St. Regis Mohawk Tribe Petitions Federal Circuit for En Banc Review of Panel Decision Voiding Sovereign Immunity in Inter Partes Review

By Kevin E. Noonan --

On July 22nd, the Federal Circuit issued its opinion in St. Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., 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.  Yesterday, the Tribe filed its brief in support of its petition for rehearing en banc.

To briefly recap, 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 Tribe's brief is focused on the Janus-like nature of these proceedings, which can be characterized as administrative agency or adversarial depending on the argument that supports an advocate's position.  The panel decision was based on the similarities of IPRs to other administrative agency proceedings (including, inter alia, ex parte reexamination).  In its brief, the Tribe set out the many ways IPRs are adversarial proceedings, including expressly these:

• The private-party petitioner controls the claims challenged and the grounds of the attacks.
• The proceeding cannot start until the private-party petitioner serves the patent owner with the petition.  35 U.S.C. § 312(a)(5).
• The patent owner may respond to the petition with a motion or a preliminary response.  37 C.F.R. §§ 42.20-42.25.
• The PTAB and Director are not parties to the proceeding.  37 C.F.R. § 42.2.
• The PTAB and Director lack authority to initiate a proceeding without a private party's petition or to engage in investigations that would lead to the filing of a claim.
• Once an IPR is initiated, neither the statute nor regulations provide any role for the PTAB or any federal officer to act as advocates in the proceedings, to add patent claims to an existing IPR, or to add prior art to that cited by the petition.
• The private-party petitioner provides the evidence, 35 U.S.C. § 312(a)(3)(B), and shoulders the burden of proof.  Id. at § 316(e).
• The parties (i.e., the petitioner and patent owner) can seek discovery, which the PTAB can enforce through sanctions.  37 C.F.R. §§ 42.51-42.65.
• The PTAB and Director have no power to initiate discovery.
• The Federal Rules of Evidence generally apply to IPRs.  Id. at § 42.62.
• The parties (but not the Board) may offer rebuttal evidence "which is responsive to the adversary's evidence."  Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1082 (Fed. Cir. 2015) (emphasis added).
• If a patent owner withdraws from an IPR, the Board may issue an "adverse judgment" cancelling the patent owner's claims.  37 C.F.R. § 42.73(b)(4).  But the judgment is limited to the grounds raised by petitioner.
• The parties may settle the IPR, but "the Board is not a party to the settlement," id. at § 42.74(a), and the Board lacks authority to settle an IPR if the petitioner wishes to proceed.
• The parties have the right to an oral hearing.  35 U.S.C. § 316(a)(10).
• The three PTAB "judges" issue a final written decision known as a "judgment."  77 Fed. Reg. at 48,766-67.
• The Board must decide the case based on the "arguments that were advanced by a party."  In re Magnum Oil Tools Int'l, Ltd., 829 F.3d1364, 1380-81 (Fed. Cir. 2016).
• The loser of the IPR may be subject to estoppel.  37 C.F.R.§ 42.73(d)(3).  The Board, which is not a party, is not estopped.
• The PTAB has continued to borrow judicial practices for IPR trials, including recently revised procedures for expert testimony, word counts, motion practice, and other matters.

In support of its argument, the Tribe cites SAS Inst. Inc. v. Iancu, 138 S.Ct. 1348 (2018), that an IPR is a "procedure allow[ing] private parties to challenge previously issued patent claims in an adversarial process before the Patent Office that mimics civil litigation."  Id. at 1352 (emphases added).  Moreover, the Supreme Court characterized IPRs as being "party-directed, adversarial" proceedings before neutral judges with "many of the usual trappings of litigation" such as discovery, briefing, and oral hearing.

The Tribe's brief further asserts (as it did before the merits panel) the applicability of Federal Maritime Comm'n v. S.C. State Ports Auth., 535 U.S. 743 (2002) ("FMC") as controlling precedent.  It cites the Board's prior decisions in Covidien LP v. Univ. of Fla. Research Found. Inc., 2017 WL 4015009 (PTAB Jan. 25, 2017); NeoChord, Inc. v. Univ. of Md., Balt., No. IPR2016-00208 (PTAB May 23, 2017), and Reactive Surfaces, Ltd. v. Toyota Motor Corp., 2017 WL 2992435 (PTAB July 13, 2017), that FMC applies to IPRs.  Also, the brief argues that the Supreme Court's reasoning that sovereign immunity can be asserted in interferences, in Vas-Cath, Inc. v. Curators of Univ. of Mo., 473 F.3d 1376 (Fed. Cir. 2007), also applies to IPRs.  The Board itself (and the AIA) define IPRs as "trials" 37 C.F.R. § 42.100(a), according to the brief.

The Tribe further argues that "the panel misconstrued Alden v. Maine, 527 U.S. 706, 756 (1999), in opining that the Director's discretion whether to institute an IPR is comparable to the Attorney General's control over whether, how, and when to sue a sovereign state and in controlling the prosecution of any such action."

In addition to these general arguments, the Tribe sets forth its response to the "four factors" it contends the panel relied upon to support its decision that tribal sovereign immunity cannot be asserted to avoid an IPR proceeding.  The first of these is that "the Director has discretion in deciding whether to institute an IPR."  The brief states that the Supreme Court in SAS rejected this argument, and that the Director's involvement in IPR institution does not act to transform an IPR into an "agency-led, inquisitorial process"; instead, the brief contends that an IPR continues to be a "party-directed adversarial process" that "mimics civil litigation," citing SAS, 138 S.Ct. at 1352, 1355.  This is because, inter alia, "the Director may not "start proceedings on his own initiative" or "initiate whatever kind of inter partes review he might choose."  Id. at 1355.  In IPRs, "the petitioner's petition, not the Director's discretion, is supposed to guide the life of the litigation," and "the statute tells us that the petitioner's contentions, not the Director's discretion, define the scope of the litigation all the way from institution through to conclusion."  138 S.Ct. at 1356-57.  This portion of the Tribe's argument also notes the similarities between the government's arguments in SAS and the reasoning of the panel decision, which they argue the Supreme Court rejected.

With regard to the bases of the panel's analysis that an IPR is instituted by "a politically accountable officer," the brief distinguishes Alden v. Maine because:

IPRs are brought in the name (and for the benefit) of a private-party petitioner, not the government.  Private parties draft IPR petitions and litigate the proceedings; the Director has no role in how IPRs are prosecuted.  Moreover, the Director has delegated to the PTAB responsibility to make institution decisions, citing SAS, 138 S.Ct. at 1353, and thus plays no role (and exercises no political accountability) in deciding which cases to institute.  In short, the Director's attenuated role in IPRs is far removed from the Attorney General's responsibility in Alden.

The brief also cites FMC for the principle that "a subsequent enforcement action by the Attorney General does not 'retroactively convert an [administrative] adjudication initiated and pursued by a private party into one initiated and pursued by the Federal Government.'"  With regard to this ground of the panel's opinion, the brief argues that the panel ignored the Vas-Cath precedent entirely, which was error in light of the parallels between interferences and IPRs.  Finally, the Tribe argues that the panel's view of the nature of IPR proceedings is contrary to the legislative history of the Leahy-Smith America Invents Act (AIA):

[T]he panel's reasoning is backwards.  Contrary to Judge Dyk's concurrence, the history of IPRs shows that Congress gave the Director discretion to institute privately-filed IPRs precisely because they mimic private litigation.  The Committee Report accompanying the American Invents Act explained that the legislation was intended to "convert[] inter partes reexamination from an examinational to an adjudicative proceeding."  H.R. Rep. No. 112-98, at 46 (2011) (emphasis added).  The report recognized the dangers posed by IPRs "as tools for harassment or a means to prevent market entry through repeated litigation and administrative attacks on the validity of a patent."  Id. at 48.  Accordingly, the Report instructed the Director to use his authority "to address potential abuses."  Id.  The statutory safeguard of the Director's discretion not to institute IPRs reflects a congressional understanding that they are not agency actions [emphasis in brief].

The second basis for the panel's opinion is that "the Board may 'continue review even if the petitioner chooses not to participate' and intervene in appeals."  According to the brief, such instances are "exceptional" and only arise when the PTAB has already reached a decision.  Also, "[t]he Board lacks the power actually to prosecute a claim in the petitioner's absence."  Moreover, the brief cites FMC for the proposition that "the absence of a case-or-controversy requirement in administrative tribunals" is an even "greater insult" to a sovereign's interests.  535 U.S. at 760 n.11.

The third ground of the panel's opinion, according to the Tribe, is that "procedures in IPR do not mirror the Federal Rules of Civil Procedure."  But this is not necessary, says the Tribe; "FMC and Vas-Cath did not require that the procedures be identical, and there is no reason for such a requirement."  And again, "FMC warned that the differences between an administrative tribunal and an Article III court actually presented a greater danger to sovereign interests.  535 U.S. at 760 n.11":

The affront to a State's dignity does not lessen when an adjudication takes place in an administrative tribunal as opposed to an Article III court.¹¹  In both instances, a State is required to defend itself in an adversarial proceeding against a private party before an impartial federal officer.¹²  Moreover, it would be quite strange to prohibit Congress from exercising its Article I powers to abrogate state sovereign immunity in Article III judicial proceedings, see Seminole Tribe, 517 U. S., at 72, but permit the use of those same Article I powers to create court-like administrative tribunals where sovereign immunity does not apply.¹³

¹¹ One, in fact, could argue that allowing a private party to haul a State in front of such an administrative tribunal constitutes a greater insult to a State's dignity than requiring a State to appear in an Article III court presided over by a judge with life tenure nominated by the President of the United States and confirmed by the United States Senate.

¹² Contrary to the suggestion contained in Justice Breyer's dissenting opinion, our "basic analogy" is not "between a federal administrative proceeding triggered by a private citizen and a private citizen's lawsuit against a State" in a State's own courts.  Post, at 779.  Rather, as our discussion above makes clear, the more apt comparison is between a complaint filed by a private party against a State with the FMC and a lawsuit brought by a private party against a State in federal court.

¹³ While Justice Breyer asserts by use of analogy that this case implicates the First Amendment right of citizens to petition the Federal Government for a redress of grievances, see ibid., the Constitution no more protects a citizen's right to litigate against a State in front of a federal administrative tribunal than it does a citizen's right to sue a State in federal court.  Both types of proceedings were "anomalous and unheard of when the Constitution was adopted," Hans v. Louisiana, 134 U. S. 1, 18 (1890), and a private party plainly has no First Amendment right to haul a State in front of either an Article III court or a federal administrative tribunal [emphasis added].

The fourth and final ground of the panel's opinion, as argued by the Tribe, is that "[t]he mere existence of more inquisitorial proceedings in which immunity does not apply does not mean that immunity applies in a different type of proceeding before the same agency."  This argument was rejected by the Supreme Court in its SAS decision and was relevant to the Court in its reasoning in support of that decision, according to the brief.

Finally, the Tribe's brief argues that neither Oil States Energy Services v. Greene's Energy Group, LLC, 138 S. Ct. 1365 (2018), nor Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016), supports the panel's reasoning.  The brief cites language in Oil States concluding that IPRs use "court-like procedures" before "an adjudicatory body" composed of "judges" and include "some of the features of adversarial litigation,"  Id. at 1371, 1378, and that Cuozzo Speed Techs., LLC v. Lee, 136 S.Ct. 2131 (2016), stated that IPRs "help[] resolve concrete patent-related disputes among parties."

The brief also emphasizes that the panel's reasoning, if allowed to stand, could be applied to assertion of State sovereign immunity in IPRs, an issue now before the court in Regents of the University of Minnesota v. LSI Corp. as another reason the Court should take up en banc the question of sovereign immunity in IPR proceedings.

Comments

[EG]

Hey Kevin,

I didn't see anywhere your article a post of the brief by the St. Regis Mohawk Tribe. Having the posted brief would be helpful.

[Kevin E. Noonan]

Fixed. Thanks, EG

[EG]

Hey Kevin,

You most welcome, but you deserve the thanks, not me, for posting the brief.

[Skeptical]

Brief, page 7:

The panel’s decision effectively abrogated all sovereign immunity in IPRs. Although the panel stated that its decision was limited to the assertion of tribal immunity (Add.12), the panel’s holding turns entirely on the inherent attributes of the IPR proceeding itself. Those attributes are the same for all IPRs, and thus the panel’s decision effectively bars States and even federal agencies, such as NASA, HHS, the U.S. Army, and the U.S. Navy, which are some of nation’s most prolific patent filers, from asserting sovereign immunity in IPRs brought against them as patent owners.

[Kevin E. Noonan]

Well you know the cert petition is just a foregone conclusion, so ultimately it will be the Supreme Court who decides. Should the Federal Circuit apply the same logic to the state university case, it will just give the Court a reason to combine the two cases and decide them together.

[Skeptical]

Dr. Noonan,

But has not the CAFC ruled differently in regards to State immunity?

Is there not (already) a type of "circuit-split" WITHIN the CAFC?

Is the (current) "State" case necessary to be combined?

[Kevin E. Noonan]

The PTAB has ruled differently on State sovereign immunity, and also ruled that immunity was waived when the patents were asserted in district court litigation (raising the issue of whether actions in one forum (an Article III court) can waive sovereign immunity in a different, Article I, forum). The court will have the opportunity to treat tribal and sovereign immunity the same (or differently), and then the Supreme Court will have the opportunity to speak to whether either immunity protects against IPRs.