Patent Docs: Allergan, a Mohawk tribe and the USPTO

Federal Circuit decision addresses dispute between Allergan and the St. Regis Mohawk Tribe, tackling the issue of sovereign immunity

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One of the most controversial patent application strategies in recent memory is Allergan’s attempt to avoid inter partes review (IPRs) of several of its patents1 protecting its Restasis product franchise. Specifically, Allergan assigned its rights in the patents to the St. Regis Mohawk Tribe in return for a license, and the tribe argued that its sovereign immunity precluded the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) from proceeding with ongoing IPRs involving these patents.
This argument was unsuccessful, with the PTAB deciding that, as an issue of first impression, the tribe had not borne its burden of showing it was entitled to the requested relief, and that the nature of the license left all substantive patent rights with Allergan, and thus that the company could amply represent the tribe’s rights even in its absence. The tribe appealed, and on July 20th the Federal Circuit upheld this decision. Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2018)
The Federal Circuit opinion, written by Judge Moore, joined by Judges Dyk and Reyna, acknowledges the existence of tribal sovereign immunity affirmed by the Supreme Court, including Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978), and Okla. Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505, 509 (1991), but that the immunity “does not extend to actions brought by the federal government,” citing E.E.O.C. v. Karuk Tribe Hous. Auth., 260 F.3d 1071, 1075 (9th Cir. 2001), and United States v. Red Lake Band of Chippewa Indians, 827 F.2d 380, 383 (8th Cir. 1987). In particular, tribal sovereign immunity “does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action” according to the opinion, citing Pauma v. NLRB, 888 F.3d 1066 (9th Cir. 2018), and Fed. Power Comm’n v. Tuscarora Indian Nation, 362 U.S. 99, 122 (1960), as well as Karuk Tribe Hous. Auth.
But this exception to tribal sovereign immunity does not constitute a “blanket rule” regarding the application of tribal sovereign immunity according to the court, as illustrated by Fed. Maritime Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 754–56 (2002)(FMC).
The FMC case formed the legal foundation for the panel’s opinion (appropriate seeing as the Tribe had used this case to support its sovereign immunity assertion, even though that case involved state sovereign immunity). The panel drew its distinction on the quality of IPRs as being more akin to federal administrative proceedings (in which the Federal government is the “superior sovereign” and tribal immunity does not apply) than these proceedings are to a dispute between private parties, in which a government agency plays an adjudicatory role (as in the FMC precedent). The opinion distinguishes IPRs from the circumstances in FMC based on the “hybrid” nature of IPRs, as the Supreme Court characterized these proceedings in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016). (The Supreme Court has continued its explication of the nature of IPRs in its two recent decisions on these proceedings, Oil States Energy Services v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018), and SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018)).
Under these precedents, the panel concluded that there were sufficient similarities between IPRs and administrative agency proceedings (here, wherein the USPTO reconsiders the propriety of granting the challenged patents) and sufficient differences from more adjudicatory proceedings (including the “broad” and “complete discretion” vested in the director on whether to institute an IPR, the absence of any requirement that either party continue to participate once an IPR has been instituted, and procedural differences relating to, inter alia, evidentiary and discovery rules) for tribal sovereign immunity not to apply.
The “government’s central role” in IPRs and the firector’s unreviewable discretion (rather than merely the insistence of a private party) in deciding whether to institute IPR proceedings were considerations leading to the panel’s conclusion that “IPR is more like an agency enforcement action than a civil suit brought by a private party” and tribal sovereign immunity could not shield the tribe from the IPRs. (And the opinion notes that the director is “politically accountable,” sub silentio acknowledging the public policy aspects of the question, both in controlling increased drug prices and the ability of Native American tribes to participate in facets of the economy outside casinos and tourism.)
Also relevant to the panel’s opinion is the capacity of the PTAB to continue IPRs after institution even if the petitioner (Cuozzo) or patent holder (Reactive Surfaces Ltd. v. Toyota Motor Corp., IPR2017-00572 (PTAB July 13, 2017)) declines to participate. Finally, “substantial” differences in procedure between IPRs and district court litigation (wherein similarities between administrative agency action and district court litigation was used to support tribal sovereign immunity in FMC) was another basis for the Federal Circuit’s opinion (“An IPR hearing is nothing like a district court patent trial.”).
The opinion avoided Mylan’s other arguments, including that the assignment and re-licensing of these patents was a sham intended by the parties to avoid reexamination of these patents to thwart congressional goals of improving patent quality by providing a means to invalidate improvidently granted patents. The opinion also pointedly states that its decision was limited to tribal sovereign immunity and that the court “leave[s] for another day” the question of whether States can assert their Eleventh Amendment immunity against IPR proceedings (which the Court is slated to hear in the upcoming Ericsson v. University of Minnesota appeal).
It is very likely that the tribe will file a petition for certiorari to the Supreme Court. In view of the importance of the issue of the proper scope of tribal sovereign immunity (and the Court’s recent penchant for patent law cases), there is a good chance that the final decision on this matter has not been rendered.
The Federal Circuit is expected to hear and render a decision on the Ericsson case within the next few months. This case, which implicates the Eleventh Amendment’s sovereign immunity for the Sovereign States, poses additional important questions that are related to but may prove distinguishable from the court’s decision in the St. Regis case.
1 The issue arose over IPRs instituted by Petitioners Mylan Pharmaceuticals, Teva Pharmaceuticals USA, Inc. and Akorn, Inc., against U.S. Patent Nos. 8,685,930, 8,629,111, 8,642,556, 8,633,162, 8,648,048, and 9,248,191.
Kevin Noonan is a partner with the law firm McDonnell Boehnen Hulbert & Berghoff LLP and represents biotechnology and pharmaceutical companies on a myriad of issues. A former molecular biologist, he is also the founding author of the Patent Docs weblog,

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