In the
United States Court of Appeals
For the Seventh Circuit
No. 08-4164
B OARD OF R EGENTS OF THE
U NIVERSITY OF W ISCONSIN S YSTEM,
Plaintiff-Appellee,
v.
P HOENIX INTERNATIONAL S OFTWARE, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 07 C 665—Barbara B. Crabb, Judge.
A RGUED JUNE 4, 2009—D ECIDED D ECEMBER 28, 2010
Before F LAUM, W OOD , and T INDER, Circuit Judges.
T INDER, Circuit Judge. Phoenix International Software
created software that it called Condor and registered
the CONDOR mark with the Patent and Trademark Office
(PTO) for “computer software for on-line programming
development, library management and system utilities
functioning on mainframe systems.” Phoenix used this
mark since June 1978 and registered it in January 1997.
2 No. 08-4164
The delay in registration was due to a prior, separate
registered CONDOR mark not at issue here. (We are
capitalizing CONDOR when we refer to the mark, as the
parties have in their briefs.)
The Board of Regents of the University of Wisconsin
System (to whom we will refer simply as Wisconsin,
because it is an arm of the state) registered its own CON-
DOR mark with the PTO in 2001 for “computer network
operating system software, downloadable from a global
computer network, that delivers large amounts of compu-
tational power by utilizing idle computing resources
in a network of individual computer workstations . . . .”
The question in this case is whether Wisconsin’s
CONDOR mark is likely to be confused with Phoenix’s.
Phoenix filed a petition before the Trademark Trial and
Appeal Board (TTAB) to cancel Wisconsin’s registration
on the grounds that Wisconsin’s registration would create
confusion in trade. See 15 U.S.C. § 1064 (“A petition to
cancel a registration of a mark . . . may . . . be filed . . . by
any person who believes that he is or will be dam-
aged . . . by the registration of a mark on the principal
register . . . . ”). The confusion in trade allegation refers
to 15 U.S.C. § 1052(d), which forbids the registration of
a trademark that “[c]onsists of or comprises a mark which
so resembles a mark registered in the [PTO] . . . as to
be likely, when used on or in connection with the goods
of the applicant, to cause confusion, or to cause mistake,
or to deceive . . . .”
The TTAB granted the petition and cancelled Wis-
consin’s registration, finding that
No. 08-4164 3
the marks are identical in every aspect. In such
cases, even when goods or services are not com-
petitive or intrinsically related, the use of iden-
tical marks can lead to an assumption that there
is a common source . . . . In addition, the parties’
software performs similar functions and, there-
fore, we cannot find that they are used in
unrelated fields. Even sophisticated purchasers
would likely believe that there is some relation-
ship or association between the sources of the
goods under these circumstances.
Phoenix Software Int’l v. Bd. of Regents of the Univ. of Wis.
Sys., Cancellation No. 92042881, at 19 (T.T.A.B. Sept. 26,
2007) (quotations and citations omitted).
Wisconsin brought a civil action in federal district
court pursuant to 15 U.S.C. § 1071(b) challenging the
TTAB’s decision. Phoenix counterclaimed, seeking dam-
ages from Wisconsin for trademark infringement and
false designation of origin under the Lanham Act (15
U.S.C. §§ 1114, 1125(a)); it also raised state law claims
that it later voluntarily dismissed with prejudice. The
district court dismissed Phoenix’s federal counterclaims
on sovereign immunity grounds and granted Wisconsin’s
motion for summary judgment, reversing the TTAB’s
determination. Phoenix appeals.
I. Standard of Review
The standard of review in this case is complicated by
its initial status as a matter before the TTAB. After losing
4 No. 08-4164
there, Wisconsin had two options: take an appeal directly
to the Court of Appeals for the Federal Circuit or
institute an action in a district court. See 15 U.S.C. § 1071.
The procedure for appeal to the Federal Circuit con-
forms to the familiar standard for administrative appeals.
The parties present their case based on the closed
record developed before the TTAB and the circuit
court determines whether substantial evidence before
the TTAB supported the decision. CAE, Inc. v. Clean Air
Eng’g, Inc., 267 F.3d 660, 673, 675 & n.9 (7th Cir. 2001).
The choice to institute an action in the district court
allows Wisconsin the benefit of expanding the record
by offering new evidence to fend off Phoenix’s cancel-
lation claim. We have described the district court option
as “both an appeal and a new action, which allows the
parties to request additional relief and to submit new
evidence.” Id. at 673; see also Aktieselskabet AF 21. November
2001 v. Fame Jeans Inc., 525 F.3d 8, 12-13 (D.C. Cir. 2008)
(“[T]he court may consider both new issues and new
evidence that were not before the TTAB.”). But a court’s
posture when considering an appeal and new issues is
different, particularly in terms of issues of fact, which
we will see are the key issues in this case. There is
tension between the level of deference an appellate
court pays to the fact-finder (in this case, an administra-
tive body) and the parties’ opportunity to present new
evidence. See CAE, 267 F.3d at 674 (“[T]he district court
is an appellate reviewer of facts found by the TTAB and
is also a fact-finder based on new evidence introduced
to the court.”).
No. 08-4164 5
The district court, relying on CAE, adopted a defer-
ential substantial evidence standard to review the
TTAB’s findings. See id. at 676. The court described its
role as one that “affords deference to the findings of
fact made by the board but considers the board’s deci-
sion de novo to the extent the parties present new evi-
dence. The board’s findings of fact are properly reviewed
under the standard set forth in [the Administrative Pro-
cedure Act (APA)] which requires the court to set aside
findings and conclusions ‘unsupported by substantial
evidence.’ ” Bd. of Regents of the Univ. of Wis. Sys. v. Phoenix
Software Int’l, Inc., No. 07 C 665, 2008 WL 4950016, at *8
(W.D. Wis. Nov. 18, 2008) (citing CAE, 267 F.3d at 674, 675-
76). The district court’s formulation of the interplay
between both sets of evidence matches ours. “Although
the district court’s review of the TTAB’s decision is con-
sidered de novo when the parties present new evidence
and assert additional claims, the district court also
must afford deference to the fact findings of the TTAB.”
CAE, 267 F.3d at 674. (We note, however, that the D.C.
Circuit has recently held that because the Lanham Act,
15 U.S.C. § 1071(b), provides for judicial review of TTAB
decisions, the APA is not directly applicable. See
Aktieselskabet, 525 F.3d at 14. The D.C. Circuit did not
address how this would affect its deference to the
TTAB’s fact-finding, except to note that courts have
interpreted Dickinson v. Zurko, 527 U.S. 150 (1999), as
requiring the application of the APA’s substantial evi-
dence standard to TTAB decisions. Aktieselskabet, 525
F.3d at 14 & n.2. We are one such court, CAE, 267 F.3d
at 675, and neither party has made an issue of our
standard of review.)
6 No. 08-4164
So an important part of this case should be to
delineate the specific factual findings of the TTAB to
which we owe deference and the new evidence, which
we view in favor of the nonmoving party on a motion
for summary judgment, and assess the impact of each
on the summary judgment standard. Given that Phoenix
was the prevailing party before the TTAB and that it was
the nonmoving party on the summary judgment motion
that was granted, we must say at the outset that the
state of the facts presents a real obstacle to summary
judgment in Wisconsin’s favor. A party is entitled to
summary judgment only if there exists “no genuine
issue of material fact” and the moving party “is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(c)(2).
The entire issue in this case—the likelihood of confu-
sion—is an issue of fact. AutoZone, Inc. v. Strick, 543
F.3d 923, 929 (7th Cir. 2008); CAE, 267 F.3d at 677;
Barbecue Marx, Inc. v. 551 Ogden, Inc., 235 F.3d 1041, 1044
(7th Cir. 2000); Reed-Union Corp. v. Turtle Wax, Inc., 77
F.3d 909, 912 (7th Cir. 1996); McGraw-Edison Co. v. Walt
Disney Prods., 787 F.2d 1163, 1167 (7th Cir. 1986).
To overturn the TTAB’s decision, therefore, the
district court (and this court, on de novo review) must
find that substantial evidence did not support the
TTAB’s determination, or that a legal error clouded its
understanding of the likelihood of confusion issue. If
the TTAB’s determination is supported by substantial
evidence and there is no undermining legal error, Wis-
consin must show that there is a killer set of facts, that
Wisconsin neglected to bring to the TTAB’s attention,
that resolves the case in its favor even if we credit all the
No. 08-4164 7
facts the TTAB found during its proceedings. To win on
summary judgment, Wisconsin must show that the
TTAB was not merely wrong, but wrong as a matter of
law, and that the evidence was not only not substantial
enough to support its decision but that the evidence
compelled, without a new hearing by a fact-finder, the
conclusion opposite to the TTAB’s determination. (We
ordinarily do not allow a party to hold evidence in
reserve for appeal, but our standard of review is pre-
scribed by the Lanham Act, 15 U.S.C. § 1071(b)(1). As the
D.C. Circuit noted, the Lanham Act “does not require
exhaustion of the administrative procedures itself” and
therefore does not impose the traditional waiver rules
on parties appealing TTAB decisions to the district
court. Aktieselskabet, 525 F.3d at 14.)
We now proceed to the analysis. Only if the record, as
credited by the TTAB and supplemented by the parties
in the district court, reveals no genuine issue of mate-
rial fact may we affirm the district court’s decision.
II. Relevant Findings
A. Trademark Trial and Appeal Board
The TTAB found that Wisconsin’s software “involve[s]
using individual workstations in a network to better
utilize idle computing resources,” while Phoenix’s soft-
ware “functions on a mainframe system and . . . provides
online programming development, library management
and systems development.” Phoenix Software Int’l, Can-
cellation No. 92042881, at 10. Before the TTAB was testi-
8 No. 08-4164
mony from Wisconsin’s mainframe coordinator that “an
organization that did not have a mainframe or is not
involved in developing software application[s] for main-
frame computers” would have no use for Phoenix’s
software and testimony from Wisconsin’s software
creator that established that its software was not used
on mainframe computers. (“[N]one of the [Wisconsin]
Condor users that came back to us and asked any ques-
tion told us that it’s installed on a mainframe.”)
But Phoenix presented evidence that its software, at
least, was usable beyond the mainframe environment.
Its sole shareholder, Fred Hoschett, testified in a dep-
osition that “effectively we can run our software, un-
changed, unaltered on a workstation, on someone’s
desktop, as if it were on a mainframe” and that the soft-
ware “often” operates on a network of workstations,
which he defined as a “LAN, WAN or some other net-
work that allows the interconnection of these work-
stations.” (LAN is an acronym for Local Area Network;
WAN is an acronym for Wide Area Network.) He also
testified that he has “many customers that use Condor
that do not have mainframes.”
In his deposition, Hoschett also read Wisconsin’s de-
scription of its software from the University’s web site:
Condor is a specialized workload manage-
ment system for computer-intensive jobs. Like
other full-featured batch systems, Condor provides
a job queuing mechanism, scheduling policy,
priority scheme, resource monitoring, and resource
management. Users submit their serial and
No. 08-4164 9
parallel jobs to Condor. Condor places them into
a queue, chooses when and where to run the
jobs based upon a policy, carefully monitors their
progress, and ultimately informs the user upon
completion.
Hoschett testified that this language “very much” con-
cerned him because when he first read Wisconsin’s de-
scription of its software he initially thought it was de-
scribing his product. Before the TTAB, Phoenix described
its software as “a toolbox of functionality to be used
essentially by anyone who uses a computer to assist
them in doing their jobs, whether it be programming
software, submitted batch jobs and queuing batch jobs,
or managing the environment or managing the resources.”
Based on this evidence, the TTAB found that there was
“at least some evidence in the record that the parties’
respective software performs the same general functions
and the evidence does not demonstrate the goods are
used in distinctly different fields,” and that “there is no
clear division between the parties’ software that would
cause us to conclude that these products are not re-
lated.” The biggest difference between the products the
TTAB found was that Phoenix’s software was “used in a
mainframe environment while [Wisconsin’s] goods are
used in a network of individual computer workstations.”
That distinction was “not necessarily” significant, be-
cause as one of Wisconsin’s witnesses conceded, “there
might be some incentive” to operate “in both environ-
ments.”
The TTAB further found that both programs were
“downloadable” and nothing in Phoenix’s registration
10 No. 08-4164
indicated otherwise, that consumers of either program
were not ordinary consumers and had “some level of
skill and sophistication to the extent that they are pro-
gramming mainframe computers or networking com-
puter workstations to increase computational resources,”
and that their “purchases would be made with some
care.” (The TTAB classified consumers of both programs
as purchasers, even though Wisconsin distributes its
software under an open source, free license. This differ-
ence is irrelevant to our analysis.) The TTAB also
found that there was no evidence that any consumer
was actually confused as to the source of either product
despite evidence that Phoenix offered to support its
claim to the contrary (including Internet searches for
“Condor Software” that returned results for both prod-
ucts and a Wikipedia entry for Wisconsin’s product,
with no entry for Phoenix’s).
The TTAB found that both parties’ marketing prac-
tices were “relatively limited.” A Wisconsin witness
testified that “[w]e don’t do any advertising with Condor”
and Phoenix’s controller estimated that Phoenix spent
approximately $65,000 in marketing, focused on
attending trade shows and printing brochures and other
marketing materials. But Wisconsin told the TTAB that
it was expanding its operations, which the TTAB
found made the chances of confusion more likely.
Based on these factual findings and inferences
drawn therefrom, and applying relevant law, the TTAB
found that Phoenix had met its burden of proving the
likelihood of confusion and granted Phoenix’s petition to
No. 08-4164 11
cancel Wisconsin’s registration of the CONDOR mark. It
noted that “the marks are identical in every aspect” and
that both products perform similar functions. The TTAB
concluded that “we cannot find that they are used in
unrelated fields” and that “[e]ven sophisticated pur-
chasers would likely believe that there is some relation-
ship or association between the sources of the goods
under these circumstances.”
B. District Court
At the district court, Phoenix attempted to further
supplement the record with evidence that bolstered its
case that the Condor software products performed over-
lapping functions. Wisconsin, according to Phoenix’s
sole shareholder Fred Hoschett, had struck deals with
IBM to make Wisconsin’s version of Condor available
on PC-based mainframes. Hoschett also provided a list of
customers operating Phoenix’s version of Condor on PC-
based mainframes. But the district court rejected the
proffered evidence on the grounds that it was filed with
Phoenix’s reply brief instead of in its initial proposed
findings of fact, in violation of a local rule. Phoenix does
not argue that it did, in fact, comply with the local rule.
Based on the evidence it did consider, the district
court found that it was undisputed that Phoenix’s soft-
ware cannot run on a network of workstations that
are not connected to a mainframe system, but that the
software may be run on non-mainframe computers
through the use of emulation software. The court found
that the Phoenix software allows “its users to submit
12 No. 08-4164
batch jobs to local and remote computers through a
network of computers to more effectively utilize and
balance the available computing cycles,” that Phoenix had
100 or fewer active licensees of its software, but that
licenses cost anywhere from $30,000 to $300,000 a year
(so that 100 licenses can be very profitable), and that
Phoenix advertises at trade shows, on the Internet, and
through brochures.
Phoenix’s customers, the court found, must be special-
ized because mainframe computer systems “are gen-
erally expensive computing systems that are extremely
reliable and secure and capable of enormous through-
put,” they are “centrally managed and maintained,” and
a choice of software for use on a mainframe “requires
careful consideration.” In other words, customers don’t
buy mainframe software on a lark. The end-users
of software like Phoenix’s are “mainframe systems ad-
ministrators and mainframe systems application devel-
opers.” The community of mainframe administrators
and developers is a tight-knit one (in the words of the
district court, a “niche”) that learns about products
through word-of-mouth advertising, mainframe trade
shows and conferences, and the advice of consulting
firms. Phoenix spent approximately $65,000 on mar-
keting in 2000; that number was virtually unchanged
in 2003. Phoenix’s competitors are IBM and Computer
Associates.
As for distribution and customer overlap, the district
court found that Wisconsin distributes its software
under an open software license and links together “a
No. 08-4164 13
network of individually owned computer resources”
to create a system wherein those computers trade oper-
ating capacities. The court determined that Wis-
consin’s software does not run in mainframe environ-
ments, but did not resolve whether a mainframe could
be part of the grid on which Wisconsin’s software oper-
ates. The court found that users of Wisconsin’s software
are generally systems operators of scientific research
groups, but since the software is free and available for
download others may use it. Because of this, the court
found that users of Wisconsin’s software are tough to
identify; Wisconsin’s estimates place the total number
of users in the tens of thousands. They generally must
have a “systems-level understanding” of computers in
order to make Wisconsin’s Condor program work. Users
include the “high energy physics community, the DOE
[Department of Energy] National labs, biology and com-
puter science departments, and industrial groups.” Ac-
cording to the district court, 3738 copies of Wisconsin’s
software were downloaded in 2000; by 2004, the number
of downloads grew to 15,155, an increase of more than
400 percent. A promotional program offered by the Uni-
versity of Wisconsin, “Condor Week,” showed similar
growth from a one-day event attracting twenty partic-
ipants (presumably it was then called “Condor Day”) to
a four-day event with more than 150 participants.
III. Likelihood of Confusion
The question here is whether consumers were likely to
be confused by Wisconsin’s and Phoenix’s concurrent
14 No. 08-4164
use of the CONDOR marks. As the district court framed
it, “the only question is whether the identical marks used
in the general field of computing create a likelihood of
confusion for consumers . . . or whether the differences
in the computer products for which the software is sold,
in the trade channels, in the conditions under which
sales of products are made and other factors eliminate
the possibility of confusion . . . .” Bd. of Regents of the
Univ. of Wis. Sys., 2008 WL 4950016, at *1. The district
court found that the TTAB “erred when it considered the
actual nature of the parties’ goods and misapplied the
burden of proof to its determination of a likelihood of
confusion.” Id. Because it determined that the TTAB
opinion was erroneous, and Phoenix’s evidence before
the district court was relevant only to the analysis
adopted by the TTAB, the district court found for Wis-
consin.
We agree that the key issue in this case is the likelihood
of confusion between the products described by the
two marks. We are not considering whether the
products themselves perform the same functions, but
whether consumers, and specifically consumers who
would use either product, would be likely to attribute
them to a single source. AutoZone, 543 F.3d at 931.
“[D]issimilarity is not dispositive of the likelihood of
confusion inquiry. A likelihood of confusion may exist
even if the parties are not in direct competition or their
products and services are not identical. Rather, because
the rights of an owner of a registered trademark extend
to any goods that might be, in the minds of con-
sumers, ‘related,’ i.e., put out by a single producer, the
No. 08-4164 15
more accurate inquiry is whether the public is likely to
attribute the products to a single source.” CAE, 267 F.3d
at 679 (citations omitted). This, as we shall see, is a key
point of divergence between our analysis and that of
the district court.
There are a series of multiple-factor tests that are used
across the circuits to determine the likelihood of confu-
sion. We use this one:
1. Similarity between the marks in appearance
and suggestion.
2. Similarity of the products.
3. The area and manner of concurrent use.
4. The degree of care likely to be exercised by
consumers.
5. The strength of the plaintiff’s mark.
6. Whether actual confusion exists.
7. Whether the defendant intended to “palm off”
his product as that of the plaintiff.
See AutoZone, 543 F.3d at 929. The Federal Circuit uses
a different set of factors (referred to by the TTAB in its
opinion). See In re E. I. DuPont DeNemours & Co., 476
F.2d 1357, 1361 (C.C.P.A. 1973). They essentially cover
the same ground as our factors, and neither party
suggests that the differences between the factors affect
the outcome of the case. As noted above, likelihood of
confusion is a question of fact for the jury to determine.
AutoZone, 543 F.3d at 929. “The question of fact may be
resolved on summary judgment only if the evidence is
16 No. 08-4164
so one-sided that there can be no doubt about how the
question should be answered.” Id. (quotations omitted).
The district court overruled the TTAB in two key re-
spects. First, it found that the TTAB erred when it con-
sidered the “actual nature of the parties’ goods” rather
than the goods as they were described in their respec-
tive registrations. This error, the court found, combined
with the lack of evidence that the products were suf-
ficiently related to cause confusion, removed a key ratio-
nale that supported the TTAB’s decision. The district
court also found that the TTAB erred in placing the
burden on Wisconsin to prove that the parties’ goods
are distinct when it considered the way the products
were used or sold. The district court found that the
burden should have been placed on Phoenix, who sought
to cancel a presumptively valid registered mark, and
found that Phoenix did not present sufficient evidence
to meet this burden (because the district court rejected
all the TTAB’s findings on the products’ similarities as
irrelevant).
The district court’s analysis addressed several factors
outlined in our test, but focused mainly on the similarity
of the products and the area and manner of their use.
Wisconsin does not (and cannot) dispute that the marks
are identical and Phoenix has not been able to press
the argument that actual confusion existed between the
two marks—the TTAB found otherwise and evidence to
the contrary was excluded by the district court. Funda-
mentally, then, the district court’s rejection of the
TTAB’s decision rested on a disagreement with its
No. 08-4164 17
analysis of the products’ similarity and their manner of
use.
The district court examined the manner in which
both products were described in their registrations,
disregarded most evidence of their actual use, and
focused on whether a sophisticated consumer would be
likely to confuse the product described as “computer
software for on-line programming development, library
management and system utilities functioning on main-
frame systems” with a product described as “computer
network operating system software, downloadable from
a global computer network, that delivers large amounts
of computational power by utilizing idle computing
resources in a network of individual computer work-
stations.” It appears that the district court mistakenly
assumed that the similarity of the products’ functions
was the dispositive issue in the case; this misapprehen-
sion was magnified by the district court’s error in
confining its examination to the registration of the par-
ties’ products. Instead of a focus on the description of the
goods in the trademark registry, the proper analytical
framework, according to our cases, is “whether the par-
ties’ products are the kind the public might very well
attribute to a single source.” AutoZone, 543 F.3d at 931
(citations omitted); McGraw-Edison Co., 787 F.2d at 1169.
“The rights of an owner of a registered trademark
extend to any goods or services that, in the minds of
consumers, might be put out by a single producer. Thus,
a likelihood of confusion may exist even if the parties
are not in direct competition, or their products and
services are not identical.” AutoZone, 543 F.3d at 931
(quotation and citation omitted).
18 No. 08-4164
This is a proposition we have repeatedly laid out in the
many cases in which we’ve considered the likelihood
of confusion between goods described by similar or
identical marks. See id. at 931; CAE, 267 F.3d at 679; Eli
Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 463
(7th Cir. 2000); McGraw-Edison Co., 787 F.2d at 1169. It
was also recognized by the TTAB. “[I]t is not necessary
that the goods and/or services be similar or competitive,
or even that they move in the same channels of trade
to support a holding of likelihood of confusion.”
Phoenix Software Int’l, Cancellation No. 92042881, at 9
(citing Hilson Research Inc. v. Soc’y for Human Res. Mgmt., 27
U.S.P.Q. 2d 1423, 1432 (T.T.A.B. 1993)). “It is sufficient
that the respective goods and/or services are related in
some manner, and/or that the conditions and activities
surrounding the marketing of the goods and/or services
are such that they would or could be encountered by
the same persons under circumstances that could,
because of the similarities of the marks used therewith,
give rise to the mistaken belief that they originate from
or are in some way associated with the same producer.”
Hilson Research Inc., 27 U.S.P.Q. 2d at 1432.
Once we accept this proposition, we see that Wis-
consin’s focus on the descriptions in the registry, adopted
by the district court, is a bit of a red herring. Our cases
make clear that products don’t even have to perform
similar functions, much less be described identically, for
a likelihood of confusion to exist. In McGraw-Edison we
found that a likelihood of confusion could exist between
a mark for electrical fuses and the mark on Disney’s
merchandise for the movie Tron. McGraw-Edison Co., 787
No. 08-4164 19
F.2d at 1169. In CAE, we found that a likelihood of con-
fusion could exist between a mark registered by a
company that designed and manufactured sophisticated
measuring equipment and a mark registered by a
company that tested facilities for compliance with pol-
lution laws. CAE, 267 F.3d at 679. In AutoZone, we
found that a likelihood of confusion could exist
between an auto-parts retailer’s mark and the mark of a
oil change and carwash operator. AutoZone, 543 F.3d at
931. All of these cases featured products with a far
more tenuous similarity than that at issue here. We
note that in these cases, the products had identical
marks (with the exception of AutoZone, which featured
two marks with identical “zone” suffixes). It is possible
that we, as a circuit, have historically assigned too
much weight to the fact that marks are identical. Cf. M2
Software, Inc. v. M2 Commc’ns, Inc. 450 F.3d 1378, 1385
(Fed. Cir. 2006). But, perhaps that is because the issue
is fact-bound and identical marks often create triable
issues of fact regarding the various ways a product is
marketed. Regardless, neither party attacks our trade-
mark standard as inconsistent with the Lanham Act.
Furthermore, the identical nature of the marks weighed
heavily in the TTAB’s analysis. Phoenix Software Int’l,
Cancellation No. 92042881, at 19 (citing In re Shell Oil
Co., 992 F.2d 1204 (Fed. Cir. 1993)). The TTAB also cited
Amcor, Inc. v. Amcor Indus., Inc., 210 U.S.P.Q. 70, 78
(T.T.A.B. 1981), for the proposition that when con-
sidering identical marks, “the relationship between the
goods on which the parties use their marks need not be
as great or as close as in the situation where the marks
are not identical or strikingly similar.”
20 No. 08-4164
The approach adopted by the district court limiting
its consideration to the products as they are described
is too formalistic and ignores the requirement that the
products are to be examined as they appear to the con-
sumer. “[O]ur inquiry in comparing the two products
is not whether they are interchangeable, but whether
the parties’ products are the kind the public might very
well attribute to a single source.” Eli Lilly & Co., 233 F.3d
at 463 (emphasis added) (quotation omitted); see also
AutoZone, 543 F.3d at 931; McGraw-Edison, 787 F.2d at
1169 (“In finding the parties’ product lines to be
‘entirely unrelated’ the district court apparently ignored
the question of whether the purchasing public might
believe a single source could produce both [products].”).
Octocom Systems, Inc. v. Houston Computer Services, Inc.,
918 F.2d 937, 942 (Fed. Cir. 1990), the Federal Circuit case
that the district court relied on, is not to the contrary. In
that case, the registrant whose mark was challenged
tried to supplement the registration by showing that the
registrant really intended its mark to cover a narrow
class of goods, rather than the unlimited coverage that
the actual mark sought. The Federal Circuit found that
the subsequent attempt to limit the registration was
improper and the court was required to consider only the
goods as described in the registration. The court then
found that there was a likelihood of confusion between
the products because the registrant’s original applica-
tion “encompassed modems and computer programs” and
thus conflicted with the petitioner’s registration of a
similar mark for computer programs. Furthermore, “the
record supports no other factual findings but that
No. 08-4164 21
modems and computer programs are commonly used
together in networking, could come from a single
source, and be identified with the same mark. Thus,
[the attempted registrant’s] elimination of ‘computer
programs’ from its application leaving only ‘modems’
was pointless maneuvering.” Octocom Sys., 918 F.2d at 943.
The likelihood of confusion in Octocom stemmed not
from the fact that the registrations were identical, but
from the registrations’ coverage of similar products. In
fact, in Octocom, the Federal Circuit recognized that the
similarity of the products described in the registration
may be “expressly or inherently” reflected. Id. at 942.
The Federal Circuit noted that “[e]vidence that the
goods of the applicant and opposer, as identified in the
respective application and registration, are the types of
goods that would be expected to move in different
trade channels or be sold to different classes of pur-
chasers may be material and relevant.” Id. at 943. So, the
relevant question for us is whether a product that runs
on a mainframe and a product that runs on a network
of computers are the types of goods that are similar
enough to be attributed to a single source by consumers
likely to use one of those products. While we must con-
sider the marks as they are described, it would be a
mistake to bar any evidence of their actual use as irrele-
vant. After all, one of the factors in the test is the “area
and manner of concurrent use.” See AutoZone, 543 F.3d
at 929. And, as noted, the actual use of the product is
relevant to explain the meaning of the terms used in the
registration. See Octocom Sys., 918 F.2d at 943; see also
CAE, 267 F.3d at 681-82; Forum Corp. of N. Am. v. Forum,
22 No. 08-4164
Ltd., 903 F.2d 434, 442 (7th Cir. 1990). Indeed, the
TTAB explicitly declared that it was considering the
nature of the parties’ goods “[t]o the extent that these
facts provide some information about the market and
purchasers of these goods.” Phoenix Software Int’l, Can-
cellation No. 92042881, at 9.
Rejecting the district court’s approach, however, does
not dispose of the case. “Because confusion is a factual
matter, the plaintiff must produce proof; a theory about
how consumers might be confused will not do, unless
evidence supports the theory.” Reed-Union Corp., 77 F.3d
at 912. Even as we consider the products’ actual uses
to determine the meaning of the marks’ registrations,
or more specifically to determine whether there is a
possibility of confusion between the two products as
described in their registrations, Wisconsin would still
prevail if there is no evidence to support the idea that a
supplier of software to a mainframe system (the manner
of use specified in Phoenix’s registration) can be con-
fused with a supplier of software to a network of indi-
vidual computer workstations (the manner of use
specified in Wisconsin’s registration).
The TTAB relied on three key factors in its order to
cancel Wisconsin’s registration. First, and most impor-
tantly, it relied on the fact that the marks are identical.
Wisconsin does not challenge this finding (and as noted,
this seems to be a compelling factor in our circuit).
Second, the TTAB found that the parties’ software per-
forms similar functions, which precluded a finding that
they were used in unrelated fields. Third, it found that
No. 08-4164 23
“sophisticated purchasers would likely believe that there
is some relationship or association between the sources
of the goods under these circumstances.” Phoenix Software
Int’l, Cancellation No. 92042881, at 19. Ultimately, the
TTAB concluded that sophisticated purchasers would
associate the two products. Mapping the TTAB’s findings
onto our factors, we see that the TTAB’s finding of a
likelihood of confusion was based on the identical
nature of the marks, the manner in which both parties’
products are used, and the similarity of the products.
The district court dismissed these findings on the
basis that all analysis of the products should have
been confined to the terms in the registries. As we’ve
explained, this was an error. Moreover, because the
TTAB was using the correct factor-based balancing test,
the district court was incorrect to dismiss the TTAB’s
findings on the area and manner of use factor by
declaring that the TTAB had misallocated the burden of
proof. Because the TTAB found that the similarity of
the marks and products weighed in Phoenix’s favor, the
area and manner of use tipped the balance in favor of
Phoenix. The TTAB noted specifically in its holding that
“a presumption of validity attaches to a service mark
registration, and the party seeking cancellation must
rebut this presumption by a preponderance of evidence.”
Id. at 18. “We hold that petitioner has met its burden.”
Id. at 19.
Once we reinstate the TTAB’s findings, we see that
Phoenix has offered sufficient evidence to survive sum-
mary judgment on the issue of confusion. The TTAB
24 No. 08-4164
credited Phoenix’s evidence that its mainframe soft-
ware can operate unaltered on a network of workstations.
The TTAB found that both programs perform similar
functions to the extent that Phoenix’s representative
was himself confused by Wisconsin’s public description
of its product; he thought it was Phoenix’s own. The
TTAB further found that, as conceded by Wisconsin’s
witness, there was “some incentive” to operate in both
the mainframe and network environments. The TTAB
also found that both products were delivered in the
same manner, and that the same customers are likely
to encounter both products, particularly since Wis-
consin indicated that it had been and would be
expanding its marketing efforts. For the TTAB, these
findings justified the cancellation of Wisconsin’s mark.
Wisconsin does offer new evidence to rebut these
findings and argues that the facts should be interpreted
differently. Most significantly, Wisconsin argues that the
sophistication of consumers cuts in the state’s favor. We
note that this factor was considered at length by the
TTAB, who found in Phoenix’s favor. But as we dis-
cussed above, the question is not whether purchasers of
Phoenix’s Condor product would accidentally buy Wis-
consin’s product but whether those consumers would
likely attribute them to a single source. In re Total Quality
Group Inc., 51 U.S.P.Q. 2d 1474, 1477 (T.T.A.B. 1999)
(“[E]ven careful purchasers are not immune from source
confusion. We find this to be especially the case here
where the marks are substantially identical and the
goods are related.”). Much of the evidence Wisconsin
offers is designed to show that mainframe purchasers
No. 08-4164 25
take care when choosing to purchase a product; this is
relevant to, but not dispositive of the likelihood of con-
fusion issue. 4 McCarthy on Trademarks and Unfair
Competition § 23:103 (“When there is a strong likelihood
of confusion created by other factors, even a high level
of care exercised by a professional buyer may not be
sufficient to tip the scales in the direction of no confu-
sion.”)
The TTAB credited Phoenix’s sole shareholder, who
testified that he was confused by Wisconsin’s descrip-
tion of its product; we are bound to give this finding
deference. This is a key piece of evidence supporting
the finding. The TTAB’s consideration of other factors,
namely the fact that the marks are identical and that the
products are similar (as determined by the TTAB) both
reinforced the TTAB’s judgment. There was also
evidence admitted at the district court that the lines
between mainframe operations and network systems
are disappearing and that Wisconsin was broadening
the scope of its operations. Wisconsin’s evidence of so-
phistication, much of it considered by the TTAB, is not
so compelling that we believe no issue of fact exists.
Wisconsin runs through the other factors, focusing
mainly on the DuPont analysis, and makes good points.
There was no actual confusion; the “downloadability”
of both programs is not dispositive of whether the prod-
ucts were sold in similar trade channels; Phoenix may
not have been diligent about protecting its mark; and
any confusion is likely to be quickly rectified. Considering
this evidence is appropriate, but none of this evidence
26 No. 08-4164
is sufficient to render the facts found by the TTAB im-
material and compel summary judgment. Weighing all
of the parties’ evidence is a task for a finder of fact and
we are required to defer to the TTAB’s determination
on the issues it considered. Accordingly, we must
reverse the district court and remand for a trial on the
likelihood of confusion issue.
IV. Phoenix’s Counterclaims
Phoenix also asks us to reinstate the counterclaims it
brought under 15 U.S.C. §§ 1114 and 1125 for infringe-
ment and false designation of origin; both sections an-
nounce Congress’s intent to make states liable in a
civil action to anyone damaged by the state’s acts. But,
Phoenix’s counterclaims were dismissed on sovereign
immunity grounds. We review the district court’s grant
of a motion to dismiss de novo. Thompson v. Ill. Dep’t
of Prof’l Regulation, 300 F.3d 750, 753 (7th Cir. 2002).
The Eleventh Amendment bars suits against states
and restores “the sovereign immunity that the States
possessed before entering the Union.” Coll. Sav. Bank
v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S.
666, 669 (1999). There are two relevant exceptions to the
sovereign immunity guarantee. See id. at 670. The first
occurs when Congress acts pursuant to the Fourteenth
Amendment to regulate state behavior. Id. (citing
Fitzpatrick v. Bitzer, 427 U.S. 445 (1976)). The second
occurs when a state waives its sovereign immunity
by consenting to suit. Id. (citing Clark v. Barnard, 108
No. 08-4164 27
U.S. 436 (1883)). Phoenix argues that its counterclaims
should be reinstated under either theory.
A. Was the Trademark Remedy Clarification Act a
valid exercise of Congress’s Fourteenth Amendment
power?
The Trademark Remedy Clarification Act (TRCA), Pub.
L. 102-542, 106 Stat. 3567, established state liability for
trademark violations. A portion of the TRCA has
already been deemed unconstitutional by the Supreme
Court. Coll. Sav. Bank, 527 U.S. at 691. This portion pro-
vided for state liability for false advertising, which is
one form a 15 U.S.C. § 1125(a) claim can take; the false
designation of origin claim at issue here is another.
We’ll assume for purposes of our discussion that the
claim we are considering is different from the provision
at issue in College Savings Bank; in any event, the
Supreme Court has not spoken clearly on the other coun-
terclaim: trademark infringement under 15 U.S.C. § 1114.
The TRCA’s sister statute, the Patent and Plant Variety
Protection Remedy Clarification Act (Patent Remedy
Act), established state liability for patent infringement
and was similarly found unconstitutional. See Fla. Prepaid
Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527
U.S. 627, 647-48 (1999). Phoenix’s argument that it
should be able to pursue a trademark infringement
remedy against Wisconsin depends largely on its ability
to convince us that its claims are different from patent
enforcement and false advertising claims. The Supreme
Court found that states were protected by the Eleventh
28 No. 08-4164
Amendment against claims for money damages under
either of those causes of action. Id.; Coll. Sav. Bank, 527
U.S. at 691.
To preserve its claims against Wisconsin, Phoenix needs
to show that Congress expressly intended to abrogate
state sovereign immunity, that it did so under Section 5
of the Fourteenth Amendment, that the trademark in
question was a property interest cognizable under the
Fourteenth Amendment, and that the abrogation of
state immunity was an appropriate exercise of Congress’s
Section 5 power. See Fla. Prepaid, 527 U.S. at 635. It is
undisputed that Phoenix can clear the first two hurdles
(Congress expressly intended to abrogate state sovereign
immunity and it acted under Section 5). Wisconsin con-
tends that the Fourteenth Amendment does not protect
trademarks, but Supreme Court dictum indicates the
opposite. “The Lanham Act may well contain provisions
that protect constitutionally cognizable property inter-
ests—notably, its provisions dealing with infringement
of trademarks, which are the ‘property’ of the owner
because he can exclude others from using them.” Coll.
Sav. Bank, 527 U.S. at 673. Wisconsin gives us no reason
to doubt that this would be the Court’s current position.
So the question is whether the TRCA is an “appro-
priate” law as the term is used in Section 5 of the Four-
teenth Amendment. (“The Congress shall have power
to enforce, by appropriate legislation, the provisions of
this article.”). In City of Boerne v. Flores, 521 U.S. 507,
519 (1997), the Supreme Court held that Congress’s
Section 5 power is inherently limited to remedial and
No. 08-4164 29
preventive laws. When legislating under Section 5, Con-
gress must achieve “a congruence between the means
used and the ends to be achieved.” Id. at 530. Further-
more, the law must be a proportional response to the
problem Congress seeks to solve through legislation. Id.
at 532; see also Fla. Prepaid, 527 U.S. at 639 (discussing
Boerne). Thus, for Congress to invoke Section 5, it must
identify conduct transgressing the Fourteenth Amend-
ment’s substantive provisions, and must tailor its legisla-
tive scheme to remedying or preventing such conduct.
As we’ve noted, the Supreme Court found that the
Patent Remedy Act, which is to patents what the TRCA
is to trademarks, was not a proportional or congruent
exercise of Congress’s Section 5 powers. That act was
designed to remedy patent infringement by a state, just
as the TRCA is designed to remedy trademark infringe-
ment, by providing for money damages against a state.
In Florida Prepaid, the Supreme Court found that
Congress identified little evidence of pervasive state
infringement of patents. Instead, the harm Congress
identified was speculative. Id. at 641. College Savings’
alternative argument, joined by the United States, was
that when a state infringes a patent without paying a
fee, the state has denied the patent-holder of a property
interest without due process of law. But, the Supreme
Court rejected this argument because Congress “barely
considered the availability of state remedies for patent
infringement” and thus did not sufficiently consider
whether existing state remedies might already provide
constitutionally sufficient due process for patent infringe-
ment. Id. at 643. The Court also noted that states are not
30 No. 08-4164
liable for constitutional violations when they negligently
cause injuries and that Congress made no distinc-
tion between negligent infringement (which would not
be a proper subject of Congress’s Section 5 power) and
reckless and intentional infringement which would
trigger the Fourteenth Amendment’s protection. Id. at
645. For all these reasons, the Court found that the
Patent Remedy Act did not abrogate a state’s Eleventh
Amendment immunity.
Wisconsin argues, and the district court found, that
the same reasons support a decision to preserve state
immunity against damages under the TRCA. We agree
that the TRCA is not materially different from the
Patent Remedy Act found unconstitutional in Florida
Prepaid. Both acts, for instance, share the same Senate
Report (S. Rep. No. 102-280) which identifies only one
case of state trademark infringement where the state was
protected from federal suit, and suffers from all the
infirmities identified by the Supreme Court in Florida
Prepaid, 527 U.S. at 643-45 (rejecting the idea that the
legislative history of the Patent Remedy Act satisfies
requirements for Congress’s action under Section 5 of
the Fourteenth Amendment).
As for whether trademarks are different than patents,
Phoenix argues that trademarks are of permanent dura-
tion and that the creation of trademarks protects the
public from confusion and thus they must be analyzed
under a separate rubric than patents. We agree that
the two rights are different, but the Supreme Court in
Florida Prepaid treated patents as a serious property
No. 08-4164 31
right and its holding in that case did not turn on the
nature of the property right, but on the insufficiently
narrow tailoring of Congress’s remedy to the harms it
sought to remedy and the insufficient findings that a
national remedy was necessary. Given the similarity
between the laws here, we are compelled to find that
Florida Prepaid controls the outcome of this issue. Unless
Wisconsin waived its immunity from suit, it is pro-
tected from Phoenix’s counterclaims.
B. Did Wisconsin waive its immunity from suit?
One problem Congress identified when enacting the
TRCA (and its sister patent statute) was the uneven
playing field created by a trademark regime without
remedies against states. In the patent context, it ex-
plained: “A public school such as UCLA can sue a
private school for patent infringement, yet USC cannot
sue UCLA for the same act. The status of an infringing
party should have no relation to the amount of invest-
ment made in a product. State universities should
not have an unjustified advantage in the commercial
arena over private universities for funding because of
the potential for immunity from patent infringement
actions.” S. Rep. No. 102-280, at 9 (1992) reprinted in 1992
U.S.C.C.A.N. 3568, 3094. The level-playing-field issue
is particularly pertinent in the context of scientific
research and patents, but this case exemplifies that
similar concerns arise in the trademark arena.
Phoenix contends that we can fix this problem by
finding that Wisconsin waived its sovereign immunity
32 No. 08-4164
by choosing to participate in the federally regulated
trademark process. After all, Wisconsin could have
chosen to use the CONDOR mark without registering
it, and without concern for damages because of its sover-
eign immunity guarantee. Wisconsin, however, chose to
register the mark, and actively participated in the
system by which it gained benefits (i.e., clearing the
field of other CONDOR marks). Wisconsin’s gain of
benefits from its participation in the system should,
Phoenix argues, subject it to responsibilities arising from
its participation—namely a suit for damages if it
infringes on other marks in the system.
Unfortunately for Phoenix, the Supreme Court rejected
a similar argument in the TRCA case, College Savings
Bank, where it found that a state’s decision to engage “in
the interstate marketing and administration of its pro-
gram,” 527 U.S. at 671, is not a constructive waiver of
immunity, id. at 687.
Wisconsin is in a bit of a different situation than was
the state of Florida: it formally registered its mark with
the PTO. It entered the federal trademark system not by
simply possessing a trademark that it marketed in com-
merce, as Florida did, but by actively availing itself of
the benefits of federal trademark registration. But
College Savings Bank sweeps more broadly than merely
rejecting a “market-entry” waiver of sovereign immu-
nity. College Savings Bank rejected the entire notion of
a constructive waiver of sovereign immunity, id. at 680,
and limited the inquiry of waiver to whether “the State
made an altogether voluntary decision to waive its im-
No. 08-4164 33
munity,” id. at 681 (quotation omitted). A law that
merely alerts the state to the federal government’s inten-
tion to abrogate the state’s immunity is insufficient to
create a waiver if the state is engaging in otherwise
lawful activity. Id. at 687. The state’s choice to register
its mark was otherwise lawful activity, and Phoenix
does not and cannot suggest that the receipt of trade-
mark registration is specifically conditioned on a waiver
of immunity. In fact, Phoenix’s counterclaims do not
depend at all on whether Wisconsin registered its
mark; the statutory infringement and false designation
of origin claims are ordinarily available against any
actor who infringes a registered mark.
After College Savings Bank, the doctrine of constructive
waiver is no longer available. Wisconsin is entitled to
assert its immunity from suit notwithstanding its volun-
tary participation in the federal trademark registration
system.
But Wisconsin’s participation in the trademark system
is not the only conduct that Phoenix identifies as trig-
gering a waiver of Wisconsin’s Eleventh Amendment
privileges. Phoenix also argues that Wisconsin waived
its sovereign immunity the moment it invoked the juris-
diction of the district court pursuant to 15 U.S.C. § 1071(b).
Phoenix cites Lapides v. Board of Regents of the University
System of Georgia, 535 U.S. 613, 619 (2002), in support of
this proposition. There, the state of Georgia was subject
to state law claims against it in state court. It removed
the case to federal court, and then argued that the
Eleventh Amendment barred the federal court from
34 No. 08-4164
hearing the state law claims against it. In rejecting Geor-
gia’s immunity argument, the Supreme Court “focus[ed]
on the litigation act” Georgia performed and concluded
that removal was an insufficiently “special” act, Lapides,
535 U.S. at 620, to warrant departure from the long-
standing general principle that “where a State volun-
tarily becomes a party to a cause and submits its rights
for judicial determination, it will be bound thereby and
cannot escape the result of its own voluntary act by
invoking the prohibitions of the Eleventh Amendment.”
Id. at 619 (quoting Gunter v. Atl. Coast Line R.R., 200
U.S. 273, 284 (1906)). It also necessarily implied that by
removing the case to federal court, Georgia affirma-
tively changed the character of its participation in the
litigation, for the Supreme Court recognized that Georgia
had been “brought involuntarily into the case as a defen-
dant in the original state court proceedings.” Id. at 620.
Phoenix contends that Wisconsin’s litigation status
was similarly changed—and its sovereign immunity
similarly waived—when it made the decision to file an
action in district court pursuant to 15 U.S.C. § 1071(b)
rather than appealing the TTAB’s decision to the
Federal Circuit pursuant to § 1071(a). In choosing to
proceed under § 1071(b) rather than § 1071(a), Phoenix
asserts, Wisconsin gained the benefit of additional evi-
dence and so should face the cost of Phoenix’s infringe-
ment and false designation of origin counterclaims.
But the simple cost-benefit analysis Phoenix proposes
overlooks the true nature of the proceedings here. Wis-
consin, like Georgia in Lapides, was originally haled into
No. 08-4164 35
litigation with Phoenix involuntarily. Its status was that
of a defendant. See 37 C.F.R. § 2.116(b). Wisconsin’s elec-
tion to pursue an appeal in the district court rather than
the appellate court—which it, like private parties to
cancellation proceedings, was statutorily entitled to
do—gave it the official title of plaintiff, but title is not
what matters for sovereign immunity purposes. If the
character of the litigation act turned on title, Georgia
would have been able to assert its sovereign immunity
claims in Lapides.
The technically voluntary nature of Wisconsin’s appeal
is not determinative either. Our dissenting colleague
makes a thoughtful presentation on this front, but the
mere fact that Wisconsin exercised its option to chal-
lenge an adverse decision against it does not necessarily
result in a waiver of its sovereign immunity. Indeed, our
colleague concedes that Wisconsin could have appealed
in the Federal Circuit—another federal forum reached
wholly voluntarily—and still retained its ability to
mount a sovereign immunity defense to the very claims
Phoenix brings here. See Dissent at 58.
What is crucial is the nature of Wisconsin’s litigation
act. Unlike Georgia’s removal in Lapides, Wisconsin’s
pursuit of judicial review in the wake of the adverse
agency decision it did not initiate is “special.” Despite
its formal characterization as a standalone civil action,
see 15 U.S.C. § 1071(b); 37 C.F.R. § 2.145, at its heart Wis-
consin’s pursuit of redress in the district court is
simply a continuation of Phoenix’s original cancellation
action. Cf. Vas-Cath, Inc. v. Curators of the Univ. of Mo., 473
36 No. 08-4164
F.3d 1376, 1382 (Fed. Cir. 2007) (stating that an appeal
brought in the district court pursuant to 35 U.S.C. § 146,
which is roughly analogous to 15 U.S.C. § 1071(b), “is not
a new claim, but an authorized phase of the interference
proceeding that is conducted by the PTO and is subject
to judicial review”). “[T]he mere seeking of judicial
review of an agency decision . . . by a state that was a
defendant before the agency [is] insufficient alone to
infer a waiver of immunity,” Taylor v. U.S. Dep’t of
Labor, 440 F.3d 1, 5 (1st Cir. 2004) (quotation omitted),
and Phoenix has not identified for our consideration
any other relevant affirmative litigation acts undertaken
by Wisconsin.
We are mindful of the concerns about unfair litiga-
tion gameplay that animated the Court’s holding in
Lapides, 535 U.S. at 620-22; we recognize that while
the Eleventh Amendment gives states an upper hand,
it cannot be massaged to create unfair litigation advan-
tages. Attempts to assert sovereign immunity under
circumstances that create “inconsistency, anomaly, and
unfairness” in the litigation context, id. at 620, implicate
those concerns and cannot be permitted to go forward.
But there is no indication that Wisconsin used—
or even could use, for the potential exploitation of the
sovereign immunity privilege is an imperative consider-
ation as well, see Lapides, 535 U.S. at 621—its district court
action as an opportunity to gain any sort of unfair or
inconsistent litigation advantage over Phoenix here. See
Taylor, 440 F.3d at 8 (“The Lapides-[New Hampshire v.]
Ramsey[, 366 F.3d 1 (1st Cir. 2004)] line of cases does
not prevent a litigant from obtaining any sort of
No. 08-4164 37
advantage relating to immunity in pursuing his case.
They only condemn those litigation advantages that are
‘inconsistent’ or ‘unfair.’ ” (quoting Lapides, 535 U.S. at
622)). To the contrary, Wisconsin did not employ the
hybrid appellate vehicle to raise any new claims; it
simply appealed the adverse TTAB ruling. Had it
brought new claims against Phoenix, the nature of its
litigation act, and the outcome of our analysis, would
plainly be different; the assertion of previously unlitigated
claims in a federal forum is undoubtedly “a form of
voluntary invocation of a federal court’s jurisdiction
sufficient to waive the State’s otherwise valid objection
to litigation of a matter . . . in a federal forum.” Lapides,
535 U.S. at 624.
Wisconsin made a choice to proceed in the district
court, and there were undeniably some litigation advan-
tages to be had as a result of that decision. But these
advantages are equally available to all participants in
trademark cancellation proceedings; they simply cannot
be considered “unfair” or “inconsistent.” It would be
both unfair and unrealistic to require states to passively
accept—or even pre-empt, see Dissent at 61—adverse
TTAB decisions so as to keep their sovereign im-
munity privilege intact. It was at Phoenix’s behest that
Wisconsin was “brought involuntarily into the case as
a defendant,” Lapides, 535 U.S. at 620, and Wisconsin’s
election to proceed in district court rather than before
the Federal Circuit does nothing to fundamentally alter
the nature of the proceedings or its participation in them.
Wisconsin’s assertion of sovereign immunity in re-
sponse to claims distinct from those raised in the
38 No. 08-4164
original administrative action does not implicate the
fairness concerns identifed by the Supreme Court. Wis-
consin immediately and unfalteringly asserted a
sovereign immunity defense when the federal counter-
claims were filed. Contra Johnson v. Rancho Santiago Cmty.
Coll. Dist., 623 F.3d 1011, 1021-22 (9th Cir. 2010). It was
generally entitled to defend against Phoenix’s claims
in such a manner, see Dissent at 58, and did not use any
litigation sleight of hand to invoke the Eleventh Amend-
ment, see, e.g., Lapides, 535 U.S. at 621; Ind. Prot. &
Advocacy Servs. v. Ind. Family & Soc. Servs. Admin., 603
F.3d 365, 373 (7th Cir. 2010) (en banc), petition for cert.
filed, 79 U.S.L.W. 3063 (July 21, 2010) (No. 10-131); New
Hampshire v. Ramsey, 366 F.3d 1, 16-17 (1st Cir. 2004).
We therefore conclude that Wisconsin has not through
its appeal from the TTAB’s decision waived its sovereign
immunity defense to Phoenix’s counterclaims.
V. Conclusion
The district court misapplied the likelihood of confu-
sion test and improperly rejected the TTAB’s factual
findings. For that reason, Phoenix is entitled to a trial on
the likelihood of confusion issue. However, Wisconsin is
protected by the Eleventh Amendment from Phoenix’s
counterclaims. Accordingly, we reverse the district
court’s decision only with respect to its grant of sum-
mary judgment to Wisconsin on the likelihood of confu-
sion issue and remand for a trial on that issue only.
No. 08-4164 39
W OOD , Circuit Judge, dissenting in part. Behind the
details of the trademark dispute between appellant Phoe-
nix International Software (“Phoenix”) and the University
of Wisconsin (“Wisconsin”) is a difficult question of
constitutional law: are Phoenix’s compulsory counter-
claims against Wisconsin barred by the sovereign im-
munity doctrine that the Supreme Court has found re-
flected in the Eleventh Amendment to the U.S. Constitu-
tion? My colleagues conclude that the answer to that
question is yes, based primarily on their understanding
of the decisions in Florida Prepaid Postsecondary Educa-
tion Expense Board v. College Savings Bank, 527 U.S. 627
(1999) (“Florida Prepaid”), and City of Boerne v. Flores, 521
U.S. 507 (1997). With respect, I do not agree with them.
I am willing to assume for the sake of argument that
Wisconsin would have been entitled to assert sovereign
immunity if Phoenix had sued it directly in federal
court, although even that proposition is contestable
given more recent developments in the law of sovereign
immunity. But that is not how this case arose. Instead, it
was Wisconsin that chose unrestricted litigation in the
federal forum, when it decided to challenge the decision
of the Trademark Trial and Appeal Board (“TTAB”) in
the federal district court instead of taking an appeal to
the Federal Circuit. See 15 U.S.C. § 1071(b) (providing
that a party “dissatisfied with the decision of the
[TTAB]” may “have remedy by a civil action”). Having
elected the district court, which was not limited to the
record created in the administrative proceeding, it has
effectively waived its sovereign immunity for all mat-
ters that might arise in that particular case, including
40 No. 08-4164
counterclaims that arise out of the same transaction or
occurrence. See Lapides v. Board of Regents of the University
System of Georgia, 535 U.S. 613 (2002). Thus, while
I agree with the majority that the case must be
remanded for a trial on the question whether there is a
likelihood of confusion between Phoenix’s CONDOR
mark and Wisconsin’s CONDOR mark, I would also
reinstate Phoenix’s counterclaims for damages based on
trademark infringement and false designation of origin.
I
Phoenix’s right to pursue its counterclaims turns on
whether Wisconsin waived its sovereign immunity when
it decided to pursue a challenge to the decision of the
TTAB in federal district court, rather than to take ad-
vantage of an appeal to the Federal Circuit. Ante, at 31-
38. The majority concludes that we should not find
waiver, but I do not agree with them. Even if the district
court were the only forum available to the state—which
it was not, as I explain later—nothing requires anyone
to pursue an appeal from an administrative agency’s
ruling. To the contrary, sometimes Congress provides
that no appeal is possible, and courts have regularly
upheld such jurisdiction-stripping provisions. See, e.g.,
Kucana v. Holder, 130 S. Ct. 827, 831 (2010) (reaffirming
that the jurisdiction-stripping provision in 8 U.S.C.
§ 1252(a)(2)(b) prevents review of removal decisions of
the Attorney General in the immigration area when
those decisions are made discretionary by statute);
No. 08-4164 41
Czerkies v. U.S. Dep’t of Labor, 73 F.3d 1435, 1437-39 (1996)
(en banc) (recognizing that a federal court may not
review a challenge to a benefits determination of the
Office of Workers’ Compensation Programs in the De-
partment of Labor); Marozsan v. United States, 852 F.2d
1469, 1473 n.10 (7th Cir. 1988) (en banc) (discussing
how veterans may not obtain federal-court review of an
individual claims determination by the Veterans Ad-
ministration). Wisconsin’s choice here to contest the
decision of the TTAB by filing an action in the federal
district court is thus litigation conduct that is incon-
sistent with an assertion of sovereign immunity. This
is especially the case because Wisconsin wants to enjoy
the litigation advantages of the federal forum, in which
it is seeking judicial action to overturn the TTAB’s deci-
sion, while at the same time it is maneuvering to
block Phoenix’s effort to litigate claims in that court that
arise out of the same transaction. (The majority suggests
otherwise, see ante, at 36-37, but there is nothing in the
record to support its assumption that Wisconsin has
decided to forego the extra litigation advantages offered
in the federal district court.) The waiver doctrines that
the Supreme Court has endorsed do not permit this kind
of selective litigation strategy, particularly given the
fact that the trademark laws offered Wisconsin a
different option—appeal to the Federal Circuit—that
would have allowed it to challenge the agency’s action
based on the record created before the agency in a way
that did not permit counterclaims.
42 No. 08-4164
A
The Supreme Court has interpreted the Eleventh
Amendment to guarantee that “an unconsenting State
is immune from suits brought in federal courts by her
own citizens as well as by citizens of another State.”
Edelman v. Jordan, 415 U.S. 651, 662-63 (1974). The Court has
long recognized, however, that a state waives its sovereign
immunity when it consents to suit. E.g., Clark v. Barnard,
108 U.S. 436 (1883). “Generally, we will find a waiver
either if the State voluntarily invokes our jurisdiction, or
else if the State makes a clear declaration that it intends
to submit itself to our jurisdiction.” College Savings Bank
v. Florida Prepaid Postsecondary Education Expense Board,
527 U.S. 666, 675-76 (1999) (“College Savings”) (internal
quotation marks and citations omitted). The state’s
waiver must be “unequivocal [and] specifically ap-
plicable to federal-court jurisdiction.” Atascadero State
Hosp. v. Scanlon, 473 U.S. 234, 241 (1985).
For more than a century, the Supreme Court has recog-
nized that a state may voluntarily waive its immunity
through conduct during litigation. In 1883, it held that
when a state makes a “voluntary appearance” in federal
court as an intervenor, that participation amounts to a
wavier of the state’s sovereign immunity. Clark, 108 U.S. at
447. To the same effect, it held in Gunter v. Atlantic Coast
Line R.R. Co., 200 U.S. 273, 284 (1906), that “where a state
voluntarily become a party to a cause, and submits
its rights for judicial determination, it will be bound
thereby, and cannot escape the result of its own
voluntary act by invoking the prohibitions of the 11th
Amendment.” Later, it wrote in Gardner v. New Jersey
No. 08-4164 43
that, in the context of a bankruptcy dispute, a state that
voluntarily files in federal court “waives any immunity . . .
respecting the adjudication of the claim.” 329 U.S. 565,
574 (1947). Most recently, the Court confirmed in
Lapides that its recognition of this principle remains
unqualified: “The Court has long accepted this state-
ment of the law as valid, often citing with approval
the cases embodying that principle.” 535 U.S. at 619
(citing College Savings, 527 U.S. at 681 n.3; Employees
Dep’t of Pub. Health and Welfare of Mo. v. Department of
Pub. Health and Welfare of Mo., 411 U.S. 279, 294 & n.10
(1973) (Marshall, J., concurring); Petty v. Tennessee-Missouri
Bridge Comm’n, 359 U.S. 275, 276 (1959)).
Lapides confirms that the Court did not eliminate
the notion of waiver by conduct in litigation when it
issued its opinion in Ford Motor Co. v. Department of Trea-
sury of Indiana, 323 U.S. 459 (1945). Ford held that a
state could assert its sovereign immunity for the first
time in the Supreme Court, despite the state attorney
general’s defense on the merits in the lower courts. Id.
at 467-69. For a time, it seemed that Ford was in tension
with the view that voluntary invocation of federal juris-
diction waives any immunity defense. But the Court’s
decision in Wisconsin Department of Corrections v.
Schacht, 524 U.S. 381 (1998), showed that this was not the
case. There, the Court wrote that “[t]he Eleventh Amend-
ment . . . does not automatically destroy original juris-
diction. Rather, the Eleventh Amendment grants the
State a legal power to assert a sovereign immunity
defense should it choose to do so. The State can waive
the defense. . . . Nor need a court raise the defect on its
own. Unless the State raises the matter, a court can
44 No. 08-4164
ignore it.” Id. at 389 (citations omitted). The year after
Schacht was decided, the Court reaffirmed “the unre-
markable proposition that a State waives its sovereign
immunity by voluntarily invoking the jurisdiction of
the federal courts.” College Savings, 527 U.S. at 681 n.3.
The question on which the Court granted review
in Lapides was “whether a state waive[s] its Eleventh
Amendment immunity by its affirmative litigation
conduct when it removes a case to federal court . . . .” 535
U.S. at 617 (internal quotation marks omitted). Lapides,
a professor employed by the Georgia state university
system, had sued the Board of Regents in state court,
in both their personal and official capacities. He asserted
that they had violated both state law and his federal
constitutional rights by placing allegations of sexual
harassment in his personnel file. The state defendants
removed the case to federal court, where they promptly
sought dismissal of the official-action claims on state
sovereign immunity grounds. Although the Court found
it necessary to limit the strict reach of its ruling to state-
law claims (noting that a state is not a “person” for pur-
poses of 42 U.S.C. § 1983 and thus that the federal
claims could not be sustained on that ground alone), its
discussion of waiver by litigation conduct was a
general one. The Court concluded that it would adhere
to the rule in Gunter, quoted above, and stressed that
a state cannot use the Eleventh Amendment as a get-out-
of-court-free card when it voluntarily submits to a
federal tribunal for a judicial determination of its rights.
Id. at 619 (quoting Gunter, 200 U.S. at 284). It offered a
number of reasons for its endorsement of waiver by
litigation conduct:
No. 08-4164 45
[A]n interpretation of the Eleventh Amendment
that finds waiver in the litigation context rests
upon the Amendment’s presumed recognition of
the judicial need to avoid inconsistency, anomaly,
and unfairness, and not upon a State’s actual
preference or desire, which might, after all, favor
selective use of “immunity” to achieve litigation
advantages. . . . The relevant “clarity” here must
focus on the litigation act the State takes that
creates the waiver. And that act—removal—is
clear.
Id. at 620. Central to the holding in Ford, the Court said,
was the fact that it “involved a State that a private
plaintiff had involuntarily made a defendant in federal
court.” Id. at 622. Concluding “that Clark, Gunter, and
Gardner represent the sounder line of authority,” the
Court “[found] Ford inconsistent with the basic rationale
of that line of cases” and “overrule[d] Ford insofar as
it would otherwise apply.” Id. at 623.
As I see it, the Court could not have expressed itself
more plainly. Ford has been limited to its facts; states
can waive their sovereign immunity by voluntary
conduct in particular cases; and the potential sovereign
immunity of a state does not implicate the federal
court’s subject-matter jurisdiction. The only question
remaining is how to apply these broad principles to
the case before us.
46 No. 08-4164
B
It is important, in considering that problem, to be
precise about what aspect of Wisconsin’s conduct we
are talking about. One possibility is Wisconsin’s decision
to participate in the federal trademark system at all.
The majority holds that this is not enough to support a
conclusion of waiver, ante, at 31-33, and I agree with
them. College Savings, which rejected the same argument
in the patent context, rules out any possibility that Wis-
consin constructively waived its immunity by reg-
istering its trademark. See 527 U.S. at 680-84. Neverthe-
less, the Court took care in Lapides to recall that “College
Savings Bank distinguished the kind of constructive
waivers repudiated there from waivers effected by litiga-
tion conduct.” Lapides, 535 U.S. at 620.
Here, Wisconsin engaged in litigation conduct that
must be evaluated. My colleagues believe that Wis-
consin’s actions in court were not enough to support a
finding of waiver. They begin by comparing Wisconsin’s
conduct to that at issue in Lapides, highlighting the fact
that in Lapides the state of Georgia was sued initially in a
Georgia court under a state law that explicitly waived
Georgia’s immunity to damages in state court. Id. at 617.
After that suit was filed, Georgia removed the action
to federal court and asserted its sovereign immunity
from suit. According to my colleagues, it was the use of
the removal power in this context that demonstrated
that Georgia had voluntarily invoked federal jurisdic-
tion and waived its sovereign immunity. Ante, at 33-35.
No. 08-4164 47
The majority does not say whether it reads Lapides as
limited to cases in which a state removes a particular
type of state-law claim to federal court, but it suggests
that litigation acts comparable in “nature” to removal
may fall within the general rule of Lapides. See ante, at 35.
Before moving forward, however, it is important to
consider how broadly the Supreme Court’s decision in
Lapides ought to apply. In addition to a state-law claim
based on a statute that waived Georgia’s immunity in
state court, the plaintiff in Lapides asserted a claim
against Georgia under § 1983; the latter claim could not
go forward against the state because a state is not a
“person” for purposes of § 1983. Lapides, 535 U.S. at 617
(citing Will v. Michigan Dep’t of State Police, 491 U.S. 58,
66 (1989)). Accordingly, the Court was careful to say
that its conclusion that the state’s act of removing the
case to federal court led to a waiver of its sovereign
immunity was reached in “the context of state-law
claims, in respect to which the State has explicitly
waived immunity from state-court proceedings.” Id. at
617. At the same time, however, the Court offered a
broader rationale for its ruling:
It would seem anomalous or inconsistent for a
State both (1) to invoke federal jurisdiction, thereby
contending that the “Judicial power of the
United States” extends to the case at hand, and
(2) to claim Eleventh Amendment immunity,
thereby denying that the “Judicial power of the
United States” extends to the case at hand. And a
Constitution that permitted States to follow their
litigation interests by freely asserting both claims
48 No. 08-4164
in the same case could generate seriously unfair
results.
Id. at 619. The Court added that “[a] benign motive [for
removing to federal court] . . . cannot make the critical
difference for which Georgia hopes. Motives are difficult
to evaluate, while jurisdictional rules should be clear. . . .
To adopt the State’s Eleventh Amendment position
would permit States to achieve unfair tactical advantages,
if not in this case, in others.” Id. at 621 (internal citations
omitted). We recently observed in our en banc decision
in United States v. Skoien that “[t]his is the sort of message
that, whether or not technically dictum, a court of
appeals must respect, given the Supreme Court’s entitle-
ment to speak through its opinions as well as through
its technical holdings.” 614 F.3d 638, 641 (7th Cir. 2010)
(en banc). That message applies with equal force to the
logic applied by the Court in Lapides.
Reflecting that spirit, most courts of appeals have
applied the rule of Lapides to all instances of removal
initiated by a state. The Fifth Circuit’s decision in Meyers
ex rel. Benzing v. Texas explains why this is the proper
result:
[I]n formulating its rationale, the Court did not
restrict itself to facts, rules, or reasons peculiar to
the Lapides case. Rather, throughout its opinion, the
Court’s reasoning, rule-making, and choice of
precepts were derived from generally applicable
principles serving “the judicial need to avoid
inconsistency, anomaly, and unfairness” in states’
claims of immunity in all types of federal litigation.
No. 08-4164 49
410 F.3d 236, 244 (5th Cir. 2005) (quoting Lapides, 535
U.S. at 620). While this court has had the opportunity to
apply Lapides only in circumstances functionally equiva-
lent to those at issue in Lapides itself, see Omosegbon v.
Wells, 335 F.3d 668 (7th Cir. 2003) (considering a claim
based on a state law waiving immunity that was re-
moved to federal court by a defendant state), other
courts have given Lapides a broader reading, see, e.g.,
Lombardo v. Pennsylvania Dep’t of Public Welfare, 540 F.3d
190, 198 (3d Cir. 2008) (“We hold that the [State]’s removal
of federal-law claims to federal court effected a waiver
of immunity from suit in federal court.”); Embury v. King,
361 F.3d 562, 564 (9th Cir. 2004) (finding that Lapides
applies to action removed by the state to federal court
based on either state or federal law); Estes v. Wyoming
Dep’t of Transp., 302 F.3d 1200, 1206 (10th Cir. 2002) (same).
Only the Fourth Circuit has understood Lapides as limited
to its facts. Stewart v. North Carolina, 393 F.3d 484, 488-90
(4th Cir. 2005). I agree with the Fifth Circuit’s view that
the Fourth Circuit’s Stewart decision is an outlier that
“misconstrues important principles animating Lapides.”
Meyers, 410 F.3d at 249.
As the Lapides Court explained, “In large part the
rule governing voluntary invocations of federal juris-
diction has rested upon the problems of inconsistency
and unfairness that a contrary rule of law would create.”
535 U.S. at 622. “[R]emoval is a form of voluntary in-
vocation of a federal court’s jurisdiction sufficient to
waive the State’s otherwise valid objection to litigation
of the matter (here of state law) in a federal forum.” Id.
at 624. But it is, in the end, just a mechanism for
50 No. 08-4164
invoking the federal court’s jurisdiction. There is no
reason to think that the state’s use of any other mecha-
nism—such as filing an original action in federal
court—carries less force, for waiver purposes.
The majority stresses that what was critical in Lapides
was that “Georgia affirmatively changed the character
of its participation in the litigation” by removing the
case to federal court. Ante, at 34 (citing Lapides, 535 U.S.
at 620). Indeed, the Supreme Court took care to point out
that “the State was brought involuntarily into the case as
a defendant” but then “voluntarily agreed to remove
the case to federal court.” Lapides, 535 U.S. at 620. I have
no quarrel with my colleagues’ view that a state waives
its immunity only when it exhibits a voluntary change
in behavior that demonstrates that it is no longer
defending the lawsuit and is instead taking advantage
of the federal forum. I also agree with them that “title
is not what matters for sovereign immunity purposes.”
Ante, at 35. The waiver-by-litigation-conduct analysis
should not turn on whether the state is a defendant, as
in Lapides, an intervening claimant, as in Clark, 108 U.S.
at 447, a plaintiff, as Wisconsin is here, or even an appel-
lant in this court, see Indiana Protection and Advocacy
Services v. Indiana Family and Social Servicing Admin., 603
F.3d 365, 370 (7th Cir. 2010) (en banc). Instead, the
crucial considerations are the voluntariness of the
state’s choice of forum and the functional consequences
of that choice.
The Federal Circuit has had occasion to consider how
the voluntary invocation principles in Lapides apply
No. 08-4164 51
outside of the removal context. Its conclusions can be
summarized as follows. First, a state that initiates and
prevails in a patent interference proceeding against a
competing applicant cannot block an appeal to federal
court of the agency’s decision by asserting its sovereign
immunity, because the statutory appeal is a later phase
of one integrated proceeding. See Vas-Cath, Inc. v.
Curators of University of Missouri, 473 F.3d 1376, 1385
(Fed. Cir. 2007) (“[T]he [state] University cannot both
retain the fruits of [the administrative action] and bar
the losing party from its statutory right of review[.]”).
Second (and of particular interest here), a state that files
suit in federal court to enforce a patent claim consents
to all compulsory counterclaims that arise from the
same transaction or occurrence. Regents of the University
of New Mexico v. Knight, 321 F.3d 1111, 1125-26 (Fed. Cir.
2003). The Federal Circuit has refused, however, to find
a waiver of state sovereign immunity when an initial
proceeding brought by a state is dismissed for improper
venue and the defendant in the initial proceeding later
refiles elsewhere, see Biomedical Patent Mgmt. v. California
Dep’t of Health Servs., 505 F.3d 1328, 1334-41 (Fed. Cir.
2007), or when a state that files suit in one district
court faces related lawsuits in another district court, at
least if the party that files suit in the other district
court could have intervened in the initial action filed by
the state, see Tegic Communications Corp. v. University of
Texas Board of Regents, 458 F.3d 1335 (Fed. Cir. 2006). Lastly,
the Federal Circuit has found no waiver when a state
simply defends against a Lanham Act claim in federal
court, see State Contracting & Eng’g Corp. v. Florida, 258
F.3d 1329, 1336 (Fed. Cir. 2001).
52 No. 08-4164
Phoenix’s case presents an additional wrinkle that
must be addressed: Wisconsin did not initiate the pro-
ceeding before the administrative agency, but it did
choose to go to court after Phoenix prevailed in the
TTAB. Several decisions of our sister circuits may help
to unravel this last complication. In New Hampshire v.
Ramsey, 366 F.3d 1, 16-17 (1st Cir. 2004), the First Circuit
held that when a state voluntarily participates in pro-
ceedings before a federal arbitration panel without
raising a sovereign immunity defense, the state cannot
attempt to challenge the panel’s decision in federal
district court by claiming it was entitled to immunity
from suit. The court reached this conclusion “even
though [the state] was not formally the plaintiff in the
administrative proceeding.” Id. at 16. Any other decision,
it reasoned, would allow the state to gain an unfair ad-
vantage. Id. at 16-17. Earlier, the same court had deter-
mined that the state’s participation as a defendant in
administrative proceedings did not waive a sovereign
immunity defense in federal court when the state had
“consistently asserted its sovereign immunity, both [in
federal court] and in the administrative proceeding.” Rhode
Island Dep’t of Envt’l Mgmt. v. United States, 304 F.3d 31,
49 (1st Cir. 2002). My colleagues rely on the First
Circuit’s most recent decision involving state sovereign
immunity and administrative proceedings, Taylor v.
U.S. Department of Labor, 440 F.3d 1 (1st Cir. 2005). That
case involved a situation “slightly different” from the
First Circuit’s earlier decisions, id. at 5, and its unique
circumstances provide little help in evaluating Wiscon-
sin’s litigation conduct here. The state in Taylor
No. 08-4164 53
requested adjudicative proceedings before an ALJ for
the very purpose of asserting its sovereign immunity
from suit. Id. at 7-8. The state’s request for an ALJ was
necessary because the sovereign immunity defense
“was not available at the investigatory stage of the ad-
ministrative proceedings.” Id. at 8.
The distinction that these courts have recognized,
between a voluntary, active decision by the state to
entrust a matter to federal court and involuntary,
defensive measures, is reflected in the Supreme Court
decisions I have discussed above. When a state chooses
to intervene in a federal case, it waives its immunity
for purposes of those proceedings. Clark, 108 U.S. at 447-
48. If a state voluntarily files a claim in federal court,
waiver once again occurs. Gardner, 329 U.S. at 574. More-
over, a waiver of immunity in an initial proceeding
extends to all ancillary proceedings that follow. Gunter,
200 U.S. at 281-82, 289-90. I conclude, both from the
Supreme Court’s many decisions in this area and from
the decisions in our sister circuits, that Lapides requires a
finding of waiver in the present case. Wisconsin’s decision
to challenge the TTAB’s unfavorable decision by
initiating a suit in federal court is precisely the affirma-
tive choice to move to federal district court that my
colleagues say that Lapides requires. A state’s deci-
sion to initiate an action in federal court challenging
an agency decision should bar a finding of sovereign
immunity as a defense to counterclaims arising out of
the same transaction or occurrence that the defendant
wishes to raise. (Sovereign immunity to one side, those
counterclaims are regarded as compulsory by Federal
Rule of Civil Procedure 13(a).)
54 No. 08-4164
C
Wisconsin has raised, or could raise, a number of objec-
tions to my position, but none of them withstands close
examination. First, it may complain that it was forced
to bring this lawsuit in the district court once the TTAB
ruled adversely to it. My colleagues describe Wiscon-
sin’s decision as “technically voluntary,” ante, at 35, but
they regard it as practically forced. I do not see it that
way, for the simple reason that Wisconsin was not com-
pelled to do anything. Just as Georgia in Lapides had
the option of litigating in its home court rather than
removing to federal court, Wisconsin here enjoyed a
number of options, and each option carried a different
implication for sovereign immunity. It is useful, in this
connection, to recall how the present lawsuit came
about. Phoenix filed a petition with the TTAB seeking
to cancel Wisconsin’s CONDOR mark, see 15 U.S.C. § 1064,
arguing that the University’s mark would be confused
with Phoenix’s own CONDOR mark, see 15 U.S.C.
§ 1052(d). The TTAB agreed with Phoenix and cancelled
Wisconsin’s mark. Phoenix Software Int’l v. Board of
Regents of the Univ. of Wis. Sys., Cancellation No. 92042881
(T.T.A.B. Sept. 26, 2007), app. at 46. At that point, Wis-
consin had three choices: (1) it could do nothing and let
the TTAB decision stand; (2) it could appeal the
TTAB decision to the Federal Circuit, 15 U.S.C. § 1071(a);
or (3) it could forego an appeal and initiate a civil
action challenging the cancellation in federal district
court, 15 U.S.C. § 1071(b). As we know, Wisconsin chose
the third of these paths. It is helpful to begin by com-
paring choice #3 to the other two.
No. 08-4164 55
1. Do Nothing. First, Wisconsin could have acquiesced
in the TTAB’s cancellation of its mark and found a new
trademark for its software. Nothing forced it to spend a
minute in federal court. The state may object that it is
unfair to force it to choose between maintaining its im-
munity and challenging an adverse agency decision,
but that is no more unfair than the present law, which
permits the state to enjoy the benefits of the trademark
system while exempting itself from certain forms of
accountability to others who use the same system. Al-
though College Savings forecloses a theory of construc-
tive waiver based solely on the fact of the state’s partic-
ipation in the trademark system, there is no reason
to expand this principle to its outer limits. (Indeed, as
I will explain shortly, the evolution of the sovereign
immunity doctrine illustrates that there is every reason
to be cautious about expansions when we are dealing
with commercial activities.) Administrative agencies
resolve the rights of parties before them every day, and
Congress does not always see fit to provide for recourse
to the courts. Indeed, I am not familiar with any admin-
istrative scheme in which the party who loses before
the agency is compelled to appeal the adverse decision.
An appeal or a new lawsuit is a privilege that is often
extended, but that privilege sometimes comes at a
certain price. Perhaps, as here, the new lawsuit in
district court will offer de novo review on an expanded
record—something the agency winner (in this case, Phoe-
nix) will dislike, but the loser (Wisconsin) will appreci-
ate. Supplemental claims and counterclaims might be
added once the case reaches the court. See, e.g., City of
56 No. 08-4164
Chicago v. International Coll. of Surgeons, 522 U.S. 156
(1997). Only if a challenge to the TTAB decision in
federal district court is a necessary facet of any party’s
participation in the trademark system would College
Savings dictate the conclusion that the state’s invocation
of federal jurisdiction is involuntary and thus does not
support a finding of waiver of sovereign immunity. If,
as I believe, a district court action is optional, then the
decision to enter federal court is properly understood
as a voluntary invocation of federal jurisdiction and a
waiver of sovereign immunity.
Another way to ask the question whether the state’s
appeal of a decision to the district court is a voluntary
move to a new tribunal is to ask whether requiring the
state to accept the TTAB’s decision without further re-
course would be offensive somehow. Not that I can see.
Other regimes that pass constitutional muster where
federal court review of agency adjudication is curtailed
concern rights at least as precious as a party’s interest in
a trademark. Just this past Term, the Court reaffirmed
that judicial review of the Attorney General’s immigra-
tion removal determinations may be limited, see Kucana,
130 S. Ct. at 831, and we have recognized in at least two
en banc decisions that review of an agency’s entitlement
determinations may be foreclosed, see Czerkies, 73 F.3d
1437-39; Marozsan, 852 F.3d at 1473 n.10. In many cir-
cumstances, Congress has seen fit to limit the role of
federal courts in disputes about important rights and
courts do not regard the limitation as impermissible or
offensive. See, e.g., the jurisdiction-limiting provisions
in the Prison Litigation Reform Act of 1996, Pub. L. No.
No. 08-4164 57
104-134, 110 Stat. 1321-66, and the Antiterrorism and
Effective Death Penalty Act of 1996, Pub. L. No. 104-132,
110 Stat. 1214. If there is nothing wrong with foreclosing
review of the TTAB’s decision altogether, then there is
nothing unfair about compelling a state to choose
between its sovereign immunity and a second bite at
the apple after the agency has spoken.
The Federal Circuit has considered and rejected an
argument quite similar to the one Wisconsin is making
here. In Vas-Cath, Inc., which I have already mentioned,
the Federal Circuit rejected a state’s attempt to avoid on
sovereign immunity grounds an appeal of a Patent
and Trademark Office (“PTO”) priority determination.
473 F.3d at 1383-84. The court held that the state’s par-
ticipation in the agency proceedings waived its im-
munity claim in federal court. The state had argued
“that it had no choice but to request the [patent] inter-
ference and participate in an adversarial proceeding, for
if it had not taken this action it would have lost its
rightful patent . . . .” Id. at 1384. The court responded
as follows:
[T]he question in this case is not whether the
University voluntarily participated in the PTO
interference, but whether the University can now
bar the appeal of the PTO’s decision in favor of
the University. This argument raises issues not
of federalism, but of litigation tactics . . . .
Id. at 1384. While our case concerns trademarks rather
than patents, the underlying issue is the same. Wisconsin
should not be permitted to wait and see whether it is
58 No. 08-4164
successful in the agency, and then challenge the agency’s
decision with a stacked deck, protected by sovereign
immunity from counterclaims filed by its adversary.
2. Appeal to the Federal Circuit. While the majority ex-
presses little concern about unfair litigation tactics on
the state’s part, I see matters differently. Wisconsin’s
sovereign immunity claim loses any remaining force
when one realizes that the state freely chose to chal-
lenge the TTAB decision in the federal district court
rather than the Federal Circuit. Had the University of
Wisconsin opted instead for the Federal Circuit,
Phoenix would not have been able to introduce counter-
claims into the litigation. (Like all of the federal courts
of appeals, the Federal Circuit operates under the
Federal Rules of Appellate Procedure, not the Federal
Rules of Civil Procedure, and there is no provision in
the Appellate Rules that would allow an appellee to
introduce a new counterclaim.) The Federal Circuit was
thus an available forum that would have been able to
focus exclusively on the TTAB’s decision, without any
threat to Wisconsin’s sovereign immunity. Finally, had
Phoenix responded to an appeal to the Federal Circuit
with an original action against Wisconsin in district
court, the state would naturally have been fully entitled
to assert its sovereign immunity. The majority recognizes
that this is the case. See ante, at 35. The question the
majority brushes over is why Wisconsin chose to
attack the agency decision in the district court rather
than the Federal Circuit, given that the latter forum
provided the state all the relief it sought with complete
insulation from Phoenix’s counterclaims.
No. 08-4164 59
An animating principle of Lapides is that a state
should not reap litigation advantages through its selec-
tion of a forum and subsequent assertion of sovereign
immunity as a defense. By choosing to institute a new
action in the federal district court, Wisconsin provided
itself better odds of reversing the agency’s cancellation
of its mark. As I have already noted, the standard of
review when a TTAB decision is examined by the
district court is de novo, and in the district court the state
is allowed to present new evidence that was not part of
the agency record. In comparison, review in the Federal
Circuit follows typical rules of administrative law,
with deference to the agency’s factual and legal conclu-
sions and limitation to the record that has already been
compiled. Along with the advantages to the state of
filing an action in the district court came the possibility
that the defending party (Phoenix) would assert counter-
claims in that forum—counterclaims that it risked losing
if it failed to raise them. See F ED. R. C IV. P. 13(a). Nothing
in Lapides supports the conclusion that Wisconsin could
take advantage of the benefits of the federal district
court while avoiding aspects of that forum that it found
less desirable.
As my colleagues note, the Court in Lapides remarked
that there was nothing “special” about removal that
warranted abandoning the general legal principle that
a state may waive its immunity through its litiga-
tion conduct. 535 U.S. at 620. Addressing this point, the
majority maintains that Wisconsin’s decision to file suit
in the district court here was “special” (unlike the
state’s decision in Lapides) and thus the general waiver
60 No. 08-4164
principles do not apply and Wisconsin’s immunity is
left intact. See ante, at 34-36. They explain that they see
Wisconsin’s lawsuit as “special” because it is merely an
appeal of an agency decision—a continuation of a pro-
ceeding in which Wisconsin was the defendant. Perhaps
this would be a different case if that were the only
option available to the state. But as I have already ex-
plained, it was not. Furthermore, to hang the entire sov-
ereign immunity analysis on the question whether a
particular litigation act is “special” is to adopt a rule
that will be nearly impossible to apply. All the Lapides
Court said was that removal is not “special”—it did not
provide any guidance about what litigation conduct
it might in the future consider “special” enough to
avoid waiver. See 535 U.S. at 620. The majority here has
not supplied the necessary guidance in this respect—
because, I believe, the task is impossible—for either
states or the parties with whom states litigate. For ex-
ample, why is filing a lawsuit challenging an agency
decision in the district court more “special” than inter-
vening to protect an interest that is at stake in ongoing
litigation in the district court?
Putting to one side the options Wisconsin chose not to
pursue, it is also worth noting that the system for
which Wisconsin is arguing creates serious inefficiencies
for the trademark system. It wants the district court to
reverse the agency decision but to stop before it reaches
the other litigant’s competing trademark claim. In effect,
it seeks an unnatural bifurcation of a single, integrated
problem: Who owns the mark CONDOR? How much
does that mark cover? And what payments might be
No. 08-4164 61
due if one party has encroached upon the other’s space?
The only efficient way—perhaps even the only possible
way—to resolve these questions is in one proceeding,
before one tribunal.
Finally, Wisconsin ignores the fact that at one point in
the history of this case it had yet another avenue
available to it. Before Phoenix initiated TTAB pro-
ceedings, Wisconsin could have filed a suit against
Phoenix in state court to resolve who had rights to the
CONDOR mark. Although the federal courts have juris-
diction over trademark claims brought under the Lanham
Act, that jurisdiction is not exclusive. See 28 U.S.C.
§ 1338(a); 15 U.S.C. § 1121; Alpharma, Inc. v. Pennfield Oil
Co., 411 F.3d 934, 938 (8th Cir. 2005); Aquatherm Industries,
Inc. v. Florida Power & Light Co., 84 F.3d 1388, 1394 (11th
Cir. 1996). (Note, in contrast, that federal jurisdiction is
exclusive in patent and copyright cases. See 28 U.S.C.
§ 1338(a) (“Such jurisdiction shall be exclusive of the
courts of the states in patent, plant variety protection
and copyright cases.”).) A party alleging a trademark
violation under the statute may litigate in state court if
it so chooses. Accordingly, if Wisconsin was concerned
about Phoenix’s competing CONDOR trademark and
wished to preserve its sovereign immunity, it had the
option of filing its own infringement action in Wiscon-
sin state court at the outset.
D
In summary, as I see it, Wisconsin’s effort to block
Phoenix’s compulsory counterclaims in federal court
62 No. 08-4164
while seeking relief from that court in the very same
lawsuit implicates the very same fairness concerns that
the Supreme Court identified in Lapides. Wisconsin
was not forced to litigate in the federal district court. Its
choice to do so was every bit as free as that of the Univer-
sity of Georgia in Lapides to remove its case from state
court to federal court. Neither Lapides nor any other
decision of the Supreme Court supports the idea that
waiver of immunity through litigation conduct occurs
only when a state files suit asserting new claims
against a defendant. See ante, at 37 (discussing how the
outcome would be different if Wisconsin “[h]ad . . .
brought new claims against Phoenix” in the district
court). Nor does that line of cases hold that a state
must defend a claim on the merits, participate in dis-
covery, and file a motion to dismiss and a motion for
summary judgment in order to waive immunity. See ante,
at 38 (referring to the Ninth Circuit’s recent decision
in Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d
1011, 1021-22 (9th Cir. 2010)). I would find that the Uni-
versity of Wisconsin waived its sovereign immunity
for purposes of claims associated with the CONDOR
trademark when it filed suit in the district court. Phoenix
was thus entitled to assert its compulsory counter-
claims, which by definition had to arise out of the
same transaction or occurrence. As the Supreme Court
acknowledged:
It would seem anomalous or inconsistent for a
State both (1) to invoke federal jurisdiction,
thereby contending that the “Judicial power of the
United States” extends to the case at hand, and
No. 08-4164 63
(2) to claim Eleventh Amendment immunity,
thereby denying that the “Judicial power of the
United States” extends to the case at hand. And a
Constitution that permitted States to follow their
litigation interests by freely asserting both claims
in the same case could generate seriously unfair
results.
Lapides, 535 U.S. at 619. I would reinstate Phoenix’s coun-
terclaims and remand for further appropriate proceedings.
II
Broader policy considerations surrounding the doctrine
of sovereign immunity also argue strongly for finding a
waiver in these circumstances, which involve ordinary
commercial activity being conducted by the state. Al-
though the Supreme Court has touched on this aspect of
sovereign immunity law in the past, a closer look at its
decisions reveals that there are still unresolved ques-
tions that would benefit from a closer look. And at a
minimum, these issues inform the question of how
broadly or narrowly we should construe the waiver
doctrines I have just been considering.
From the time of the Declaration of Independence
until the Constitution of 1787 took effect, the states were
fully sovereign in the international sense of the term:
they were States, just as modern-day France, Japan, or
India are States today. This fact is reflected in Articles II
and III of the Articles of Confederation. Article II
affirms that “[e]ach State retains its sovereignty, free-
64 No. 08-4164
dom and independence, and every power, jurisdiction
and right, which is not by this confederation expressly
delegated to the United States, in Congress assembled.”
A RTICLES OF C ONFEDERATION of 1781, art. II. Article III
reinforces the point by specifying, “The said States
hereby severally enter into a firm league of friendship with
each other,” for purposes including common defense
and general welfare. Id. art. III (emphasis added). It was
against this backdrop that the 1787 Constitution was
written. Although that Constitution greatly strengthened
the powers of the central, or “federal,” government, it
did not change the fundamental principle under which
the states remain sovereign entities to the extent that
the Constitution does not override their sovereignty.
Indeed, that is precisely the point of the Tenth Amend-
ment, which says, “The powers not delegated to the
United States by the Constitution, nor prohibited by it
to the States, are reserved to the States respectively, or to
the people.” U.S. C ONST. amend. X. This assurance, no
less than the remainder of the Bill of Rights, was
regarded as essential during the ratification debates.
A
Over the years, the Supreme Court has consistently
recognized the sovereign immunity of the states. Even
in Chisholm v. Georgia, 2 U.S. (2 Dall.) 419 (1793), better
known for its holding that the state of Georgia could
be sued than for the reasons offered by Justices Blair
and Wilson (over Justice Iredell’s dissent), all members
of the Court understood that they had to decide
No. 08-4164 65
whether the state’s sovereignty had been overridden by
the federal Constitution. Justice Blair thought that
Article III of the Constitution provided a clear answer
in the affirmative to that question; he pointedly noted
that he “thought it best to pass over all the strictures
which have been made on the various European con-
federations; . . . . The Constitution of the United States
is the only fountain from which I shall draw; the only
authority to which I shall appeal.” 2 U.S. at 450. Justice
Wilson allowed his gaze to cover more ground; he chose
to look at the principles of general jurisprudence, the
laws and practices of other States and Kingdoms, and
finally the constitutional text. After a philosophical dis-
cussion on the concept of sovereignty, he concluded that
precedents existed under which states could be brought
to account before tribunals and that the Constitution
permitted this suit. Id. at 453-66.
Justice Iredell, whose view was quickly vindicated by
the passage of the Eleventh Amendment, would have
found immunity for Georgia. Id. at 449-50. He em-
phasized the lack of federal legislation that would have
permitted the lawsuit before the Court, but he added
these words: “So much, however, has been said on the
Constitution, that it may not be improper to intimate
that my present opinion is strongly against any construc-
tion of it, which will admit, under any circumstances,
a compulsive suit against a State for the recovery
of money.” Id. at 449. Justice Iredell took this absolute
position because, as he had noted earlier, “in every State
in the Union, previous to the adoption of the Constitu-
tion, the only common law principles in regard to suits
66 No. 08-4164
that were in any manner admissible in respect to claims
against the State, were those which in England apply to
claims against the crown . . . .” Id. at 437. He drew a
direct link between the states’ immunity from suit
before the adoption of the Constitution—immunity
derived from principles of sovereign immunity em-
bodied in public international law—and the states’ con-
tinuing immunity afterwards:
[I]t is incumbent upon us to enquire, whether
previous to the adoption of the Constitution
(which period, or the period of passing the law, in
respect to the object of this enquiry, is perfectly
equal) an action of the nature like this before the
Court could have been maintained against one
of the States in the Union upon the principles of
the common law, which I have shown to be
alone applicable. If it could, I think it is now main-
tainable here; If it could not, I think, as the law
stands at present, it is not maintainable; what-
ever opinion may be entertained; upon the con-
struction of the Constitution, as to the power of
Congress to authorize such a one.
Id.
Throughout the nineteenth century, the Court com-
monly turned to the same principles of public interna-
tional law that it was using for foreign relations when
it had to decide issues involving interstate relations.
Thus, for example, in Bank of the United States v. Donnally,
33 U.S. 361 (1834), the Court had to decide whether a
promissory note in the Bank’s favor that was signed
No. 08-4164 67
in Kentucky could be enforced in Virginia, over an asser-
tion that the statute of limitations in Virginia had run.
In the course of upholding Virginia’s right to apply its
own limitations period (and thus defeat the Bank’s
action), Justice Story wrote that “whatever may be the
legislation of a state, as to the obligation or remedy on
contracts, its acts can have no binding authority beyond
its own territorial jurisdiction. Whatever authority they
have in other states, depends upon principles of inter-
national comity, and a sense of justice.” Id. at 372. More
than forty years later, Justice Field used almost the same
words in Pennoyer v. Neff, 95 U.S. 714 (1877), the decision
(now overruled) that for years was the wellspring of
the constitutional law of personal jurisdiction. There he
wrote that “[t]he several States of the Union are not, it
is true, in every respect independent, many of the right
and powers which originally belonged to them being
now vested in the government created by the Constitu-
tion. But, except as restrained and limited by that in-
strument, they possess and exercise the authority of
independent States, and the principles of public law to
which we have referred are applicable to them.” Id. at
722. He continued with the observation that “[t]he
several States are of equal dignity and authority, and
the independence of one implies the exclusion of power
from all others.” Id.
The Supreme Court has returned repeatedly to this
theme in the line of cases that began with Seminole Tribe
of Florida v. Florida, 517 U.S. 44 (1996), in which the
Court reinvigorated the doctrine of state sovereign im-
munity:
68 No. 08-4164
Although the text of the [Eleventh] Amendment
would appear to restrict only the Article III diver-
sity jurisdiction of the federal courts, we have
understood the Eleventh Amendment to stand
not so much for what it says, but for the presup-
position . . . which it confirms. . . . That presup-
position, first observed over a century ago in
Hans v. Louisiana, 134 U.S. 1 (1890), has two parts:
first, that each State is a sovereign entity in our
federal system; and second, that “ ‘[i]t is inherent
in the nature of sovereignty not to be amenable
to the suit of an individual without its consent,’ ”
id., at 13 (emphasis deleted), quoting The Fed-
eralist No. 81, p. 487 (C. Rossiter ed. 1961) (A.
Hamilton). . . . For over a century we have reaf-
firmed that federal jurisdiction over suits against
unconsenting States was not contemplated by
the Constitution when establishing the judicial
power of the United States.
517 U.S. at 54 (some internal quotation marks and cita-
tions deleted). The theme continues in Florida Prepaid,
527 U.S. at 634-35, College Savings, 527 U.S. at 669-
70 (referring to “the sovereign immunity that the
States possessed before entering the Union”), Alden
v. Maine, 527 U.S. 706, 713 (1999) (“[A]s the Constitu-
tion’s structure, its history, and the authoritative inter-
pretations by this Court make clear, the States’ immunity
from suit is a fundamental aspect of the sovereignty
which the States enjoyed before the ratification of the
Constitution, and which they retain today (either
literally or by virtue of their admission into the Union
No. 08-4164 69
upon an equal footing with the other States) except
as altered by the plan of the Convention or certain con-
stitutional Amendments.”), Kimel v. Florida Board of
Regents, 528 U.S. 62, 72-73 (2000), Board of Trustees of the
University of Alabama v. Garrett, 531 U.S. 356, 363-64 (2001),
and Federal Maritime Commission v. South Carolina State
Ports Authority, 535 U.S. 743, 760 (2002) (“The preeminent
purpose of state sovereign immunity is to accord
States the dignity that is consistent with their status as
sovereign entities.”).
B
This brief review demonstrates that the states enjoy
“sovereign immunity.” But that turns out to be just the
beginning of the inquiry. The term is, after all, a general
one; it applies not only to the states, but to the United
States, to foreign countries, and to Native American
tribes. Early theorists thought that sovereignty was nec-
essarily a singular phenomenon: either an entity enjoyed
sovereignty, or it did not—there was no such thing
as partial sovereignty. See, e.g., J.L. B RIERLY, T HE L AW OF
N ATIONS: A N INTRODUCTION TO THE INTERNATIONAL L AW
OF P EACE 8 (Sir Humphrey Waldock ed., 6th ed. 1963).
A sovereign state is recognizable through several charac-
teristics: a specific territory, a permanent population, its
own government in control, and the capacity to engage
in formal relations with other such entities. R ESTATE-
MENT (T HIRD ) OF THE F OREIGN R ELATIONS L AW OF THE
U NITED S TATES § 201 (1987). The Framers of the Constitu-
70 No. 08-4164
tion, however, had a more nuanced view of the concept
of sovereignty. As Justice Kennedy put it in his con-
curring opinion in U.S. Term Limits, Inc. v. Thornton, the
Framers “split the atom of sovereignty” between the
states and the national government. 514 U.S. 779, 838
(1995) (Kennedy, J., concurring). Thus, with reference to
state or Native American sovereignty, it is always neces-
sary to consider whether sovereign powers have
already been ceded, see, e.g., Central Virginia Community
College v. Katz, 546 U.S. 356, 377-78 (2006) (states agreed
in the plan of the constitutional Convention not to
assert sovereign immunity in bankruptcy proceedings),
or abrogated by valid congressional legislation, see, e.g.,
Seminole Tribe, 517 U.S. at 55-73; see also City of Boerne,
521 U.S. at 529-30 (describing requirements for valid
remedial measures under section 5 of the Fourteenth
Amendment). In addition, as the Supreme Court made
clear in Wisconsin Department of Corrections v. Schacht,
another attribute of sovereign immunity under the
federal Constitution is that “the Eleventh Amendment
grants the State a legal power to assert a sovereign im-
munity defense should it choose to do so. The State
can waive the defense. . . . Nor need a court raise the
defect on its own. Unless the State raises the matter, a
court can ignore it.” 524 U.S. 381, 389 (1998) (citations
omitted).
Another question, largely unexplored for state
sovereign immunity, but by now well elaborated for
foreign sovereign immunity, deals with the scope of the
defense. Is the doctrine absolute, or is it qualified or
restrictive? And if it has changed over time, are courts
No. 08-4164 71
required to apply the doctrine as it applied at the time
of the Founding, or at the time any given state entered
the Union, or as the doctrine is generally understood
today?
The answer to these latter questions for purposes of
foreign sovereign immunity has received extensive at-
tention in both Congress and the courts. From the Found-
ing until 1952, the United States granted foreign nations
absolute immunity from suit in U.S. courts as a matter
of comity. Verlinden B.V. v. Central Bank of Nigeria, 461
U.S. 480, 486-89 (1983) (discussing The Schooner Exchange
v. McFaddon, 11 U.S. (7 Cranch) 116 (1812)). The
Supreme Court “deferred to the decisions of the polit-
ical branches . . . on whether to take jurisdiction over
actions against foreign sovereigns” and, “[u]ntil 1952, the
State Department ordinarily requested immunity in all
actions against friendly foreign sovereigns.” Id. at 486.
Reacting in the wake of World War II to the important
role of state-owned enterprises in the Communist
countries and reluctant to give a litigation advantage
in U.S. courts to those enterprises, in 1952 the United
States shifted its position. Commentators regularly out-
lined the tension between absolute sovereign immunity
and the rise of state trading, particularly in the Soviet
Union, and expressed the concern that “private traders
will be reluctant to deal with state traders if their legal
rights and remedies are greatly curtailed by the
principle of sovereign immunity.” Bernard Fensterwald,
Jr., Sovereign Immunity and Soviet State Trading, 63 H ARV .
L. R EV. 614, 614 (1950); see also Sigmund Timberg, Sover-
72 No. 08-4164
eign Immunity, State Trading, Socialism and Self-Deception,
56 N W . U. L. R EV. 109, 111 (1961).
In 1952, Jack Tate, Acting Legal Adviser for the Depart-
ment of State, wrote a letter to the Acting Attorney
General announcing that the State Department intended
henceforth to apply a restrictive theory of foreign
sovereign immunity:
According to the classical or absolute theory of
sovereign immunity, a sovereign cannot, without
his consent, be made a respondent in the courts
of another sovereign. According to the newer or
restrictive theory of sovereign immunity, the
immunity of the sovereign is recognized with
regard to sovereign or public acts (jure imperii) of a
state, but not with respect to private acts (jure
gestionis).
Letter from Jack B. Tate, Acting Legal Adviser, U.S.
Department of State, to Acting U.S. Attorney General
Philip B. Perlman (May 19, 1952), reprinted in 26 Dep’t
State Bull. 984-85 (1952). After describing the trend
among various countries toward a restrictive theory of
sovereign immunity and noting “that the widespread
and increasing practice on the part of governments of
engaging in commercial activities [made] necessary a
practice which [would] enable persons doing business
with them to have their rights determined in the
courts,” Tate wrote that it would thereafter be the State
Department’s policy “to follow the restrictive theory of
sovereign immunity in the consideration of requests of
foreign governments for a grant of sovereign immu-
No. 08-4164 73
nity.” Id. “The reasons which obviously motivate state
trading countries in adhering to the theory [of absolute
immunity] with perhaps increasing rigidity,” wrote Tate,
“are most persuasive that the United States should
change its policy.” Id.
Experience under the Tate Letter demonstrated that
more was necessary, as the Supreme Court recounted
in Verlinden:
The restrictive theory was not initially enacted
into law . . . and its application proved trouble-
some. As in the past, initial responsibility for
deciding questions of sovereign immunity fell
primarily upon the Executive . . . and the courts
abided by “suggestions of immunity” . . . . As a
consequence, foreign nations often placed diplo-
matic pressure on the State Department in seeking
immunity. On occasion, political considerations
led to suggestions of immunity in cases where
immunity would not have been available under
the restrictive theory.
An additional complication was posed by the
fact that foreign nations did not always make
requests to the State Department. In such cases,
the responsibility fell to the courts to determine
whether sovereign immunity existed, generally
by reference to prior State Department deci-
sions. . . . Not surprisingly, the governing stan-
dards were neither clear nor uniformly applied.
In 1976, Congress passed the Foreign Sovereign
Immunities Act in order to free the Government
74 No. 08-4164
from the case-by-case diplomatic pressures, to
clarify the governing standards, and to “assur[e]
litigants that . . . decisions are made on purely
legal grounds and under procedures that insure
due process,” H.R. Rep. No. 94-1487, p. 7 (1976).
Verlinden B.V., 461 U.S. at 487-88 (citations and footnote
omitted).
The Foreign Sovereign Immunities Act (“FSIA”), 28
U.S.C. §§ 1330, 1332, 1391(f), 1441(d), and 1602-1611,
codifies the restrictive theory of sovereign immunity. It
provides that “a foreign state shall be immune from the
jurisdiction of the courts of the United States and of the
States,” 28 U.S.C. § 1604, except in cases where:
• the foreign state has explicitly or impliedly
waived its immunity, § 1605(a)(1);
• the action is based on commercial activity
carried on in the United States by the foreign
state, an act performed in the United States
related to commercial activity of the foreign
state elsewhere, or an act outside of the
United States related to commercial activity
of the foreign state outside of the United
States that causes a direct effect in the United
States, § 1605(a)(2);
• the action concerns rights in property that
has been taken in violation of international
law, where the property is connected to
commercial activity of the foreign state
within the United States, § 1605(a)(3);
No. 08-4164 75
• the action concerns rights in real estate or
inheritance or gift property located in the
United States, § 1605(a)(4);
• the action involves certain noncommercial
torts occurring within the United States,
§ 1605(a)(5);
• the action involves a maritime lien, § 1605(b);
or
• the action involves certain acts of terrorism
connected to the foreign state, § 1605A.
In addition, in actions brought by foreign States (or in
cases where a foreign State intervenes) the foreign State
is not accorded immunity with respect to any counter-
claim:
(a) for which a foreign state would not be entitled
to immunity under section 1605 or 1605A . . . had
such claim been brought in a separate action
against the foreign state; or
(b) arising out of the transaction or occurrence
that is the subject matter of the claim of the
foreign state; or
(c) to the extent that the counterclaim does not
seek relief exceeding in amount or differing in
kind from that sought by the foreign state.
28 U.S.C. § 1607.
“The most significant of the FSIA’s exceptions . . . is the
‘commercial’ exception of § 1605(a)(2) . . . .” Republic of
Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992). When
76 No. 08-4164
evaluating whether a foreign State has engaged in com-
mercial activity that falls within the commercial activity
exception, a court must evaluate the nature of the act,
rather than the purpose for which that act was under-
taken. 28 U.S.C. § 1603(d); Republic of Argentina, 504 U.S.
at 614 (“[T]he issue is whether the particular actions that
the foreign state performs (whatever the motive be-
hind them) are the type of actions by which a private
party engages in ‘trade or traffic or commerce,’ Black’s
Law Dictionary 270 (6th ed. 1990).”). “[W]hen a foreign
government acts, not as regulator of a market, but
in the manner of a private player within it, the foreign
sovereign’s actions are ‘commercial’ within the meaning
of the FSIA.” Republic of Argentina, 504 U.S. at 614. Where
one of the FSIA’s statutory exceptions, like the one
for commercial acts, applies, “the foreign state shall be
liable in the same manner and to the same extent as
a private individual under like circumstances” (with
modifications for punitive damages and wrongful
death actions). 28 U.S.C. § 1606.
The Supreme Court has had several opportunities to
discuss the commercial-act exception to the general rule
of foreign sovereign immunity. It has recognized that
“the distinction between state sovereign acts, on the
one hand, and state commercial and private acts, on the
other, [is] not entirely novel to American law.” Republic
of Argentina, 504 U.S. at 613 (discussing Alfred Dunhill
of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695-96
(1976)). Indeed, as early as 1823 Chief Justice Marshall
noted the importance of the distinction:
No. 08-4164 77
It is, we think, a sound principle, that when a
government becomes a partner in any trading
company, it divests itself, so far as concerns the
transactions of that company, of its sovereign
character, and takes that of a private citizen. In-
stead of communicating to the company its privi-
leges and its prerogatives, it descends to a
level with those with whom it associates itself, and
takes the character which belongs to its associates,
and to the business which is to be transacted.
Bank of the United States v. Planters’ Bank of Georgia, 22 U.S.
(9 Wheat.) 904, 907 (1823); cf. Sloan Shipyards Corp. v.
United States Shipping Bd. Emergency Fleet Corp., 258
U.S. 549, 567-68 (1922). Relying on precedents dealing
with state action within the United States, the Dunhill
plurality justified the line between commercial and gov-
ernmental acts as follows:
In this same tradition, South Carolina v. United
States, 199 U.S. 437 (1905), drew a line for pur-
poses of tax immunity between the historically
recognized governmental functions of a State
and businesses engaged in by a State of the kind
which theretofore had been pursued by private
enterprise. Similarly, in Ohio v. Helvering, 292
U.S. 360, 369 (1934), the Court said: “If a state
chooses to go into the business of buying and
selling commodities, its right to do so may be
conceded so far as the Federal Constitution is
concerned; but the exercise of the right is not
the performance of a governmental function . . . .
78 No. 08-4164
When a state enters the market place seeking
customers it divests itself of its quasi sovereignty
pro tanto, and takes on the character of a
trader . . . .” It is thus a familiar concept that
“there is a constitutional line between the State
as government and the State as trader . . . .” New
York v. United States, 326 U.S. 572, 579 (1946).
See also Parden v. Terminal R. Co., 377 U.S. 184, 189-
190 (1964); California v. Taylor, 353 U.S. 553, 564
(1957); United States v. California, 297 U.S. 175, 183
(1936).
425 U.S. at 696.
It was against this backdrop that the Court could
have reconsidered the question whether a distinction
between commercial acts and governmental acts was
proper for the state sovereign immunity it found
reflected in the Eleventh Amendment. It did not do so,
however, in any sustained way. In College Savings, Justice
Scalia wrote:
The “market participant” cases from our dor-
mant Commerce Clause jurisprudence, relied upon
by the United States, are inapposite. . . . Those
cases hold that, where a State acts as a participant
in the private market, it may prefer the goods or
services of its own citizens, even though it could
not do so while acting as a market regulator. . . .
The “market participant” exception to judicially
created dormant Commerce Clause restrictions
makes sense because the evil addressed by those
restrictions—the prospect that States will use
No. 08-4164 79
custom duties, exclusionary trade regulations,
and other exercises of governmental power . . .
to favor their own citizens . . .—is entirely absent
where the States are buying and selling in
the market. In contrast, a suit by an individual
against an unconsenting State is the very evil at
which the Eleventh Amendment is directed—and
it exists whether or not the State is acting for
profit, in a traditionally “private” enterprise,
and as a “market participant.” In the sovereign-
immunity context, moreover, “[e]venhandness”
between individuals and States is not to be ex-
pected: “[T]he constitutional role of the States
sets them apart from other employers and defen-
dants.” Welch [v. Texas Dep’t of Highways and
Public Transp.], 483 U.S. [468, 477 (1987)].
527 U.S. at 685-86 (citations omitted). The concerns under-
lying the dormant Commerce Clause, however, are
quite different from those motivating sovereign im-
munity, as the Court understandably recognized. The
latter doctrine received little attention. Aside from a
couple of fleeting references in dissenting opinions and
an even briefer response by the majority, it does not
appear that the rationale underlying the recognition of
a commercial-acts exception for purposes of foreign
sovereign immunity was considered by the Court.
What attention there was primarily came from Justices
Stevens and Breyer. In his dissenting opinion in that
case, Justice Stevens remarked:
The procedural posture of this case requires the
Court to assume that Florida Prepaid is an “arm
80 No. 08-4164
of the State” of Florida because its activities
relate to the State’s educational programs. . . . But
the validity of that assumption is doubtful if
the Court’s jurisprudence in this area is to be
based primarily on present-day assumptions
about the status of the doctrine of sovereign im-
munity in the 18th century. Sovereigns did not
then play the kind of role in the commercial mar-
ketplace that they do today. In future cases, it
may therefore be appropriate to limit the cov-
erage of state sovereign immunity by treating the
commercial enterprises of the States like the com-
mercial activities of foreign sovereigns under the
Foreign Sovereign Immunities Act of 1976.
527 U.S. at 691-92 (Stevens, J., dissenting) (citing the
FSIA’s commercial activity exception, 28 U.S.C.
§ 1605(a)(2), and its definition of “commercial activity,” id.
§ 1603(d)). Justice Breyer’s dissent also mentioned that
Congress had drawn a line between a state’s public acts
and its acts as a “market participant” in the FSIA:
In doing so, Congress followed the modern trend,
which spread rapidly after the Second World War,
regarding foreign state sovereign immunity. . . .
Indeed, given the widely accepted view among
modern nations that when a State engages in
ordinary commercial activity sovereign im-
munity has no significant role to play, it is today’s
holding, not Parden, that creates the legal “anom-
aly.”
527 U.S. at 699 (internal quotation marks and citations
omitted).
No. 08-4164 81
Justice Scalia found those allusions to foreign sovereign
immunity unhelpful; he dismissed the “suggestion . . .
that we limit state sovereign immunity to noncom-
mercial state activities because Congress has so limited
foreign sovereign immunity” with this comment:
This proposal ignores the fact that state sovereign
immunity, unlike foreign sovereign immunity, is
a constitutional doctrine that is meant to be both
immutable by Congress and resistant to trends.
The text of the Eleventh Amendment, of course,
makes no distinction between commercial and
noncommercial state activities . . . .
527 U.S. at 686 n.4 (opinion of Scalia, J.). The text of the
Eleventh Amendment, of course, also says nothing about
state sovereign immunity. If the matter were fully pre-
sented today, it is possible that the Court might view
matters differently. In virtually all of the cases that fol-
lowed College Savings, the Court recognized that nothing
about the doctrine of state sovereign immunity—either
its breadth or its limitations—appears in the Eleventh
Amendment. See, e.g., South Carolina State Ports Auth.,
535 U.S. at 753 (“[T]he Eleventh Amendment does not
define the scope of the States’ sovereign immunity; it is
but one particular exemplification of that immunity.”);
Garrett, 531 U.S. at 363 (“Although by its terms the Amend-
ment applies only to suits against a State by citizens of
another State, our cases have extended the Amend-
ment’s applicability to suits by citizens against their own
States.”); Kimel, 528 U.S. at 72-73 (quoting Blatchford v.
Native Village of Noatak and Circle Village, 501 U.S. 775, 779
82 No. 08-4164
(1991), for the proposition that “we have understood
the Eleventh Amendment to stand not so much for what
it says, but for the presupposition of our constitu-
tional structure which it confirms”).
These more recent developments in the law of state
sovereign immunity lend some support to the possibility
that the question of the scope of state sovereign
immunity may not yet be resolved. As I have already
noted, at least through the end of the nineteenth century
the Court regularly applied principles of public interna-
tional law (that is, the principles that apply among dif-
ferent nation-states of the world) to the U.S. states. Those
principles permeate this country’s foundational docu-
ments, and international analogies abound in the
Federalist Papers. Thus, it appears that the burden of
proof is on those who would deny that the rules gov-
erning the immunity of foreign countries apply in the
context of the states, or that a time came when state
sovereign immunity diverged from foreign sovereign
immunity. As of 1787, these were just two applications
of the same doctrine.
The Supreme Court has decided at least one case in
which it looked back to the original plan of the Conven-
tion to see if a state retained its sovereign immunity or
if it ceded a portion of that immunity to the federal gov-
ernment. This was Central Virginia Community College
v. Katz, in which the Court held that an adversary pro-
ceeding in bankruptcy brought by a Chapter 11 trustee
to set aside preferential transfers that the debtor had
made to state agencies was not barred by the state’s
No. 08-4164 83
sovereign immunity. 546 U.S. at 359. Essentially, the
State of Virginia wanted to prevent the trustee from
undoing the preferential transfers. It would have suc-
ceeded if the trustee’s action ran up against the barrier
of sovereign immunity. But, noting that bankruptcy
jurisdiction is in rem and that the states at the time of
the Founding had acquiesced in a grant of congressional
power to regulate the bankruptcy process, the Court
found that no such immunity existed. Id. 362-63. If one
were to follow the same methodology for state
sovereign immunity generally, one would start with
the analogy to foreign sovereign immunity and move
forward in each case. Only one question—but a big
one—would remain: have the contours of state sovereign
immunity changed over time, just as the contours of
foreign sovereign immunity have done?
Given the fact that the doctrine of state sovereign im-
munity is one that has been developed over the years
by the courts, largely based on structural assumptions,
there is no obvious obstacle to taking the same move
away from an absolute theory of immunity for states as
the United States has done (first in the Tate Letter and
later in the FSIA) for foreign governmental immunity.
Many of the competitive concerns that motivated the
latter move apply to the states with equal force. There is
no apparent reason, for example, why the University
of Wisconsin should be immune from lawsuits that
Marquette University, a Catholic Jesuit institution
located in Milwaukee, would have to defend. Nor is
there any apparent reason why a state-owned hospital,
or garbage pick-up service, or power plant, should have
84 No. 08-4164
a competitive edge over a private competitor. And, given
the fact that litigation imposes transaction costs—often
very high costs—on the parties, it seems undeniable
that the failure to recognize a commercial-act exception
for state entities confers the same kind of competitive
advantage on the states that the United States was re-
luctant to confer on socialist or Communist countries
when it embraced the restrictive theory of foreign sover-
eign immunity after World War II. See, e.g., Joan E.
Donoghue, Taking the “Sovereign” Out of the Foreign Sover-
eign Immunities Act: A Functional Approach to the Com-
mercial Activity Exception, 17 Yale J. Int’l L. 489, 490
(1992) (“Communist governments generally supported
an absolute theory . . . while Western governments pro-
moted a restrictive theory . . . .”); see also 1 R ESTATEMENT
(T HIRD ) OF THE F OREIGN R ELATIONS L AW OF THE U NITED
S TATES 390 (1987) (Introductory Note to Part IV, Ch. 5).
Capitalism and private ownership have served the
United States well. Even though there is no clause in the
Constitution explicitly committing this country to such
an economic system (although the Takings Clause of
the Fifth Amendment may come close), the antitrust
laws have been called quasi-constitutional, and there
seems little doubt that economic freedom is high on the
list of cherished rights. See, e.g., United States v. Topco
Associates, Inc., 405 U.S. 596, 610 (1972) (“Antitrust laws . . .
are the Magna Carta of free enterprise.”); Northern Pac.
R.R. Co. v. United States, 356 U.S. 1, 4 (1958) (“The
Sherman Act was designed to be a comprehensive
charter of economic liberty[.]”). At a minimum, this
public policy should provide a rule of construction for
No. 08-4164 85
courts considering questions of state sovereign immu-
nity. At a stronger level, these considerations may yet
persuade the Supreme Court to take up the question
whether the scope of the sovereign immunity enjoyed
by the states should be limited in the same way that
sovereign immunity is limited for foreign nations, such
that an exception to immunity would exist for com-
mercial acts. My position in this case, however, does not
depend upon the Court’s taking the latter step. Even
now, Lapides and the Court’s other decisions that
recognize waivers of sovereign immunity by litigation
conduct require us to reinstate Phoenix’s counterclaims
on remand. For all of these reasons, I respectfully dissent.
12-28-10