IP Law Daily Tribal sovereign immunity does not apply in inter partes review proceedings
Friday, July 20, 2018

Tribal sovereign immunity does not apply in inter partes review proceedings

By Cheryl Beise, J.D.

The Patent Trial and Appeal Board properly determined that inter partes review ("IPR") of several patents related to Allergan’s "Restasis" drug for treating eye conditions was not barred by Allergan’s assignment of the challenged patents to the Saint Regis Mohawk Tribe, the U.S. Court of Appeals for the Federal Circuit has held. The doctrine of tribal immunity cannot be asserted in IPR proceedings because IPR is more like an agency enforcement action than a civil suit brought by a private party. In affirming the Board’s decision denying the Tribe’s motion to terminate the IPRs, the Federal Circuit left for another day whether state sovereign immunity would apply in IPR proceedings (Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., July 20, 2018, Moore, K.).

In 2015, Allergan, Inc., sued several generic drug manufacturers in the Eastern District of Texas, alleging infringement of patents relating to Allergan’s Restasis drug for treating eye conditions. On June 3, 2016, Mylan Pharmaceuticals, Inc., petitioned for IPR of the Restasis patents. The Board instituted review and joined petitioners Teva Pharmaceuticals USA, Inc., and Akorn, Inc. 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 via an assignment recorded with the USPTO on September 8, 2017. The Board allowed the Tribe to file a motion 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. On February 3, 2018, the Board denied the Tribe’s motion to terminate the pending proceedings, concluding that the Tribe did not establish that it was entitled to assert tribal immunity. The Board also denied Allergan’s motion to withdraw from the proceedings. The Board noted that Allergan retained all substantial rights and remained the true owner of the challenged patents. Allegan and the Tribe appealed.

Tribal sovereign immunity. The Federal Circuit began by noting that as "domestic dependent nations," Indian tribes possess "inherent sovereign immunity," precluding suits against them, absent a clear waiver by the tribe or congressional abrogation. However, tribal immunity derives from the common law and does not extend to actions brought by the federal government, including when the government, acting through an executive branch agency, engages in an investigative action or pursues an adjudicatory agency action.

The Tribe relied on the Supreme Court’s decision in Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743, 754–56 (2002) ("FMC"), holding that the doctrine of state sovereign immunity precluded the Federal Maritime Commission from "adjudicating a private party’s complaint that a state-run port ha[d] violated the Shipping Act of 1984." The Court concluded that FMC proceedings had "overwhelming" similarities with civil litigation in federal courts, including nearly identical discovery procedures. The Court recognized a distinction between adjudicative proceedings brought against a state by a private party and agency-initiated enforcement proceedings. The Federal Circuit acknowledged that "the precise contours of tribal sovereign immunity differ from those of state sovereign immunity tribal immunity," but nevertheless found FMC to be instructive.

In essence, the ability of the Tribe to assert tribal sovereign immunity turned on whether inter partes review proceedings are considered more akin to enforcement proceedings initiated by a federal government agency or adjudicatory proceedings between private parties.

Nature of IPR proceedings. In analyzing the nature of IPR proceedings the Federal Circuit observed that "IPR is neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government." Rather IPR "is a ‘hybrid proceeding’ with ‘adjudicatory characteristics’ similar to court proceedings, but in other respects it ‘is less like a judicial proceeding and more like a specialized agency proceeding,’" the court said, citing Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016).

The Federal Circuit additionally observed that two recent Supreme Court decisions "underscore this tension." In Oil States Energy Services v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018), the Court emphasized the government’s central role in IPR and the role of the USPTO in protecting the public interest In contrast, the Court emphasized the adjudicatory aspects of IPR and the way in which it "mimics civil litigation" in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018).

The Federal Circuit concluded that IPR is more like an agency enforcement action than a civil suit brought by a private party. The court cited several factors to support its conclusion.

First, although the USPTO Director’s discretion in how he conducts IPR "is significantly constrained," the Director has complete discretion in deciding whether to institute review, and while this is only one decision, "it embraces the entirety of the proceeding," the court noted. In FMC, the Supreme Court recognized that immunity does not apply to cases in which an agency chooses whether to institute a proceeding on information supplied by a private party. Unlike the USPTO Director, the Federal Maritime Commission lacked the "discretion to refuse to adjudicate complaints brought by private parties."

Second, once IPR has been initiated, the Board may choose to continue review even if the patent owner does not participate and even if the petitioner decides not to participate. "This reinforces the view that IPR is an act by the agency in reconsidering its own grant of a public franchise," the court said.

Third, unlike FMC, the USPTO procedures in IPR are substantially different from the Federal Rules of Civil Procedure. For example, in IPRs, discovery is limited, a petitioner may not amend its petition (except to correct clerical errors), and a patent owner may seek to amend its patent claims.

Finally, the existence of more inquisitorial and less adjudicatory proceedings in which immunity clearly does not apply—such as ex parte proceedings or inter partes reexamination proceedings—does not mean that immunity cannot also be applied to IPR proceedings administrative agency reconsideration decisions.

"The Director’s important role as a gatekeeper and the Board’s authority to proceed in the absence of the parties convinces us that the USPTO is acting as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies ‘within their legitimate scope,’" the Federal Circuit said. In affirming the PTAB’s decision, the Federal Circuit noted that its decision was limited to tribal immunity and did not reach the question of whether state sovereign immunity would apply in IPR proceedings.

Concurring opinion. Circuit Judge Timothy Dyk wrote a concurring opinion to describe in greater detail the history of inter partes review proceedings, beginning with the Reexamination Act of 1980, which created ex parte reexamination, the first post-issuance proceeding to review patent validity. According to Judge Dyk, the history and purpose of post-grant review proceedings support that they were never intended to be adjudications between private parties. Instead, they are "fundamentally agency reconsiderations of the original patent grant, proceedings as to which sovereign immunity does not apply."

This case is Nos. 18-163818-163918-164018-164118-1642 and 18-1643.

Attorneys: Michael W. Shore (Shore Chan Depumpo LLP) for Saint Regis Mohawk Tribe. Jonathan Massey (Massey & Gail LLP) for Allergan, Inc. Eric Miller (Perkins Coie, LLP) for Mylan Pharmaceuticals Inc. John Christopher Rozendaal (Sterne Kessler Goldstein & Fox, PLLC) for Teva Pharmaceuticals USA, Inc. Michael R. Dzwonczyk (Sughrue Mion PLLC) for Akorn, Inc.

Companies: Saint Regis Mohawk Tribe; Allergan, Inc.; Mylan Pharmaceuticals Inc.; Teva Pharmaceuticals USA, Inc.; Akorn, Inc.

MainStory: TopStory Patent FedCirNews

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