At first glance it seemed only fair when, in 1999, Genentech had to pay the University of California $200 million because a former university employee had carried trade secrets to his new job at the biotechnology giant. But for Massachusetts inventor Marc Andelman, the decision set off fireworks. Andelman claims the same university infringed on one of his patents, but he can’t do anything about it. Why? Because as a state entity, the university has a get-out-of-court-free card called sovereign immunity.

State sovereign immunity, guaranteed in the Eleventh Amendment and expanded by Supreme Court decisions, protects states from lawsuits by citizens. For intellectual property this immunity means that while a state or state agency can sue you for damages from a patent infringement, you can’t sue them in federal court for the same transgression-unless they agree to be sued.

Take Andelman’s story: Working at a makeshift lab in his basement, he spent 11 years developing a new method for water purification  (see “Nanofresh Water,” TR Jan/Feb 2000), using charged material to remove contaminants from dirty water. He dubbed it the Flow-Through Capacitor and filed a handful of patents in 1991.

A few years later, Andelman read about a suspiciously similar technology touted by scientists at the Department of Energy’s Lawrence Livermore National Laboratory in Berkeley, CA. He contacted the lab to discuss some sort of collaboration or, at the very least, proper patent attribution. But Livermore wasn’t interested in talking, and it didn’t flinch when Andelman hired a lawyer. By contracting with the regents of the University of California, Livermore and its employees also get sovereign immunity. Andelman can’t even get his case heard.

“Livermore is ripping off inventors like me, and nobody can do anything about it,” says Andelman. “My lawyer said we could sue until kingdom come, but nothing would come of it.”

“If Marc was David [and Livermore Goliath], where would he throw the rock?” asks Bill Warren, program manager at the Defense Advanced Research Project Agency. Two years ago, Warren’s office gave Andelman a research grant after Defense Department patent attorneys identified him as the country’s leading expert in the technology. While DARPA may have given him his due, Andelman says the regents’ snub and alleged infringement has cost him investors delayed development.

A 1999 report by the Committee on Science of the U.S. House of Representatives expressed concern that state-run government labs were bullying entrepreneurs. Inventors and small businesses working on technologies as varied as explosives, wireless communications, and DNA probes came forward with grievances against Department of Energy labs. As a federal agency, the DOE can be sued, but when its labs contract with state universities they are protected by state immunity.

Now, Senator Patrick Leahy (D-VT) has a bill he thinks can square the situation, and he’s pushing to get it past the Senate Judiciary Committee and onto the Senate floor for a vote. The goal of the Intellectual Property Protection Restoration Act of 2001 is straightforward: end state insulation from infringement suits. According to Leahy’s spokespeople, the bill “creates reasonable incentives for States to waive their immunity in intellectual property cases, but it does not oblige them to do so.” States have two years to waive their immunity. If by that time they still decline to do so, “like private parties that sue states for infringement, states that sue private parties for infringement could not recover any money damages.”

Not surprisingly, at state university technology transfer officials, who oversee the licensing of university patents to private industry, oppose the bill. A letter drafted by Louisiana State University says the university supports efforts to close the lawsuit loophole, but takes issue with Leahy’s plan because the bill would require a whole state-not just a state university-to waive sovereign immunity or face penalties. “If a state research university were unable to convince its legislature to consent to any and all infringement suits against the state highway department, state hospital and all other branches to state government,” it says, “then that university would effectively be shut out of technology transfer and development.”

Opponents to the bill say that’s exactly what will happen. No state will agree to waive its sovereign immunity, writes Janet E. Scholz, president of the Association of University Technology Managers, in a letter the Committee of the Judiciary.

Scholz’s organization has requested an amendment to the bill that would allow a state university to waive its own sovereign immunity-but not the entire state’s. With this adjustment, says Mani Iyer, director of the Office of Intellectual Property at Louisiana State University, “[t]he bill would then be more likely to achieve its goal-a level playing field for those who actually play the technology transfer game.”

Many of those in favor of the Leahy bill, however, aren’t sympathetic to universities. They see the Act as an overdue remedy for a blatantly unfair situation, in which states have been enjoying all the privileges of intellectual property protection without assuming any of the liabilities. The bill has the support of the American Bar Association, the American Intellectual Property Law Association, the Intellectual Property Owners Association and the International Trademark Association.

And then there are supporters like Andelman, inventors who claim to have been ripped off without recourse. But no one is sure of their number. The General Accounting Office, Congress’s investigative arm, published a report in September 2001, concluding-with almost painful neutrality-that the 58 examples of lawsuits it had gathered involving infringement accusations against states were neither too many to characterize a pattern of transgression nor too few to halt further investigation. To date, no comprehensive study has been done. Which raises the question: exactly how serious and widespread is this problem?

At the very least, there’s a systemic flaw that’s beginning to fester-not only among patents, but in all forms of intellectual property, including trademarks and copyrights. Register of Copyrights Marybeth Peters told the House Subcommittee on Courts and Intellectual Property in July, 2000: “Clearly, states are availing themselves of the copyright protection provided by federal law.” She also said a June 1998 report by the Copyright Office had “cited several instances of alleged copyright infringement by states that had been brought to the Office’s attention.”

“What appears certain,” said Peters, “is that as long as states remain immune from suits for damages from infringement of copyrights and other intellectual property rights, states are likely to be tempted to infringe and the number of actual infringements by states is likely to increase.”