Maier & Maier

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

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 IncorporatedNeochord, Inc. v. University of Maryland BaltimoreReactive 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).

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