In late March, the Federal Circuit issued an order staying the PTAB proceedings concerning numerous related IPRs of patents issued to Allergan, Inc. (“Allergan”), but assigned to the Saint Regis Mohawk Tribe (“the Tribe”). These IPRs were headed toward a final hearing on the merits previously scheduled for April 3rd. In those IPRs, the PTAB denied the Tribe’s motions to terminate the proceedings based upon the Tribe’s sovereign immunity. Mylan Pharma Inc. v. Saint Regis Mohawk Tribe, Case IPR2016-01127, Paper 130 (February 23, 2018). This post explains the PTAB’s decision that the court will now review on appeal. On December 8, 2016, the Board had instituted IPR proceedings for the Allergan Restasis® patents in response to petitions filed by Mylan Pharmaceuticals, Inc. (“Mylan”) and various later-joined Petitioners Less than a week before final hearing, counsel for the Tribe informed the Board that the Tribe had acquired the challenged patents from Allergan. The Tribe sought and obtained permission to file a motion to dismiss based on sovereign immunity.

The Board first questioned whether case law regarding State sovereign immunity from administrative proceedings was relevant to questions of tribal immunity. The Board noted that there was no controlling authority on the issue, and determined that case law concerning State immunity did not apply, consistent with the Supreme Court’s statement that “the immunity possessed by Indian Tribes is not co-extensive with that of the States,” citing Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 756 (1998).

The Board observed that an Indian tribe’s sovereignty is subject to the superior and plenary control of Congress, and that general Acts of Congress apply to Indians in the absence of a clear expression to the contrary. The Board noted that the legislation establishing inter partes review was of general application, and served an important public purpose of correcting the agency’s own errors—it did not merely establish a forum for parties to resolve private disputes affecting only themselves.

The Board further determined that inter partes review was “not the type of ‘suit’ to which an Indian tribe would traditionally enjoy immunity under common law.” The Board noted that in inter partes review there was no potential of an award of damages against the tribe, or the issuance of an injunction compelling it to act in any manner.

Moreover, the Board noted that in inter partes review it does not exercise personal jurisdiction over the patent owner. Rather, the Board exercises jurisdiction over the patent. The Board remarked that inter partes review may proceed even in the absence of the patent owner. For example, the Board asserted, inter partes review may continue even where the patent owner and the petitioner have settled their disputes. The Board concluded that “reconsideration of the patentability of issued claims via inter partes review is appropriate without regard to the identity of the patent owner.”

The Board further provided an alternative ground for denying the Tribe’s motion, determining that even if tribal sovereign immunity applied, the IPR proceedings could continue without the Tribe because Allergan retained ownership rights to the patents. In reaching this conclusion, the Board evaluated the substance of the assignment to the Tribe and the license given back to Allergan by the Tribe, to determine whether Allergan remained an owner of the patents, under Waterman v. Mackenzie, 138 U.S. 252, 256 (1891) where it was settled that (“[w]hether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions.”).

The Board evaluated rights transferred and rights retained by Allergan under their license agreement (“License”) with the Tribe, specifically with respect to seven of the nine rights (emphasized below), as set out in Azure Networks, LLC v. CSR PLC, 771 F.3d 1336, 1342 (Fed. Cir. 2014) (vacated on other grounds):

  1. the nature and scope of the right to bring suit;
  2. the exclusive right to make, use, and sell products or services under the patent;
  3. the scope of the licensee’s right to sublicense;
  4. the reversionary rights to the licensor following termination or expiration of the license;
  5. the right of the licensor to receive a portion of the proceeds from litigating or licensing the patent;
  6. the duration of the license rights;
  7. the ability of the licensor to supervise and control the licensee’s activities;
  8. the obligation of the licensor to continue paying maintenance fees; and
  9. any limits on the licensee’s right to assign its interests in the patent.

The Board determined that the License transferred “all substantial rights” in the challenged patents back to Allergan, and that Allergan therefore remained the effective patent owner. Accordingly, the Board concluded that the Tribe was not an indispensable party, and that the IPR proceedings could proceed against Allergan alone.

As earlier noted, the Federal Circuit recently stayed proceedings in the IPRs. The court further ordered expedited briefing on the sovereign immunity issue, and stated oral argument will occur during its June argument week. The court’s decision in the appeal may be expected shortly after the oral argument.