Tribal Sovereign Immunity Cannot Bar IPR Review: Federal Circuit
The Federal Circuit ruled on Friday July 20, 2018 that tribal sovereign immunity cannot bar inter partes review (IPR) proceedings before the U.S. Patent and Trademark Office (PTO) because they are federal agency enforcement proceedings to which tribal sovereign immunity is generally inapplicable. Saint Regis Mohawk Tribe v. Mylan Pharms. Inc., No. 2018-1638 et al, slip op. (Fed. Cir. July 20, 2018).
Background: Patents Assigned to Tribe
The IPR proceedings at issue in the appeal originated as a dispute between the private pharmaceutical companies Allergan and Mylan. Allergan sued Mylan for patent infringement, and Mylan filed IPRs with the Patent Trial and Appeal Board (PTAB) challenging the patents. A week before the PTAB’s oral hearing in the IPR proceeding (aka, trial), Allergan assigned the patents to the Saint Regis Mohawk Tribe (Tribe). The Tribe sought to terminate the IPRs by asserting tribal sovereign immunity, and Allergan moved to withdraw. The PTAB denied these motions and the Tribe appealed.
Federal Circuit’s Decision
The Federal Circuit began its opinion by discussing Supreme Court precedent in which tribes or states had asserted sovereign immunity in response to federal agency actions. The Federal Circuit analyzed whether an IPR proceeding is more like civil litigation or an agency enforcement action. The Court noted an IPR proceeding is “neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government. It is a ‘hybrid proceeding’ with adjudicatory characteristics’ similar to court proceedings, but in other respects it ‘is less like a judicial proceeding and more like a specialized agency proceeding.” Id. at 7. The Supreme Court’s constitutional framework centers around the Framers’ intent—whether the proceedings are the type “from which the Framers would have thought the States possessed immunity when they agreed to enter the Union.” Fed. Power Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 756 (2002). Under this line of precedent, the Tribe could assert sovereign immunity to avoid proceedings that resembled civil litigation, but not to avoid proceedings more akin to agency enforcement. Emphasizing the PTAB’s discretion in deciding whether to institute an IPR proceeding, as well as its ability to maintain an IPR proceeding in the absence of one or both parties, the Federal Circuit held that an IPR proceeding is more like an agency enforcement action where the PTO 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.’” Saint Regis, slip op. at 11. Although the PTO may, in its discretion, decide to “deny review . . . based on a party’s status as a sovereign,” tribal sovereign immunity cannot be asserted to bar an IPR proceeding. Id. at 8, 11.
Because the Federal Circuit resolved the appeal based on IPR’s status as a federal agency enforcement action, the Court did not reach the other issues raised by the parties, such as Mylan’s argument that the assignment to the Tribe was a sham or whether the Tribe waived sovereign immunity because the patents were asserted in district court litigation. The Federal Circuit also left unanswered the question of whether the contours of tribal sovereign immunity differ from those of state sovereign immunity in the context of an IPR proceeding.
Although the ruling held sovereign immunity cannot be used to bar IPRs, the Federal Circuit’s ruling leaves a tribe’s claim to sovereign immunity in the district court intact and may spark further innovative legal maneuvering to use tribal immunity in the patent context. The Federal Circuit’s decision is also notable because it relies in part on the Supreme Court’s decision earlier this year in Oil States v. Greene’s, 138 S. Ct. 1365 (2018), upholding the constitutionality of IPRs because patents are “public rights” and IPRs are “‘simply a reconsideration of the PTO’s original grant of a public franchise.” After the Oil States decision, commentators remarked that the “public rights” doctrine would likely be used in creative ways to place further limitations on patent rights. The tribal immunity decision does not appear to lend itself immediately to use in private-party disputes, but it does confirm that the “public rights” doctrine can be used to place limitations on patent rights.