Federal Circuit Rejects Use of Tribal Immunity to Shield Patents in IPR Proceedings
By Kevin E. Noonan --
The Federal Circuit issued its opinion on Friday in St. Regis Mohawk Tribe v. Mylan Pharmaceuticals, affirming the decision by the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office that denied the Tribe's motion to terminate Mylan's inter partes review (IPR) proceedings as being barred by tribal sovereign immunity.
The issue arose over IPR Nos. IPR2016-01127, IPR2016-01128, IPR2016-01129, IPR2016-01130, IPR2016-01131, and IPR2016-01132 (and parallel IPRs filed by Petitioners Teva Pharmaceuticals USA, Inc. and Akorn, Inc., which had been joined with Mylan's IPRs) instituted against U.S. Patent Nos. 8,685,930, 8,629,111, 8,642,556, 8,633,162, 8,648,048, and 9,248,191 respectively. After the PTAB instituted IPRs against these six patents owned by Allergan and directed to its Restasis® product, Allergan assigned its rights in the patents to the Tribe in return for a license (see "Allergan Avails Itself of Sovereign Immunity"). The Tribe argued unsuccessfully before the Board that as rightful owner of the patents the Board lost jurisdiction based on tribal sovereign immunity (see "Mohawk Nation Exercises Sovereign Immunity in Inter Partes Review"). The Board held 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 (see "PTAB Denies St. Regis Mohawk Tribe's Motion to Terminate IPRs based on Sovereign Immunity").
The Federal Circuit affirmed, in an opinion by Judge Moore joined by Judges Dyk and Reyna. The opinion 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 as illustrated by Fed. Maritime Comm'n v. S.C. State Ports Auth., 535 U.S. 743, 754–56 (2002).
The FMC case formed the basis of the panel's opinion, appropriate seeing as the Tribe had used this case to support its sovereign immunity assertion (albeit 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 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 Director's unreviewable discretion (rather than 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, Paper 32 (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).
Judge Dyk wrote a concurring opinion, expressing his views on the history of reexamination proceedings before the USPTO as being consistent with the panel's decision to uphold the Board's refusal to recognize tribal sovereign immunity in this case.
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.
Meanwhile, it can be expected that the Federal Circuit will lift the stay on the PTAB IPR proceedings that it entered while this appeal was pending (see "Federal Circuit Issues Stay in St. Regis Mohawk Tribe Sovereign Immunity Appeal"). And in due course the PTAB will hold oral hearings and issue its Final Written Decision, no doubt invalidating the claims and patents at issue.
Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2018)
Panel: Circuit Judges Dyk, Moore, and Reyna
Opinion by Circuit Judge Moore; concurring opinion by Circuit Judge Dyk