State v. Holland 221 S.W.3d 639, 50 Tex. Sup. Ct. J. 642 (Tex. 2007) Cases of Interest >  IP >  Patent

state v holland

Facts: The General Land Office (GLO) of Texas contracted with Spill Removal Products, Inc. (SRP) and Pollution Preventing Products (PPP) to design services, components, installation and consulting services for the construction of three bilge water processing facilities on the Texas Gulf Coast. Herbert Holland was the president of SRP and managing-member of PPP, and all the GLO contracts were made through him. Holland developed a polymer-based filtration system to extract oil from contaminated bilge water that was used by all three processing facilities beginning in 2001. In 1998, Holland applied for a patent on his process for cleaning oil-contaminated bilge water. Patent No. 6,027,653, referred to as the “’653 patent” was issued in 2000 for a Method of Removing Organic Compounds from Air and Water Columns. Although the GLO’s contracts with SRP and PPP did not provide for royalties, Holland began demanding royalties on his patented process in 2002. When his demand for royalties was refused, Holland filed suit against the State of Texas, the GLO, and the Texas Land Commissioner. Holland alleged the use of the patented process infringed the ‘653 patent, and that it constituted public use of private property without just compensation in violation of Article I, section 17 of the Texas Constitution. The State denied the claims, and filed a plea to the jurisdiction based on sovereign immunity.

Procedural History: The trial court denied the State’s plea and the court of appeals affirmed the decision, holding that State immunity is waived for a takings claim, which was adequately pled by Holland. Because it was an appeal from the trial court's denial of a jurisdictional plea, and there was no dissent in the court of appeals, the Supreme Court only has jurisdiction if the court of appeals' decision conflicts with a prior decision by the high court or by another court of appeals. The Supreme Court determined the court of appeals’ decision conflicted with a decision of the Supreme Court because the State was acting under the color of contract and so Holland’s claims did not arise as a taking.

Holding: The decision of the lower courts was reversed and the case dismissed for lack of jurisdiction. Sovereign immunity is waived if a suit arises under the takings clause of the Texas Constitution. To establish such a claim, the claimant must prove the government actor intentionally took or damaged property for public use. But when the government acts in accordance with colorable contract rights, the State lacks the necessary intent for a takings claim and maintains its immunity. Holland voluntarily provided, and the state accepted, his filtration process when SRP and PPP contracted with the GLO. Therefore, the State accepted the filtration process under the color of contract and retains its sovereign immunity. The Court wrote, “Lacking the requisite intent to take Holland's patented process under its eminent-domain powers, the State is not subject to liability.” Furthermore, the Court wrote that any infringement claim Holland might have for his ‘653 patent would be against SRP and PPP.

Further Analysis: In order to have jurisdiction to review the case, the Supreme Court had to make a substantive decision on the facts of the case. It seems improper that in order to get jurisdiction that the Supreme Court had to basically decide the case before it ever heard arguments so that it could rule that the court of appeals did not follow precedent.

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