United States: Tribal Sovereign Immunity Doctrine Does Not Insulate Tribes From Board Actions

In a case of first impression, the PTAB recently decided that the doctrine of tribal sovereign immunity does not apply to inter partes review proceedings.  See Mylan Pharmaceuticals Inc. v. Saint Regis Mohawk Tribe, IPR2016-01127; IPR2016-01128; IPR2016-01129; IPR2016-01130; IPR2016-01131; IPR2016-01132, Paper 130 ("Mylan").  Prior to the Mylan decision, the PTAB had never addressed a claim of tribal sovereign immunity by a patent owner.  Just over a year ago, the PTAB decided in Covidien LP v. University of Florida Research Foundation Incorporated ("Covidien") that Eleventh Amendment sovereign immunity applied to PTAB proceedings and, therefore, insulated arms of a state, such as state universities, from PTAB actions absent consent.   see,  PTABLitigationBlog  post regarding Covidien; see also  PTABLitigationBlog  post regarding Neochord. In Mylan, however, the PTAB declined to expand its Covidien holding to provide immunity to Indian tribes.

Shortly after the PTAB's decision in Neochord, Inc. v. University of Maryland, Baltimore ("Neochord"), that further insulated state universities from PTAB review, the Saint Regis Mohawk Tribe ("the Tribe") established the "Office of Technology, Research, and Patents" and entered into a patent assignment agreement with Allergan, Inc. ("Allergan") in which Allergan assigned to the Tribe a set of U.S. patents and applications related to Allergan's "Restasis" drug.  The Tribe granted back to Allergan an irrevocable, perpetual, transferable, and exclusive license for the patents for all FDA-approved uses in the United States.  At the time, the PTAB had already instituted inter partes review on Allergan's patents based on petitions filed by Mylan Pharmaceuticals, Inc.  After executing the agreements with Allergan, the PTAB allowed the Tribe to file a motion to terminate the inter partes review proceedings based on the Tribe's alleged sovereign immunity.

The PTAB declined to hold that the doctrine of tribal immunity should be applied to inter partes review proceedings because of the "recognized differences between the state sovereign immunity and tribal immunity doctrines, and the lack of statutory authority or controlling precedent" to do so.  The PTAB noted that federal courts have recognized only limited exceptions when a generally applicable federal statute should not apply to tribes and found that inter partes review proceedings were not one of those exceptions because such proceedings do not interfere with the Tribe's "exclusive rights of self-governance in purely intramural matters."  The PTAB also noted that Indian tribes have not enjoyed immunity in other types of federal administrative proceedings used to enforce generally applicable federal statutes.

In tension with its Covidien and Neochord decisions, the PTAB also concluded that "reconsideration of the patentability of issued claims via inter partes review is appropriate without regard to the identity of the patent owner" because (a) the PTAB is not adjudicating any claims in which Petitioners may seek relief from the patent owner; (b) the PTAB can neither restrain the patent owner from acting or compel it to act; (c) there is no possibility of monetary damages or an injunction as a remedy against the patent owner; and (d) the PTAB does not exercise personal jurisdiction over the patent owner.  The PTAB also pointed out that even if the parties to an inter partes review settle their dispute, the PTAB may continue to independently determine any question of patentability.  The PTAB, however, did not explain why this reasoning would not also apply to states as patent owners, and it remains to be seen whether this argument is advanced in future litigation, especially considering that Administrative Patent Judges Bisk and Harlow (neither having participated in Mylan) have previously argued in concurring opinions that state universities, having availed themselves of the Patent Office's procedures to secure patent rights, have waived sovereign immunity against reconsideration in inter partes review.

Assuming arguendo that the Tribe was entitled to assert sovereign immunity, the PTAB also decided that termination of the proceedings was not warranted because they could proceed with another patent owner's participation—Allergan's.  Despite Allergan and the Tribe's agreements that ostensibly transferred ownership of the challenged patents to the Tribe, the PTAB held that the licensing agreement transferred "all substantial rights" in the challenged patents back to Allergan, including (1) the right to sue for infringement; (2) the exclusive right to exploit the patents; (3) the right to sublicense; (4) reversionary rights in the patent; (5) the right to litigation or licensing proceeds; (6) the obligation to pay maintenance fees and the right to control Patent Office proceedings; and (7) the right to assign interests in the patents.  The PTAB found any rights retained by the Tribe "illusory."  Because Allergan remained the effective patent owner, the PTAB determined that the proceedings could continue with Allergan's participation only, regardless of whether tribal sovereign immunity applied to the Tribe.  This analysis, although dicta, should serve as a warning to patent owners, contemplating similar conveyance and licensing arrangements with state universities, that the PTAB may likewise find the licensee the "effective patent owner" if it maintains "all substantial rights" to the challenged patents.

In sum, Mylan has eliminated the possibility of relying on tribal immunity to insulate patents from inter partes review.  It remains to be seen whether the Federal Circuit has jurisdiction to review the PTAB's decisions regarding sovereign immunity on constitutional grounds, and if so, Practitioners should be interested to know whether states waive immunity by availing themselves of the Patent Office's procedures to secure patent rights and whether inter partes review is appropriate regardless of the identity of the patent holder.

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