The Federal Circuit has rejected Allergan’s ploy to shield its Restasis patents from the scrutiny of inter partes review by assigning them to the St. Regis Mohawk Tribe, finding that tribal immunity does not apply in such proceedings. The case is Saint Regis Mohawk Tribe, Allergan, Inc., v. Mylan Pharmaceuticals Inc., et al., Case No. 18-1638, July 20, 2018.

As noted in our prior post here, the Patent Trial and Appeal Board (“Board”) addressed this issue of first impression in an opinion issued earlier this year, finding tribal immunity unavailable in IPR, and sought to continue its proceedings on the Restasis patents. On a prompt appeal, the Federal Circuit stayed the IPRs pending issuance of its own decision on this important issue.

The Federal Circuit, like the PTAB and the St. Regis Mohawk Tribe, relied on the Supreme Court’s guidance in Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743 (2002) (“FMC”), in which State sovereign immunity under the 11th Amendment was found to extend to proceedings by the Federal Maritime Commission. In so finding, the Supreme Court considered whether such proceedings were ones “from which the Framers [of the Constitution] would have thought the States possessed immunity when they agreed to enter the Union” – i.e. whether they sufficiently resembled the features of federal civil litigation between parties.

Applying a similar analysis, the Federal Circuit acknowledged that “IPR is neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government,” but rather “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.” It also acknowledged the Supreme Court’s recent decision in Oil States Energy Services v. Greene’s Energy Group, LLC, 138 S. Ct. 1365 (2018), finding that IPRs are a reconsideration of the PTO’s grant of a public franchise, and its decision in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), emphasizing the adjudicatory aspects of IPR.

The Federal Circuit ultimately concluded that IPR is “more like an agency enforcement action than a civil suit brought by a private party.” In so finding, it pointed to: (1) the PTO’s discretion in institution of an IPR, (2) the ability of the PTAB to continue an IPR proceeding once instituted, even if the petitioner doesn’t participate, and (3) the fact that the procedures used in IPRs do not mirror the Federal Rules of Civil Procedure. In short:

The [USPTO] Director’s important role as a gatekeeper and the Board’s authority to proceed in the absence of the parties convinces us that [in IPR proceedings] 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.’

The Court did not reach politically contentious issues relating to the legitimacy of the contract between Allergan and the St. Regis Mohawk Tribe. It was also careful to point out that its decision was limited to tribal immunity in IPRs, and that it was not deciding whether assertion of state immunity in IPR should be treated differently. However, prior decisions by the PTAB finding that state sovereign immunity applies in IPRs similarly relied on FMC, and may be subject to reassessment if the Federal Circuit treats the state immunity issue similarly.

Overall, this decision, combined with other recent decisions, should signal that the US is committed to a system of patent proceedings that are robust and fair to both patent owners and those that may challenge patents.