By Cheryl Beise, J.D.
Inter partes review of several patents related to Allergan’s "Restasis" drug can proceed, despite Allergan’s purported assignment of the challenged patents to the Saint Regis Mohawk Tribe, the Patent Trial Appeal Board has ruled. In view of the differences between state sovereign immunity and tribal sovereign immunity and the absence of any statutory basis for tribal immunity, and given that the PTAB in post-grant review cases exercises jurisdiction over patents, not patent owners, the Board held that the doctrine of tribal sovereign immunity does not apply in inter partes review proceedings. Moreover, the presumption of ownership associated with the recorded assignment of the challenged patents in this case was overcome because under the terms of a license agreement with the Tribe, Allergan retained all substantial rights and remained the true owner of the challenged patents and the Tribe was not an indispensable party to the proceedings (Mylan Pharmaceuticals, Inc. v. Saint Regis Mohawk Tribe, February 23, 2018, per curiam).
Generic drug manufacturer Mylan Pharmaceuticals, Inc. petitioned for inter partes review of several patents owned by Allergan, Inc. related to Allergan’s "Restasis" drug for treating eye conditions. The Board instituted review and joined Allergan rivals Teva Pharmaceuticals USA, Inc., and Akorn Inc., (collectively with Mylan, "Petitioners"). Less than a week before the scheduled hearing, counsel for the Saint Regis Mohawk Tribe ("the Tribe") informed the Board that the Tribe acquired the challenged patents. The Board allowed the Tribe to file a motion to dismiss (to terminate the proceedings) based on tribal sovereign immunity. In view of the public interest and the issue of first impression generated by the Tribe’s motion, the Board allowed third parties to file amicus curiae briefs.
Patent assignment and license. On September 8, 2017, Allergan and the Tribe entered into (1) an Assignment Agreement, whereby Allergan assigned to the Tribe a set of U.S. patents, including the challenged patents, and patent applications, and (2) a Patent License Agreement, in which the Tribe granted back to Allergan "an irrevocable, perpetual, transferable and exclusive license" under the challenged patents "for all FDA-approved uses in the United States" and under which Allergan was granted the first right to sue for infringement with respect to "Generic Equivalents," while the Tribe had the first right to sue for infringement unrelated to such Generic Equivalents. In exchange for the rights granted in the License, Allergan paid the Tribe a nonrefundable amount of $13.75 million. During the royalty term of the License, Allergan would pay $3.75 million each quarter. The License also specified the rights and obligations as between Allergan and the Tribe concerning the maintenance and prosecution of the challenged patents, as well as in administrative proceedings before the PTO.
Basis for tribal sovereign immunity. Indian tribes are "domestic dependent nations" that exercise "inherent sovereign authority." A tribe’s sovereignty, however, "is of a unique and limited character," the Board noted.
The Tribe relied on the Supreme Court’s decision in Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743 (2002), holding that the doctrine of state sovereign immunity extends to federal agency adjudicatory proceedings. The Tribe cited prior PTAB decisions recognizing state sovereign immunity and certain administrative decisions of other federal agencies recognizing tribal immunity. The Board, however, noted that the Tribe cited no federal court or Board precedent holding that the doctrine of state sovereign immunity in administrative adjudications includes tribal immunity. The Supreme Court has explained that that tribal immunity is not co-extensive with the immunity enjoyed by states.
Furthermore, there was no statutory basis to assert a tribal immunity defense in inter partes review proceedings. Board precedent cautions against the application of non- statutory defenses in inter partes review proceedings, the Board noted. "In view of the recognized differences between the state sovereign immunity and tribal immunity doctrines, and the lack of statutory authority or controlling precedent for the specific issue before us, we decline the Tribe’s invitation to hold for the first time that the doctrine of tribal immunity should be applied in inter partes review proceedings," the Board said.
Inter partes review proceedings. The Board was not convinced that the tribal immunity doctrine applied to PTAB proceedings. The Board noted that the patent application, registration, and post-grant review regime enacted by Congress applies equally to all patents and patent applications, regardless of ownership. Even disputes between private parties involve over patent validity serve the public purpose of limiting the scope of patent monopolies.
As the Ninth Circuit has stated, "tribal sovereignty does not extend to prevent the federal government from exercising its superior sovereign powers." Quileute Indian Tribe v. Babbitt, 18 F.3d 1456, 1459 (9th Cir. 1994). In addition, other circuit courts have declined to find that Indian tribes are immune from administrative proceedings to enforce generally applicable federal statutes. The fact that these proceedings were maintained by the federal government rather than a private party (though some were initiated after receipt of a private party complaint) was not a distinguishing factor, in the Board’s view.
The Board also explained that an inter partes review proceeding is not the type of "suit" to which an Indian tribe would traditionally enjoy immunity under the common law. The Board in post-grant review proceedings is limited to assessing the patentability of the challenged patent claims. The Board does not adjudicate rights between private parties, award damages, or order injunctive relief. In an inter partes review proceeding, the Board exercises jurisdiction over the challenged patent, not the patent owner. In fact, the Board has exercised its authority to resolve the issue of patentability without the participation of the patent owner or even after the parties to the proceeding have resolved their underlying dispute.
The Board concluded that the Tribe’s assertion of its tribal immunity did not serve as a basis to terminate these proceedings.
Present proceedings. Even assuming arguendo that the Tribe was entitled to assert immunity, the Board determined that the present proceedings could proceed because Allergan remained the true owner of the challenged patents. In some cases, an exclusive license may be tantamount to an assignment of all substantial rights, the Board noted. But in this case—considering the rights transferred and the rights retained under the terms of the License between Allergan and the Tribe—the agreement transferred "all substantial rights" in the challenged patents back to Allergan.
Importantly, Allergan retained the right to prosecute infringement relating to "Generic Equivalents." Considering that the challenged patents were listed on the FDA’s Orange Book," "any viable infringement allegation for the challenged patents would have to necessarily be limited to drug products that require FDA approval, i.e., Generic Equivalents," the Board said. Indeed, the only district court proceedings to date were Hatch-Waxman Act cases against companies seeking to market FDA-approved generic versions of Restasis.
The License also provided that the Tribe "shall not directly or indirectly develop, market or license any Competing Product, or engage in or license activities that would and/or are intended to result in a Competing Product." The License further required the Tribe to consult with Allergan as to strategy and consider in good faith any comments with respect to such an infringement action. Based on the record, the Board concluded that the Tribe had not retained anything more than "an illusory or superficial right to sue for infringement of the challenged patents."
The Board determined that Allergan’s exclusive rights to commercially exploit the patents—purportedly limited to "all FDA-approved uses"—were co-extensive with the scope of the claimed inventions and not limited in any meaningful way. The terms of the License did not allow the Tribe to control Allergan’s (or any other licensee’s) commercial activities with regard to the challenged patents. While the Tribe could practice the licensed patents for research, scholarly use, teaching, education, and patient care, such uses were not substantial, according to the Board, because they could not advance any "Competing Product." The License also did not allow the Tribe to receive a portion of the proceeds from any of Allergan’s commercially relevant litigation or licensing activities.
The License did not allow the Tribe to freely assign its interests in the challenged patents, but Allergan was allowed to assign its interests without the Tribe’s consent. This imposed a significant restriction on the Tribe’s purported ownership rights, according to the Board. The Tribe also did not have control over the terms of sublicenses that may be granted by Allergan. The rights granted to Allergan under the License were "perpetual" and "irrevocable," and the License would continue in effect until the patents expired or were finally judged invalid. As such, the Tribe did not have any reversionary rights in the challenged patents, the Board noted.
Finally, the License provided Allergan with the primary right, but not the obligation, to prosecute and maintain the challenged patents, as well as the responsibility for any "Administrative Proceedings" before the PTO. The Tribe could conduct and control the defense in any contested PTO Proceeding only in the event that Allergan elected not to defend the challenged patents in such a proceeding.
"In sum, upon considering the relevant License terms, we find that Allergan obtained all substantial rights in the challenged patents," the Board said. Therefore, the presumption associated with the recorded assignment of the challenged patents was overcome in this case.
The Board also held that the Tribe was not an "indispensable party" to the proceedings under Federal Rule of Civil Procedure 19(b). First, the Federal Rules of Civil Procedure do not apply to inter partes review proceedings, but even they did, application of the traditional Rule 19(b) factors did not favor the Tribe. "Allergan has at least an identical interest to the Tribe—if not more of an interest as the effective patent owner for the reasons discussed above—in defending the challenged patents," the Board said. The Board found that the Tribe would not be significantly prejudiced in relation to the merits of the patentability challenges if it chose not to participate in the proceedings based on its alleged tribal immunity.
Finally, the Board rejected the Tribe’s assertion that termination of the proceedings would not affect the petitioners’ rights and remedies in the co-pending district court cases. The claims and patents litigated in the Eastern District of Texas were not co-extensive with the challenged claims and patents and the standards of proof for unpatentability in inter partes review proceedings and invalidity in district court proceedings were different. In October 2017, the federal district court in Marshall, Texas, held that the asserted claims of six patents for the formulation used in Restasis were invalid in light of prior art. The court also granted Allergan’s motion to join the Saint Regis Mohawk Tribe as a co-plaintiff, but the court questioned whether the assignment was valid and expressed misgivings about the wider implications of the transfer.
The Board concluded that the Tribe failed to establish that it was entitled to assert its tribal immunity in the inter partes review proceedings. It further held that the proceedings could continue with Allergan as the patent owner, and the Tribe was not an indispensable party.
Attorneys: Steven W. Parmelee (Wilson Sonsini Goodrich & Rosati) for Mylan Pharmaceuticals Inc. Gary Speier (Carlson, Caspers, Vandenburgh, Lindquist & Schuman, P.A.) for Teva Pharmaceuticals USA, Inc. Michael Dzwonczyk (Sughrue Mion PLLC) for Akorn Inc. Dorothy P. Whelan (Fish & Richardson PC) for Saint Regis Mohawk Tribe.
Companies: Mylan Pharmaceuticals Inc.; Teva Pharmaceuticals USA, Inc.; Akorn Inc.; Saint Regis Mohawk Tribe
MainStory: TopStory Patent USPTO
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