A panel of the Patent Trial and Appeal Board (PTAB) denied the Saint Regis Mohawk Tribe’s motion to terminate six instituted inter partes review (IPR) trials, holding that Native American tribal immunity does not apply to IPR proceedings.[1] The Mohawk Tribe filed its motion to terminate after acquiring the challenged patents from Allergan, Inc. The challenged patents cover Allergan’s successful Restasisâ product for treating dry eyes.[2]

Background

In a September 8, 2017 press release, Allergan announced that it had transferred ownership of “all Orange Book-listed patents for Restasisâ” to the Mohawk Tribe to defeat the IPR challenges based on the Mohawk Tribe’s “immunity from IPR challenges.”[3] The Mohawk Tribe received $13.75 million upon execution of the agreement, and is eligible to receive $15 million in annual royalties, while Allergan was granted an exclusive license in the six patents challenged in the IPR trials.[4] In the press release, Allergan indicated that it entered into the agreement after reviewing prior decisions in which PTAB panels dismissed IPR proceedings, including Covidien LP v. University of Florida Research Foundation Inc.[5] and Neochord, Inc. v. University of Maryland, Baltimore,[6] where state universities successfully asserted the defense of sovereign immunity under the Eleventh Amendment to obtain dismissal of the IPR proceedings.[7]

Prior PTAB Decisions on State Sovereign Immunity

While state universities were initially successful in asserting sovereign immunity as a defense under the Eleventh Amendment, other PTAB panels have limited the defense after Covidien and Neochord. In Reactive Surfaces Ltd., LLP v. Toyota Motor Corp., a PTAB panel held that Regents of the University of Minnesota, which is one of the co-owners of the challenged patent, could assert the defense of sovereign immunity, but Toyota Motor Corporation, the other co-owner of the patent, could not assert the University’s defense of sovereign immunity. Thus, the PTAB panel held that the instituted IPR trial would continue with Toyota defending the patent, while Regents of the University of Minnesota was dismissed from the trial.[8]

In Ericsson Inc. v. Regents of the University of Minnesota, an expanded panel of seven PTAB judges, including Chief Judge David P. Ruschke, unanimously decided that the patent owner, Regents of the University of Minnesota, waived its sovereign immunity defense “by filing an action in federal court alleging infringement of the patent being challenged in [the IPR] proceeding.”[9] The expanded PTAB panel reasoned that “[i]t would be unfair and inconsistent to allow a State to avail itself of the federal government’s authority by filing a patent infringement action in federal court, but then selectively invoke its sovereign immunity to ensure that a defendant is barred from requesting an inter partes review of the asserted patent from a different branch of that same federal government.”[10]

Tribal Sovereign Immunity Is Different Than State Sovereign Immunity

In Saint Regis, the PTAB panel noted that “‘[a]s a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.’”[11] However, a Native American tribe’s sovereignty “‘is of a unique and limited character’” that “‘exists only at the sufferance of Congress and is subject to complete defeasance.’”[12] The PTAB panel explained that “the Supreme Court has stated ‘the immunity possessed by Indian Tribes is not co-extensive with that of the States.’”[13]

Tribal Immunity Does Not Apply to IPR Proceedings

The panel also explained that “[t]here is no statutory basis to assert a tribal immunity defense in inter partes review proceedings.”[14] The panel reasoned that tribal immunity does not apply to IPR proceedings because Congress enacted “a generally applicable statute providing that any patent (regardless of ownership)…may be subject to inter partes review proceedings.”[15] Under the Patent Act, “Congress has given the Patent Office statutory authorization both to grant a patent limited in scope to patentable claims and to reconsider the patentability of those claims via inter partes review.”[16] IPRs serve “the ‘important public purpose’ of ‘correct[ing] the agency’s owner errors in issuing patents in the first place.’”[17] The panel explained that IPRs permit the Patent Office to “take ‘a second look at an earlier administrative grant of a patent,’ and thereby ‘help[] protect the public’s paramount interest in seeing that patent monopolies…are kept within their legitimate scope.’”[18] Based on the public purpose of IPRs and a lack of Congressional intent to provide tribal immunity in IPRs, the PTAB panel reasoned that tribal immunity does not apply to IPR proceedings.[19]

The panel also explained that IPR proceedings are not the type of proceedings to which sovereign powers have traditionally enjoyed immunity under common law. In an IPR proceeding, the PTAB is “not adjudicating any claims in which Petitioners may seek relief from the Tribe, and [the PTAB] can neither restrain the Tribe from acting nor compel it to act in any manner based on [the PTAB’s] final decisions.”[20] Further, the PTAB does not exercise personal jurisdiction over a patent owner in an IPR. Rather, “the Board exercises jurisdiction over the challenged patent in an inter partes review proceeding,” and the PTAB may take action in an IPR proceeding independent of the patent owner’s participation.[21] The panel reasoned that having jurisdiction over the challenged patent, and not the patent owner, “underscores its independent role in ensuring the correctness of granting patentable claims.”[22] In view of these factors, the panel concluded that the Mohawk Tribe’s assertion of tribal immunity did not serve as a basis to terminate the IPR proceedings.[23]

IPR Proceedings Can Continue with Allergan’s Participation

The PTAB panel also determined that even if the Mohawk Tribe was entitled to a defense of sovereign immunity, the IPR proceedings could continue with Allergan’s participation because “Allergan remains the effective patent owner.”[24] Based on the terms of the exclusive license, the panel reasoned that it was tantamount to an assignment of the patent because the license transferred all substantive rights in the patents to Allergan.[25] In support of this determination, the panel explained that Allergan retained the right to sue for infringement of the patents, including Hatch-Waxman litigation against generic equivalents,[26] the exclusive right to make, use, and sell the licensed products under the patents,[27] the right to sublicense the challenged patents,[28] all revisionary rights in the patents,[29] the right to litigation or licensing proceeds,[30] the right to control prosecution and other Patent Office proceedings and expenses,[31] and the right to assign interests in the patents.[32] In view of these factors, the panel reasoned that the exclusive license agreement between Allergan and the Mohawk Tribe created “significant restrictions on the Tribe’s purported ownership rights.”[33] The panel took no position on whether the agreement between Allergan and the Mohawk Tribe was a “sham” transaction, as argued by the petitioners.

Conclusion

The PTAB’s decision in Saint Regis that tribal immunity is different than state sovereign immunity and does not apply to IPR proceedings is a significant setback to this litigation strategy in AIA trials. Saint Regis follows the recent trend of limiting the scope of sovereign immunity in Ericsson and LSI Corp. where expanded PTAB panels held that a State entity waives its sovereign immunity when it asserts the challenged patent in federal court. It is expected that the Federal Circuit will have their say on these issues in the coming months.

[1] Mylan Pharmaceuticals Inc. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 130 (PTAB Feb. 23, 2018). The same decision was issued for similar motions to terminate in IPR2016-01128 to IPR2016-01132. The decision in IPR2016-01127 is referenced in this article.

[2] The IPRs challenge US Patent Nos. 8,629,111; 8,633,162; 8,642,556; 8,648,048; 8,685,930; and 9,248,191. The patents will expire on August 27, 2024.

[3] “Allergan and Saint Regis Mohawk Tribe Announce Agreements Regarding RESTASISâ Patents,” September 8, 2017, available at https://www.allergan.com/news/news/thomson-reuters/allergan-and-saint-regis-mohawk-tribe-announce-agr.

[4] Id.

[5] IPR2016-01274, Paper 21 (PTAB Jan. 25, 2017) (PTAB panel dismissed the IPR proceeding prior to institution because the patent owner was determined to be “an arm of the State of Florida” and is therefore entitled to a sovereign immunity defense to institution of an IPR).

[6] IPR2016-00208, Paper 28 (PTAB May 23, 2017) (PTAB panel dismissed the IPR proceeding after institution because the patent owner was determined to be “an arm of the State of Maryland” and may therefore raise sovereign immunity as a defense, and patent owner did not waive its defense through its participation in the IPR proceeding).

[7] Allergan press release, supra.

[8] IPR2016-01914, Paper 36 (PTAB July 13, 2017).

[9] IPR2017-01186, Paper 14 at 4 (PTAB Dec. 19, 2017); see also LSI Corp. v. Regents of the Univ. of Minn., IPR2017-01068, Paper 19 (PTAB Dec. 19, 2017) (an expanded PTAB panel denied patent owner’s pre-institution motion to dismiss for substantially the same reasons as in Reactive Surfaces). On February 12, 2018, Regents of the University of Minnesota filed a Notice of Appeal in response to the PTAB’s denial of its motion to dismiss the IPR.

[10] Ericsson, IPR2017-01186, Paper 14 at 8-9 (citations omitted).

[11] Saint Regis, IPR2016-01127, Paper 130 at 7 (quoting Kiowa Tribe of Okla. V. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998)).

[12] Id. (quoting United States v. Wheeler, 435 U.S. 313, 323 (1978)).

[13] Id. (quoting Kiowa, 523 U.S. at 756).

[14] Id. at 10 (citing Athena Automation Ltd. v. Husky Injection Molding Sys. Ltd., IPR2013-00290, Paper 18 at 12-13 (PTAB Oct. 25, 2013) (precedential) (contrasting 35 U.S.C. § 311(a), which governs who may file an IPR petition, with 19 U.S.C. § 1337(c) in which Congress provided that “‘[a]ll legal and equitable defenses may be presented’ in International Trade Commission (ITC) investigations”).

[15] Id. at 11 (citing 35 U.S.C. §§ 101 and 311-319) (emphasis original).

[16] Id. at 11-12 (citing MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284, 1289 (Fed. Cir. 2015)) (emphasis original).

[17] Id. at 12 (quoting MCM Portfolio, 812 F.3d at 1290.

[18] Id. at 12 (quoting Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016) (internal citations omitted)).

[19] Id. at 12-14.

[20] Id. at 16.

[21] Id. at 16-18 (explaining that the PTAB may take action in an IPR proceeding even when a patent owner has chosen not to participate, or the patent owner has settled with the petitioner).

[22] Id. at 18.

[23] Id.

[24] Id. at 18, 35.

[25] Id. at 19-20 (citing Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000) (the “party that has been granted all substantial rights under the patent is considered the owner regardless of how the parties characterize the transaction that conveyed those rights.”).

[26] Id. at 20-26.

[27] Id. at 26-29.

[28] Id. at 29-30.

[29] Id. at 30-31.

[30] Id. at 31-32.

[31] Id. at 32-33.

[32] Id. at 33-34.

[33] Id. at 34.