schwartz says Dhuey and Pincus are using the wrong vehicle to make their point. Her client is a strapped public health agency, she says, not a deep-pocketed world-class research university. "My client hasn't engaged in use of the courts to protect its patents," she points out. "My client doesn't have any patents." Dhuey argues that one branch or another of the state needs to pay up.
Dhuey has done so well in his earlier work that he is able to take on BPMC's fight against California entirely on contingency. If BPMC wins, Dhuey doesn't imagine California will often be sued for infringement. But potential targets of patent enforcement will be able to ask for declaratory judgments to invalidate the state's patents or declare that their own work doesn't infringe-a crucial "preemptive strike" for biotech companies that is currently not allowed.
