USPTO Rejects Use Of Tribal Sovereign Immunity In Allergan Patent Deal

Native American tribes’ sovereign immunity can’t be used to avoid inter partes review (IPR) of patent validity, the US Patent and Trademark Office Patent and Appeal Board (PTAB) has ruled in a first-of-its-kind case.

The IPR review process in Mylan Pharmaceuticals Inc., Teva Pharmaceuticals USA, Inc. and Akorn, Inc. v. Saint Regis Mohawk Tribe was launched in December 2016, the PTAB 23 February 2018 decision said. At that time, the undisputed owner of the patents being challenged was Allergan, Inc., the other petitioners joining later. The various cases were consolidated and set for hearing in September 2017.

Right before the hearing, counsel for the tribe informed the PTAB that it had acquired the challenged patents and filed a motion to dismiss the IPR based on tribal sovereign immunity, the PTAB said. Under the terms of the patent assignment deal between Allergan and the tribe, Allergan assigned a set of US patents and patent applications, including the challenged patents relating to Allergan’s “Restasis” drug. The tribe agreed not to waive its sovereign immunity in relation to any inter partes review or other proceeding in the USPTO. The parties also signed a patent licence agreement under which the tribe granted back to Allergan an “irremovable, perpetual, transferable and exclusive license” under the challenged patents for all Food and Drug Administration-approved uses in the US. In return, Allergan paid the tribe an upfront payment of $13.75 million and agreed to pay royalties of $15 million annually.

“In view of the public interest,” the board allowed interested third parties to file amicus briefs. It has now denied the tribe’s application to dismiss the IPR, holding that the tribe “has not established that the doctrine of tribal sovereign immunity should be applied to these proceedings.” “Allergan does not have a comment,” a spokesman said.

Could Ruling Halt Trend Toward Sovereign Immunity Defense in IPRs?

The PTAB finding, for the first time, that tribal sovereign immunity may not apply in IPRs is “significant because there has been an apparent trend of parties using sovereign immunity to avoid invalidity proceedings” at the board, said Hogan Lovells (Washington, DC) patent attorney Joseph Raffetto. The decision suggests that the PTAB is likely to continue curtailing the applicability of such immunity in cases before it, he said.

Additional PTAB decisions on the issue are likely, but the present case “seems the most advanced on tribal sovereign immunity,” he said. Any appeals of the case “should be carefully monitored, as the Federal Circuit [Court of Appeals] could provide further guidance on these issues.”

The PTAB ruling didn’t touch the merits of the validity challenges in the IPR petitions, Raffetto said. The proceedings will now proceed on the merits of the patents, with, ultimately, an appeal to the Federal Circuit likely on the sovereignty issues, he said.

Since the ruling seemed direct, the need for legislation in this area “seems somewhat diminished,” he said, adding that congressional action could, however, reinforce the holding that the defense doesn’t apply in IPRs, he said.

Late last year a bill was introduced in the Senate to abrogate tribal sovereign immunity as a defense to IPRs at the USPTO, but no further action on it has been reported, he said.

While the holding probably won’t have any impact outside the US, it “will certainly provide guidance to foreign patent owners who may be considering legal strategies like those taken in this case,” said Raffetto.

 

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