Federal Circuit Revisits IPR Estoppel in Ironburg Inventions LTD. v. Valve Corp.

Maier & Maier

Ironburg Inventions LTD. v. Valve Corp., 21-2295 (Fed. Cir. 2023)

This case presented the Court of Appeals for the Federal Circuit with an opportunity to clarify the standards for determining estoppel of invalidity grounds in inter partes review (IPR) pursuant to 35 U.S.C. § 315(e)(2).

Ironburg initially sued Valve in 2015 for infringement of their U.S. Patent 8,641,525 (the ‘525 patent) which describes a handheld video game controller with the particular innovation of back control buttons. Valve’s “Steam Controller” included similar back buttons. The trial took place in 2021 over Zoom with the jury returning a verdict of willful infringement by Valve and awarding over $4 million in damages to Ironburg. Both parties appealed.

Valve raised on appeal the arguments that: first, the claims of the ‘525 patent are invalid as indefinite; second, that Valve is entitled to judgment as a matter of law because trial record contained insufficient evidence to find infringement, or alternately that Valve is entitled to a new trial because the trial court erroneously allowed a co-inventor to provide testimony wile Valve’s genera counsel’s testimony was excluded; third, the district court erred in denying Valve’s motion for judgment as a matter of law on the issue of willfulness, or alternatively for a new trial on willfulness; and fourth, Valve should not have been estopped from asserting prior art grounds against the ‘525 patent. Ironburg’s cross-appeal for enhanced damages was dismissed as the district court was within its discretion to decline a grant of enhanced damages.

The appeals court dismissed Valve’s first arguments for indefinite claims. The terms describing the controller back buttons as “elongate member[s]” “substantially the full distance between the top and bottom edge” were found clearly, to a person of ordinary skill in the art, to be descriptive of long buttons spanning the length of the back of the controller which are accessible to the users third, fourth, and fifth fingers.

Judge Clevenger’s dissenting opinion on this issue contends that the “extends substantially the full distance between the top edge and bottom edge” language is indefinite because it gives a person of ordinary skill in the art no certain boundaries for starting and ending such a measurement. He finds that the district court merely “held ipse dixit that Valve did not carry its burden” for proving that this language is indefinite without properly addressing Valve’s measurement argument.

Valve’s appeal for judgment as a matter of law was dismissed by the appeals court based on finding that the jury was provided with substantial enough evidence to reach their conclusion. A significant factor in this finding was the fact that each juror had an actual Steam Controller sent to their homes for hands-on examination. The alternate appeal for new trial was also dismissed because the district court was found to have acted within its discretion in excluding Valve’s proffered testimony.

The appeals court did find that the district court erred as to Valve’s third issue on appeal regarding willfulness, however the error was harmless and thus the denial of Valves motions was upheld.

Valve’s fourth issue on appeal resulted in a significant clarification to the standards for Non-Petitioned Grounds estoppel in IPR review. Valve presented four grounds for invalidity, two Non-Instituted and two Non-Petitioned. The appeals court found that the district court was correct in estopping the two Non-Instituted Grounds because they were included in Valve’s initial IPR petition but not instituted by the Patent and Trademark Office. Valve chose not to seek remand for this decision and therefore forfeited their claim against estoppel.

In contrast, estoppel of the Non-Petitioned Grounds was vacated and remanded. The “standards by which a determination is to be made as to what invalidity grounds not presented in a petition are estopped” had not yet been addressed by the appeals court. Thus, the district court was left to look to other district court rulings, and erroneously placed the burden of proof on Valve for determining whether “a skilled searcher conducting a diligent search reasonably could have been expected to discover” the grounds in question. The appeals court held instead that “the burden of proving, by preponderance of the evidence, that a skilled searcher exercising reasonable diligence would have identified an invalidity ground rests on the patent holder, as the party asserting and seeking to benefit from affirmative defense of IPR estoppel.”

The court’s holding on Valve’s fourth issue on appeal will have significant impact on litigation concerning IPR estoppel moving forward, as patent owners have now been strapped with a new burden of proof in defenses against invalidity.

Prior Contract Clause Precludes IPR in Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc.

Maier & Maier

The Federal Circuit Court enforced the plain language of a confidentiality agreement to prevent an IPR proceeding from going before the PTAB.

In the summer of 2020, Nippon Shinyaku Co., Ltd. and Sarepta Therapeutics, Inc. entered into a mutual confidentiality agreement relating to a potential partnership for a Duchenne Muscular Dystrophy therapy. As a part of the deal, the parties settled on a two-year covenant not to bring any lawsuits relating to the treatment and its intellectual property. The agreement also included a forum-selection clause that required the parties to bring suits, including any patent disputes, to the District Court of Delaware following the two-year period.

Immediately following the conclusion of the two-year covenant, Sarepta filed seven inter partes review (IPR) petitions with the Patent Trial and Appeals Board (PTAB) in protest of Nippon’s patents. An IPR petition allows the challenger to protest the validity of a patent. In response, Nippon filed suit in the District of Delaware for patent infringement, breach of contract, and requested a preliminary injunction against Sarepta filing the IPR petitions.

Initially, the District Court of Delaware heard the case and rejected Nippon’s request for a preliminary injunction. It determined that the contract intended to preserve the ability to file IPR petitions because the forum-selection clause referred to federal district court litigation, not IPR proceedings. Rather, including IPR petitions in the forum-selection clause would time-bar the ability to file the petitions. In the interest of policy and public interest, the district court concluded that Sarepta should be allowed to file IPR petitions with the PTAB.

However, the Federal Circuit disagreed. In reversing the district court’s decision, the federal circuit held that the plain language of the agreement prevented filing outside the District of Delaware. The forum selection clause clearly provided the terms of the disputes. Because patent disputes were included in the forum requirement, they too had to filed with the District of Delaware. The court justified it decision based on past cases that upheld the ability for parties to waive their right to file an IPR petition. It concluded by noting that the policy factors actually weighed in favor of Nippon because Sarepta would otherwise have multiple opportunities to invalidate Nippon’s patent.

The opinion was precedential, and the court distinguished its decision from cases like Kannuu v Samsung based on the specific language of the agreement. And the decision will undeniably impact future contracts involving patent and intellectual property agreements. On one hand, the court’s decision benefits patents owners by increasing the burden of proof when arguing the invalidity of a patent. In district courts, the burden of proof requires the higher, “clear and convincing evidence” standard to find invalidity. However, the PTAB requires only a “preponderance of the evidence” to find a patent invalid, an easier standard to meet.[1] Patent owners who contract for a forum-selection clause in district courts will be better off when defending the validity of their patents.

The decision creates clear implications for contractual concerns when negotiating around intellectual property. Parties will have to be more aware of their agreements and the ease at which they can contract away their rights, even with a simple forum-selection clause. The Court has made clear that the plain language of a contract dominates. Parties should be intentional and considerate when negotiating their rights and agreements going forward considering that certain filings are not guaranteed and can be bargained away.

[1] https://www.jdsupra.com/legalnews/federal-circuit-rehearing-denial-in-6183834/

Maier & Maier Wins Contested Institution Decision for Petitioner in Inter Partes Review

Maier & Maier

The Maier & Maier litigation team scored another victory at the Patent Trial and Appeal Board (PTAB), securing an institution order on behalf of the Petitioner, Eve Energy Co., Ltd. (“Eve”).  Despite Patent Owner Varta Microbattery GmBH’s Patent Owner Preliminary Response, the PTAB has determined that Maier & Maier, on behalf of Eve, demonstrated a reasonable likelihood that it will prevail with respect to at least one of the challenged claims.

On behalf of Eve, Maier & Maier challenged claims of U.S. Patent No. 9,496,581 on obviousness grounds.  Maier & Maier’s strategic use of testimonial evidence appears to have greatly benefited its position, while the Patent Owner Preliminary Response was limited to attorney argument without testimonial evidence.  In reaching its decision, the PTAB also agreed with Eve’s asserted level of ordinary skill in the art and Eve’s assertions regarding claim construction.

On August 9, 2021, the PTAB ordered that the inter partes review be instituted for all challenged claims.

If you or your company need similar assistance, please contact Maier & Maier’s litigation team here.

Arthrex: Supreme Court Upholds PTAB Judges

Maier & Maier

After facing extreme uncertainty at the Federal Circuit, the Patent Trial and Appeal Board’s (“PTAB”) judges have avoided calamity as the Supreme Court upheld their appointment process as constitutional in Arthrex v. Smith & Nephew. In their final decision, the Court held that while their appointment was upheld, the review process for their decisions was not and remanded the case down to the acting USPTO Director for further consideration.

The case began in an inter partes review proceeding at the PTAB and was appealed to the Federal Circuit on the basis that the Administrative Patent Judges comprising the Board are principal officers, who need Presidential appointment with the advice and consent of the Senate. This was premised on the lack of review their decisions receive from the USPTO Director, who is a duly appointed principal officer. According to 35 U. S. C. §6(c), “only the Patent Trial and Appeal Board may grant rehearings”. By insolating the APJs from Director’s review, Arthrex argued that they were converted to principal officers and their appointment was unconstitutional.

At the Federal Circuit, the panel agreed. Because the review process vested the APJ’s with power that exceeded that of an inferior officer, their appointment by the U.S. Secretary of Commerce was insufficient to satisfy the constitutional requirement. To cure this, the Federal Circuit declared that the tenure provision of the APJ’s was unconstitutional. This allowed the USPTO Director to fire them at their discretion and imbued the Director with a form of review over their processes. By giving the Director this authority, the Federal Circuit believed the APJ’s were satisfactorily inferior officers and their appointment could be upheld.

After the denied en banc rehearing, the Supreme Court disagreed in a splintered decision by the Justices. The opinion of the Court was authored by Justice Roberts and joined for Parts I and II by Justices Gorsuch, Alito, Barrett, and Kavanaugh. The crux of the decision rests on the review process itself being unconstitutional and curing it by remanding the case to the Director for their constitutionally mandated authority to review. As the Court explains, the statute “is unenforceable as applied to the Director insofar as it prevents the Director from reviewing the decisions of the PTAB on his own. The Director may engage in such review and reach his own decision.”

By striking the limitation on the Director, the Supreme Court has upheld the validity of the PTAB and its proceedings and prevented what could have been an extreme period of uncertainty for patent owners with the review process in total flux.

If you have any questions or concerns about how this or any other recent news may affect your portfolio or interests, please reach out to one of our attorneys here.

Oracle Corp. v. Click-to-Call Technologies LP

Maier & Maier

Under 315(b) of the AIA (America Invents Act), Inter Partes Review “may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”[1] The Click-to-Call decision revolves around whether the time-bar applies when a complaint has been voluntarily dismissed without prejudice.

In 2001, the patent in this case, U.S. Pat # 5,818,836, had been exclusively licensed to Inforocket, who filed a patent infringement suit asserting the ‘836 patent against Ingenio (then under its previous name, Keen).[2] Ingenio then purchased Inforocket as a wholly-owned subsidiary, and the parties stipulated to dismiss the suit without prejudice.[3] Subsequently the ‘836 patent was acquired by Click-to-Call.  On May 29, 2012, Click-to-Call filed suit asserting the same ‘836 patent against a number of defendents, including Ingenio, leading to the filing of this IPR. [4]

In an opinion designated as precedential by the PTAB, the Board ruled that a voluntary dismissal of a suit creates an exception to the 315(b) time-bar. “The Federal Circuit consistently has interpreted the effect of such dismissals as leaving the parties as though the action had never been brought.”[5] Based on the premise that a voluntary dismissal serves to nullify the existence of a suit, the PTAB held that the one-year time limit for filing an IPR would be nullified along with it.

On appeal, the Federal Circuit disagreed and found that the PTAB committed legal error in its determination.  The Federal Circuit overturned the PTAB ruling. As the decision explains “the provision unambiguously precludes the Director from instituting an IPR if the petition seeking institution is filed more than one year after the petitioner, real party in interest, or privy of the petitioner ‘is served with a complaint’ alleging patent infringement. Simply put, § 315(b)’s time bar is implicated once a party receives notice through official delivery of a complaint in a civil action, irrespective of subsequent events.”[6]

Unlike the 2001 infringement complaint, the PTAB’s precedential time-bar decision has now been entirely nullified.

[1] 35 U.S.C. § 315(b)

[2] Oracle Corp. v. Click-to-Call Technologies LP, IPR2013-00312, Paper 26 at 14 (PTAB Oct. 13, 2013).

[3] Id.

[4] Id.

[5] Id at 17.

[6] Oracle Corp. v. Click-to-Call Technologies LP, Slip Op at 13 (CAFC Aug. 16, 2018).

Tribal Sovereign Immunity Does Not Apply in IPR Proceedings

Maier & Maier

In Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., Nos. 18-1638 to 18-1643, the Federal Circuit, in a precedential decision, affirmed the PTABs denial of St. Regis’s motion to terminate IPRs filed by Mylan based on tribal sovereign immunity. Tribal immunity does not apply in IPR proceedings because the USPTO is pursuing an adjudicatory agency action.

The Court concluded that “IPR is more like an agency enforcement action than a civil suit brought by a private party…. IPR is more like cases in which an agency chooses whether to institute a proceeding on information supplied by a private party.” Judge Moore writing for the panel majority averred that “[t]he 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.'” (quoting Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016)).

In his concurrence, Judge Dyk wrote to describe in greater detail the history of inter partes review proceedings, history that confirms that those proceedings are not adjudications between private parties. While private parties play a role, inter partes reviews are fundamentally an agency reconsideration of the original patent grant, similar to ex parte reexamination and inter partes reexamination proceedings, which are not adjudications of private disputes and to which sovereign immunity does not apply.

The Court’s opinion was limited to whether tribal immunity applies in IPRs: “we leave for another day the question of whether there is any reason to treat state sovereign immunity differently.”

PTAB Designates 5 Decisions as Informative

Maier & Maier

The PTAB has designated five new decisions as informative, three on IPR practice procedure and two ex parte decisions (one on issue preclusion and one on claim construction):

Ariosa Diagnostics v. Isis Innovation Ltd., IPR2012-00022, Paper 55 (PTAB Aug. 7, 2013)

Here the Board provides guidance on foreign depositions, both on the location where they are taken and the language in which they are conducted. The Board emphasizes that “the parties are in the best position to determine the procedure by which the deposition is to be conducted” but provides 12 general guidelines for procedures to use for depositions in foreign languages covering such topics as 1). each sides’ right to bring an interpreter, 2). protocol for resolving disagreements between interpreters on their respective interpretations, and 3). notice requirements on documents which will be “sight read” at the deposition. The full list is available in the decision linked above.

Ex parte Jung, 2016-008290 (PTAB Mar. 22, 2017)

In this appeal, the appellant challenged the examiner’s interpretation that the claim language “at least one of a connection branch and a contents connection list” required only ‘a connection branch’ OR ‘a contents connection list’ as opposed to requiring both of their presence. In their reversal, the Board applied the ruling from the Federal Circuit in SuperGuide Corp. v. DirecTV Enterprises, Inc., which explained that the plain meaning of ‘at least one of A and B’ is the conjunctive phrase ‘at least one of A and at least one of B.”[1] The Board explained that the plain meaning could have been rebutted with a demonstration that the other claims, specification, or the prosecution history necessitated a broader interpretation, but, absent such a showing, the examiner erred.

Argentum Pharm. LLC v. Alcon Research, Ltd., IPR2017-01053, Paper 27 (PTAB Jan. 19, 2018)

In this decision, the Board offers an analysis on the ‘good cause’ standard for protective orders.  The Board denied a motion for a protective order without prejudice for failure to demonstrate that “(1) the information sought to be sealed is truly confidential, (2) a concrete harm would result upon public disclosure, (3) there exists a genuine need to rely in the trial on the specific information sought to be sealed, and (4), on balance, an interest in maintaining confidentiality outweighs the strong public interest in having an open record.”[2]

Colas Sols. Inc. v. Blacklidge Emulsions, Inc., IPR2018-00242, Paper 9 (PTAB Feb. 27, 2018)

The decision here applies to § 315 bars to institution in IPRs. Specifically, the Board found institution was barred when a petitioner has previously filed for a declaratory judgment of invalidity on the same patent.  Furthermore, the Board ruled that a motion for joinder could not save a petitioner from the statutory bar under § 315(a)(1). In its reasoning, the Board explains that while a § 315(b) time bar is specifically excluded in instances of joinder under § 315 (c), the statutory bar for § 315(a)(1) provides for no such exemption.

Ex parte Ditzik, 2018-000087 (PTAB Mar. 2, 2018)

Here, the Board upheld an examiner’s use of issue preclusion from a related invalidity finding against the applicant in District Court. In so doing, the Board found the following arguments by the appealing applicant accurate, but unpersuasive with respect to issue preclusion: 1). The fact that the claims are not the same in the proceedings; 2). The procedural possibility for the District Court ruling to be overturned; and 3). The PTO’s absence as a party from the District Court proceeding. While the Board did not find any of the following in this case, it allowed for potential rebuttals to issue preclusion when 1). The standard applied in the prior final decision might have caused a different outcome than before the Board; 2). Evidence available now was demonstrated to not be available at the time of the prior proceeding; or 3). There was otherwise not a ‘full and fair opportunity to litigate’ in the prior proceeding and the Board wishes to exercise its discretion despite the motivations of efficiency and consistency for issue preclusion.

Each decision is linked in the respective heading above for more information and reference, and a full list of all precedential and informative decisions is available here.

[1] 358 F.3d 870, 885-86 (Fed. Cir. 2004).

[2] 37 C.F.R. § 42.54(a).

Supreme Court Upholds IPR Proceedings; Rejects Partial Institutions

Maier & Maier

Two Supreme Court Decisions came down April 24, 2018 with potentially significant impacts on patent practice. First, in Oil States v. Greene’s Energy, the Court rejected Oil States’ Article III and 7th Amendment challenges to inter partes review (IPR) proceedings, declaring the proceedings constitutional under the public rights doctrine. Second, the Court ruled that Patent Trial and Appeal Board (PTAB) Final Written Decisions must address the patentability of all challenged claims if an IPR is instituted in SAS Institute v. Iancu, eliminating partial institutions.

Oil States Energy Services v. Greene’s Energy Group

After Oil States Energy Services sued Greene’s Energy Group for infringement in federal district court, Greene’s Energy challenged the patent at the PTAB, successfully arguing the patent was invalid. Oil States then appealed the decision to the Federal Circuit, challenging both the decision and the constitutionality of IPR proceedings at the PTAB as a whole. Oil States argued that patents were a private right and that actions revoking a patent must be limited to Article III courts before a jury, and alternatively that the Seventh Amendment requires a jury trial as patent validity was traditionally decided by a jury. Attempting to distinguish IPR proceedings from re-examination proceedings, which have previously been ruled constitutional, Oil States pointed out how the adversarial process of IPR proceedings mimicked the procedure of Article III courts, while re-examination mimicked the prosecution process at the PTO.

The Court’s 7-2 decision to uphold rested primarily on the finding that because patent rights are public rights, reconsideration of those rights need not be reviewed in an Article III court. Public rights are those “arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.”[1] The Court then explained that to whatever extent patent rights are granted to a patent holder, they are statutory rights which cannot exceed the scope allowed by statute. The Court reasons that since the AIA is a statutory limitation of the patent rights, any rights granted to the patent owner are granted subject to continual review by the PTO and possible revocation.[2] Based on this construction reserving review for the PTAB, the Court resolved the Seventh Amendment challenge as moot, since it only applies when Congress has not properly assigned a matter to adjudication outside of an Article III tribunal.

Justice Gorsuch, joined by Justice Roberts, dissented from the opinion, specifically objecting to the conflation of the constitutional power of the executive to issue patents with the power to also revoke patents. He concludes his detailed history of the difference between those powers with an appeal to Article III’s purpose, explaining that “enforcing Article III isn’t about protecting judicial authority for its own sake. It’s about ensuring the people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before. And the loss of the right to an independent judge is never a small thing.”[3]

Despite these concerns, the Oil States decision has assured that any patent rights enjoyed today and tomorrow will be subject to review at the PTAB.

SAS Institute v. Iancu

SAS Institute challenged all 16 claims in ComplementSofts’s software patent in an inter partes review proceeding before the Patent Trial and Appeal Board (PTAB).  The PTAB instituted review on only some of the claims (claims 1 and 3-10).  The PTAB found claims 1, 3, and 5-10 invalid in the Final Written Decision, only upholding the validity of claim 4. SAS appealed this decision to the Federal Circuit, objecting to the PTAB’s failure to address all 16 challenged claims. The Federal Circuit upheld the PTAB in a 2-1 decision, which the Supreme Court has now reversed 5-4.

The majority relies on the plain language of the statute, the America Invents Act (AIA), in its ruling that the PTAB must address all challenged claims once it institutes an IPR. Justice Gorsuch, the author of the majority opinion, declared, “The statute, we find, supplies a clear answer: the Patent Office must ‘issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.’ In this context, as in so many others, ‘any’ means ‘every.’”[4]

This holding will impact the PTAB’s procedures, taking away their discretion to partially deny institution on individual challenged claims where they do not find a ‘reasonable likelihood of success”. Justice Ginsburg emphasizes efficiency as a concern in her dissenting opinion, rhetorically asking “Why should the statute be read to preclude the Board’s more rational way to weed out insubstantial challenges?. . . the Court’s opinion offers no persuasive answer to that question, and no cause to believe Congress wanted the board to spend its time so uselessly.”[5]

The removal of the PTAB’s current institution practice puts Director Iancu’s plan for issuing updated procedural guidance to the PTAB in the spotlight moving forward, and emphasizes the importance of the multiple patent reform bills currently being debated in Congress as potential solutions.

Meanwhile, the Court has remanded this case to be decided in accordance with their statutory interpretation, and the outcome will bear watching as it continues.

[1] Ex parte Bakelite Corp., 279 U. S. 438, 451 (1929).

[2] Oil States Energy Services v. Greenes Energy Group, Slip Op. at 10-11. (April 24, 2018).

[3] Oil States Energy Services v. Greenes Energy Group, Slip Op. at 12. (April 24, 2018) (Justice Gorsuch, dissenting).

[4] SAS Institute v. Iancu, Director, United States Patent and Trademark Office, Slip Op. at 1 (April 24, 2018).

[5] SAS Institute v. Iancu, Director, United States Patent and Trademark Office, Slip Op. at 1 (April 24, 2018). (Justice Ginsburg, dissenting)

Tribal Sovereign Immunity: Federal Circuit Stays Proceeding after PTAB Cast Doubt On Patent Defense Strategy

Maier & Maier

Last fall, Maier & Maier highlighted a new defense strategy for Patent Owners against IPR (Inter Partes Review) Petitions in an overview of the ongoing Allergan “Tribal Immunity” Proceeding. In sum, Allergan transferred their patent portfolio to the Saint Regis Mohawk Tribe (“Tribe”) in upstate New York, paying them a lump sum and royalties in exchange for retaining an exclusive license for the patent. In doing so, the Tribe became the Patent Owner, availing them of protection from suit under the Eleventh  Amendment.[1] As explained by the Supreme Court, “As 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.”[2]. After the assignment, the Tribe filed a motion to dismiss based on their Tribal Immunity. Just last month, the Patent Trial and Appeal Board (PTAB) denied that motion and set forth an expedited schedule for oral argument on April 3, 2018. The Federal Circuit issued a stay of that proceeding, giving Allergan another opportunity to plead its case for the Tribe’s sovereign immunity.

The PTAB Decision

The PTAB panel primarily based its decision on two findings: 1). Tribal Immunity does not apply to the petition for IPR; and 2). Even if it does, the Tribe is not an indispensable party that the Proceeding could not continue without.

The Board relied on a few factors for the first finding, including an absence of statutory support for applying Tribal Immunity to administrative proceedings like the PTAB and the fact that the PTAB decision would be applied to the patent itself, not the Tribe as the patent holder.

Even if Tribal Immunity applied, the Board ruled that the proceeding would still continue because the Tribe is not an indispensable party. To come to this result, the Board conducted a thorough analysis of the sale to the Tribe and the alleged license back to Allergan. As explained in the decision, the involved parties/ characterization of an agreement as a license compared to a full assignment is not determinative, with precedent relying more heavily on the terms than the label given to it. According to the Board, Allergan’s exclusive right to practice the patent, coupled with the Tribe’s ‘illusory’ rights to enforce it, indicated that the agreement was an assignment and not a license. This in turn makes Allergan an owner and allows the proceeding to continue, as any of the Tribe’s interests could be fully represented by Allergan, tipping the scales in the indispensable party analysis.[3]

The Stay

After the PTAB decision, the Board sua sponte set forth an expedited schedule which would have brought a Final Written Decision by June.[4] Allergan filed an interlocutory appeal of the Board’s decision, requesting a stay of the IPR, which the Federal Circuit has granted. In the stay order, the Federal Circuit declared that “exclusive jurisdiction to resolve the threshold issue of whether these proceedings must be terminated vests in this court, and that the Board may not proceed until granted leave by this court.”[5]

The briefing schedule for the appeal is scheduled to be completed by May 18, 2018, including any amicus briefs, which are sure to be filed. Consequently, the IPR will not be heard anytime soon, and even upon the Federal Circuit’s ruling, the PTAB may not regain jurisdiction immediately. As the order explains, “The stay shall remain in effect until the day after oral argument in the appeals in June 2018.  The court will address whether the stay shall remain in effect or whether it will be lifted at that time based on further consideration of the merits of the appeals.”[6]

Implications

If the PTAB’s decision stands, it is unlikely that the Tribal Immunity defense will be a useful tool for Patent Owners in IPR proceedings. The PTAB ruled both against its application to IPR’s and established an alternate means to continue with the proceedings with the Tribe’s licensee, making the appeal an uphill battle.

Until the appeal is settled, anyone still seeking protection for their patents under Tribal Immunity will need to push the balance of their license agreement farther than Allergan and give the Tribe more than ‘mere royalties’ and an ‘illusory’ right to enforce so that 1). the licensee would not be determined the true owner and 2). the Tribe would not be deemed indispensable.[7]

The board’s decision struck another blow to sovereign immunity defenses, as just this past December the PTAB ruled that State Sovereignty could not be applied to dismiss an IPR proceeding when the Patent Owner has filed an infringement suit asserting the patent. In the Board’s view, the act of bringing suit is as a waiver of the Eleventh Amendment right that would otherwise apply to the proceeding.[8]

As we wait for the IPR to proceed again, you can check for updates at the PTAB’s online E2E tool, or at websites like PostGrant.com which allow for full-text searching and automatic update alerts.

[1] The Eleventh Amendment provides that “Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” U.S. Const. amend. XI.  See also Covidien LP v. University of Florida Research Foundation Incorporated; Neochord, Inc. v. University of Maryland Baltimore; Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation.

[2] Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998).

[3] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 130 at 39 (PTAB, February 23, 2018).

[4] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 132 at 4 (PTAB, February 23, 2018)

[5] Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., et al., 2018-1638, Document 4 at 2 (Fed. Cir. March 28, 2018).

[6] Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., et al., 2018-1638, Document 4 at 2-3 (Fed. Cir. March 28, 2018).

[7] See Luminara Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1351 (Fed. Cir. 2016) (“a financial interest . . . without more does not amount to a substantial right.”); see also Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1191 (Fed. Cir. 2007) (“[T]he fact that a patent owner has retained a right to a portion of the proceeds of the commercial exploitation of the patent, . . . does not necessarily defeat what would otherwise be a transfer of all substantial rights in the patent.”)

[8] Ericsson Inc. v. Telfonaktiebolaget Lm Ericsson, IPR2017-01186, Paper 14 at 4 (PTAB, December 19, 2017).

Tribal Sovereign Immunity: PTAB Decision Casts Doubt On Patent Defense Strategy

Maier & Maier

Last fall, Maier & Maier highlighted a new defense strategy for Patent Owners against IPR (Inter Partes Review) Petitions in an overview of the ongoing Allergan “Tribal Immunity” Proceeding. In sum, Allergan transferred their patent portfolio to the Saint Regis Mohawk Tribe (“Tribe”) in upstate New York, paying them a lump sum and royalties in exchange for retaining an exclusive license for the patent. In doing so, the Tribe became the Patent Owner, availing them of protection from suit under the Eleventh  Amendment.[1] As explained by the Supreme Court, “As 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.”[2]. After the assignment, the Tribe filed a motion to dismiss based on their Tribal Immunity. Just last month, the Patent Trial and Appeal Board (PTAB) denied that motion.

The Decision

The PTAB panel primarily based its decision on two findings: 1). Tribal Immunity does not apply to the petition for IPR; and 2). Even if it does, the Tribe is not an indispensable party that the Proceeding could not continue without.

The Board relied on a few factors for the first finding, including an absence of statutory support for applying Tribal Immunity to administrative proceedings like the PTAB and the fact that the PTAB decision would be applied to the patent itself, not the Tribe as the patent holder.

Even if Tribal Immunity applied, the Board ruled that the proceeding would still continue because the Tribe is not an indispensable party. To come to this result, the Board conducted a thorough analysis of the sale to the Tribe and the alleged license back to Allergan. As explained in the decision, the involved parties/ characterization of an agreement as a license compared to a full assignment is not determinative, with precedent relying more heavily on the terms than the label given to it. According to the Board, Allergan’s exclusive right to practice the patent, coupled with the Tribe’s ‘illusory’ rights to enforce it, indicated that the agreement was an assignment and not a license. This in turn makes Allergan an owner and allows the proceeding to continue, as any of the Tribe’s interests could be fully represented by Allergan, tipping the scales in the indispensable party analysis.[3]

Implications

Moving forward, it is unlikely that the Tribal Immunity defense will be a useful tool for Patent Owners in IPR proceedings. The PTAB has ruled against its application to IPR’s, established an alternate means to continue with the proceedings with the Tribe’s licensee, and any appeal to the Federal Circuit would face an uphill battle.

In the meantime, anyone still seeking protection for their patents under Tribal Immunity will need to push the balance of their license agreement farther than Allergan and give the Tribe more than ‘mere royalties’ and an ‘illusory’ right to enforce so that 1). the licensee would not be determined the true owner and 2). the Tribe would not be deemed indispensable.[4]

This decision strikes another blow to sovereign immunity defenses, as just this past December the PTAB ruled that State Sovereignty could not be applied to dismiss an IPR proceeding when the Patent Owner has filed an infringement suit asserting the patent. In the Board’s view, the act of bringing suit is as a waiver of the Eleventh Amendment right that would otherwise apply to the proceeding.[5]

Allergan and the Tribe will now continue their defense in the IPR Proceeding with the PTAB, with a Final Decision expected by June, at which point it will likely go to the Federal Circuit for an appeal.[6] You can check for updates using the USPTO E2E platform or subscribe to case alerts here: www.postgrant.com.

[1] The Eleventh Amendment provides that “Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” U.S. Const. amend. XI.  See also Covidien LP v. University of Florida Research Foundation Incorporated; Neochord, Inc. v. University of Maryland Baltimore; Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation.

[2] Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998).

[3] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 130 at 39 (PTAB, February 23, 2018).

[4] See Luminara Worldwide, LLC v. Liown Elecs. Co., 814 F.3d 1343, 1351 (Fed. Cir. 2016) (“a financial interest . . . without more does not amount to a substantial right.”); see also Propat Int’l Corp. v. RPost, Inc., 473 F.3d 1187, 1191 (Fed. Cir. 2007) (“[T]he fact that a patent owner has retained a right to a portion of the proceeds of the commercial exploitation of the patent, . . . does not necessarily defeat what would otherwise be a transfer of all substantial rights in the patent.”)

[5] Ericsson Inc. v. Telfonaktiebolaget Lm Ericsson, IPR2017-01186, Paper 14 at 4 (PTAB, December 19, 2017).

[6] Mylan Pharmaceutocals Inc., et al. v. Saint Regis Mohawk Tribe, IPR2016-01127, Paper 132 at 4 (PTAB, February 23, 2018)