The topic of sovereign immunity was raised a number of times in inter partes review (IPR) proceedings in 2017, and it was cast into the national spotlight when Allergan transferred several patents for its dry-eye drug Restasis® to the St. Regis Mohawk Tribe in an attempt to shield them from PTAB review. But a recent case by the Board may cause problems for Allergan and others who have transferred or are considering transferring their patents to sovereign immune entities.
Last month in Ericsson Inc. v. Regents of the University of Minnesota, an expanded PTAB panel denied the University of Minnesota’s motion to dismiss in a case involving state sovereign immunity in an IPR proceeding.[i] The University of Minnesota, the patent owner, argued that it is entitled to avoid IPR proceedings entirely because the State is a sovereign that is immune under the Eleventh Amendment of the U.S. Constitution. The expanded panel disagreed.
The first issue the Board decided was whether the Eleventh Amendment applies to IPR proceedings. The Board agreed with past panels who determined that Eleventh Amendment immunity is available to States as a defense to IPR proceedings.[ii] The Board compared IPRs to other administrative proceedings, noting that the Supreme Court decided sovereign immunity applies to administrative adjudications similar to civil litigation in Fed. Mar Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002), and that the Federal Circuit ruled that state sovereign immunity was available in interference proceedings before the PTAB’s predecessor in Vas-Cath, Inc. v. Curators of Univ. of Mo., 473 F.3d 1376 (Fed. Cir. 2007). Accordingly, the Board confirmed that state sovereign immunity is available as a defense in IPR proceedings.
The second issue the Board confronted was an issue of first impression: whether the University of Minnesota waived its immunity by filing a patent infringement action involving the same patent challenged in the IPR petition. The Board held that the filing of an infringement action in federal court waives a patent owner’s Eleventh Amendment sovereign immunity defense. In finding waiver, the Board analogized IPR petitions to compulsory counterclaims under Fed. R. Civ. P. 13(a), explaining that “because a state as plaintiff can surely anticipate that a defendant will have to file any compulsory counterclaims or be forever barred from doing so, it is not unreasonable to view the state as having consented to such counterclaims.”[iii] Similarly, the Board found that “a party served with a patent infringement complaint in federal court must request an inter partes review of the asserted patent within one year of service of that complaint or be forever barred from doing so.”[iv] Thus, the Board found it “reasonable to view a State that files a patent infringement action as having consented to an inter partes review of the asserted patent.”[v]
The Board further noted that it is the State’s action in filing an infringement suit in federal court that triggers the one-year statutory bar for IPRs, and
[i]t would be unfair and inconsistent to allow a State to avail itself of the federal government’s authority by filing a patent infringement action in federal court, but then selectively invoke its sovereign immunity to ensure that a defendant is barred from requesting an inter partes review of the asserted patent from a different branch of that same federal government.[vi]
Therefore, the Board held that the University of Minnesota waived its Eleventh Amendment immunity by filing an action in federal court alleging infringement of the patent being challenged in the proceeding.[vii]
This decision is notable because Chief Judge Ruschke expanded the panel from the normal three administrative patent judges to seven judges, including himself and the Deputy and Vice Chief Administrative Patent Judges, and he authored the opinion himself. The Chief Judge “decided to expand the panel due to the exceptional nature of the issues presented” and determined the expansion was warranted “to ensure uniformity of the Board’s decisions involving these issues.”[viii]
The expanded panel’s opinion directly calls into question the strategy of assigning patents to Native American tribes to avoid IPR proceedings. The Board has not yet decided whether a transfer to a Native American tribe is adequate to give rise to a sovereign immunity defense. In the Restasis® IPR proceeding, the Board issued an Order in November inviting amicus briefing and adjusted the deadline for the final written decision to April 6, 2018.[ix]
In response to the Ericsson decision, the Saint Regis Mohawk Tribe filed a request for oral hearing on Tuesday, January 2, 2018, regarding its request for discovery into the “identity and impartiality” of the panel assigned to the case. The Tribe stated that “the discovery sought by the Patent Owner concerns due process, the impartiality of the merits panel in this case, and whether political or third-party pressure has been asserted to reach an outcome inconsistent with the binding Supreme Court and Federal Circuit precedents.”[x] The request comes after the Board refused to allow the Tribe to file a motion seeking the desired discovery, stating that the information requested is not within the scope of allowable discovery under 37 C.F.R. § 42.51.
This is an important issue to Saint Regis, as the Tribe was allowed to join the infringement lawsuit that Allergan previously filed in federal court. However, if a state is deemed to have waived sovereign immunity guaranteed by the Eleventh Amendment of the U.S. Constitution when it files an infringement action in federal court, it likely follows that Native American tribes will also be deemed to have waived sovereign immunity guaranteed by statute if the tribe files an infringement action. Thus, it would not be surprising if the expanded panel’s decision in Ericsson is extended to tribal sovereign immunity as well.