The Federal Circuit issued its decision in Saint Regis Mohawk Tribe et al v. Mylan Pharmaceuticals Inc., et al (18-1638) on July 20, 2018. The central question addressed in the Federal Circuit's decision was whether the principal of sovereign immunity can be asserted by a patent owner to avoid their patent being subjected to the Inter Partes Review (IPR) process. The decision hinged on whether the IPR process is more akin to the civil litigation-like proceedings in adjudications before the Federal Maritime Commission in which state sovereign immunity was held to apply (Fed. Maritime Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 754–56 (2002) ("FMC") or whether IPR is a traditional agency action in which it has been previously held that sovereign immunity does not typically apply (see, for example, Pauma v. NLRB, 888 F.3d 1066 (9th Cir. 2018); Karuk Tribe Hous. Auth., 260 F.3d at 1074; and Fed. Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99, 122 (1960)). It is important to note, however that there is no blanket rule that immunity does not apply in federal agency proceedings.
The Federal Circuit's reasoning was thus guided by the Supreme Court's analysis in FMC, to determine whether IPR more resembles typical civil litigation between two parties, or an agency proceeding. The Federal Circuit held that the IPR process is clearly neither a judicial proceeding instituted by a single party, nor clearly an enforcement action brought by the federal government, but rather is a "hybrid proceeding" with characteristics of both. While the USPTO Director has sole discretion on whether or not to institute an IPR, the IPR process still bears some resemblance to civil litigation.
Ultimately, the following factors were significant components of the Federal Circuit decision:
- While the USPTO Director has limited discretion in how IPR is conducted, the Director has broad discretion in determining whether to institute an IPR proceeding, thus acting as a gatekeeper. The Federal Circuit even states that while the Director can decide not to implement an IPR based purely on the merits of the case, the Director has the discretion to deny review for other reasons as well, such as administrative efficiency or even based on a party's status as a sovereign. This clearly weighs in favor of an agency proceeding rather than civil litigation.
- The roles of the Parties in IPR also suggests immunity does not apply in such proceedings, since once the IPR has been initiated, the Patent Trial and Appeal Board (PTAB) may choose to continue review even if the petitioner decides not to participate (35 U.S.C. 317(a)). The Director also has the right to participate in appeals even if the private challengers decide not to participate. This further weighs in favor of an agency proceeding rather than civil litigation, since if a party decides to withdraw from civil litigation, the case (or at least that party's claims) are moot.
- In IPR, the procedures do not mirror the Federal Rules of Civil Procedure. In civil litigation, the Federal Rules of Civil Procedure permit opportunities for significant amendments to complaints, while in IPR a petitioner can only make clerical or typographical corrections to its petition. Once again, this weighs in favor of IPR being more akin to an agency procedure than civil litigation.
Because of the above factors, the Federal Circuit held that tribal sovereign immunity does not apply in IPR proceedings. I note, however, that in the final sentence of their analysis, the Federal Circuit explicitly stated that this decision did NOT address whether there is any reason to treat state sovereign immunity differently with respect to IPR proceedings. That will remain to be seen...
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