Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2018)

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

Comments

[Skeptical]

I am curious as to the "leaving for another day" statement - how in the world does the "logic" of the Fed being a superior sovereign coupled with the patent being a [federal] franchise right POSSIBLY set up a different result vis a vis State sovereignty?

A: it does not. Not only does it not - it CANNOT.

While there are difference in State and tribal sovereignty, those differences find no foothold whatsoever in how this court answered the question put to it.

When it comes to the [federal] question of patents (and patent law), the Fed has preempted the States, and the same "superior" qualifier MUST apply.

[Paul F. Morgan]

For discussions of interesting issues as to what may happen next after this decision see the discussion in comments number 9 et sec under the July 19 Patently-O blog.

[Kevin E Noonan]

For someone with the nom de blog "skeptical" you are charmingly trusting with regard to the Supreme Court. "Tribes are tribes and states are states" might be all they need to say (no doubt supported by historical precedent from the 18th Century).

Stayed tuned.

[Skeptical]

Dr. Noonan,

Your reply made me chuckle.

Yes, I realize that what SHOULD happen and what DOES happen are often (and especially in patent law matters) not necessarily the same thing in regards to the Supreme Court.

But I will shoot back and challenge(even if only pedantically) the choice of the phrase "all they need to say" with the same sense of humor that what the Court NEEDS to do and what it actually does are similarly two different things.

[Kevin E Noonan]

"Need to say," of course meaning "sufficient for them to reach a conclusion contrary to the one you posit they must reach.

To paraphrase, no one ever went broke betting that this Court would do something other than what pundits think they should do.

[Skeptical]

I agree with your conclusion, given your stated meaning. Nonetheless, my point still holds.

[Skeptical]

Behind a paywall, a LAW360 article today by y Matthew Bultman reinforces my first post, and includes the following snippets:

"The Federal Circuit was careful to limit its ruling to tribal immunity, saying that it was not deciding whether state sovereign immunity applies at the PTAB, which is at issue in a separate case at the court. But attorneys said the reasoning in the ruling would appear to apply equally to state protections."

"Unlike tribal immunity, the PTAB has ruled that state sovereign immunity does apply in IPRs. And the board has cited the FMC ruling in those decisions. Attorneys said the Federal Circuit's decision in the Saint Regis case raises some questions about those holdings.

…

"It is hard to imagine how — given that the court here applied [FMC] to tribal immunity — the application of that very same case to states in the very same proceeding could come out differently," Tamara Fraizer of Squire Patton Boggs LLP said."

...

"Although there are differences between state and tribal immunity, Fraizer and others said there did not appear to be anything in the Federal Circuit's opinion that was unique to tribes. The factors the court considered were related to IPR proceedings, not the parties involved.

"The court basically made this decision based on the nature of what an IPR is, not really on the nature of what tribal sovereign immunity is," Zachary Silbersher of Kroub Silbersher & Kolmykov PLLC said."

…

"The language [in Judge Dyk's concurrence] is fairly sweeping in saying that there should be no sovereign immunity in the PTAB, period," Williams said.

I will grant that the Supreme Court "may" attempt to do as it pleases, without regard to pretty much anything (and especially so in patent cases), but the point here - at law and immediately flowing from THIS case - is strongly as I suggest.

[Greg DeLassus]

"'Tribes are tribes and states are states' might be all they need to say... ."

This is true as far as it goes, but that seems to me to underplay the differences between the two sorts of immunity. State sovereign immunity is codified in the constitution. Tribal sovereign immunity is a creature of federal common law. The federal courts can, therefore, feel much more free in defining the boundaries of tribal sovereign immunity than they can the boundaries of state sovereign immunity.

I will not lay odds one way or the other (especially because I do not know the composition of the panel that is to hear Ericson) as to how the statue question will come out, but *if* that panel wants to hold for Minnesota, it will scarcely require stiff logical contortions. They can simply say "the constitution permitted this court to hold as it did in St. Regis Mohawks, but the constitution compels a different outcome in the present case."

[Greg DeLassus]

"as to how the statue question..."

Sorry about that. This should read "as to how the stated question... ." The silly autocorrect strikes again.

[Kevin E. Noonan]

Greg: thanks for saying more fully what I was trying to say. The Eleventh Amendment is a strong impediment to any court wishing to circumscribe State sovereign immunity in ways that just don't apply to tribal immunity, for all the reasons you mentioned.

But I also am not willing to speculate on how the CAFC panel will rule in Ericsson, much less what the Supreme Court will eventually say.

[Skeptical]

Greg states "The federal courts can, therefore, feel much more free in defining the boundaries of tribal sovereign immunity than they can the boundaries of state sovereign immunity."

but this is not so.

It is not the courts that have the power to sculpt the contours of Tribal immunity - it is Congress (and the distinction is that Congress may do so without the level of agreement that a Constitutional change would require).

As the article I offered indicates: the logic of the present case - notwithstanding its caveat - simply does not impinge on any distinction of State versus Tribal immunity that looks to interject into the results of the decision.

Both Greg and Dr. Noonan are missing the point that THIS court's "logic" - as applied to a case of STATE immunity - has NO hook upon which the State fares any better than the Tribe.