The Patent Trial and Appeal Board (PTAB) has not taken kindly to a move by the Irish drug company Allergan to shield its key patents on its dry-eye drug Restasis from challenge at the U.S. Patent Office by assigning these patents to the Saint Regis Mohawk Tribe in return for a commitment by the tribe, as new owner of the patents, to invoke “sovereign immunity.”  In a decision rendered last Friday (February 23, 2017), the PTAB panel handling these cases rejected the Tribe’s claim to immunity and denied the new patent owner’s motion to terminate.

However, the PTAB panel decision denying the motion to terminate in these IPR cases (Mylan Pharmaceuticals, et al. v. Allergan, Inc., PR2016-01127, etc.) is surprising because the panel declined to take the easy way out, that being to follow the reasoning of a recent PTAB ruling in another sovereign immunity case, Ericsson Inc. v. Regents of the University of Minnesota, IPR2017-01186.

The enlarged PTAB panel in the Ericsson case (which included the PTAB’s Chief Judge and three other additional panel members selected by the Chief Judge) found that sovereign immunity was waived when a Patent Owner chose to enforce its patent rights in a federal district court action.  The easiest resolution would have been to extend the Ericsson reasoning to find a waiver of immunity equally applies to sovereign assignees of patents already in litigation.

Instead, the panel in the Mylan cases chose a frontal assault on tribal immunity.  The Mylan panel held that the AIA was an act of Congress of general applicability and “general acts of Congress apply to Indians . . . in the absence of clear expression to the contrary.”  The panel also appears to have adopted the position that IPR trials are in rem proceedings, not exercises of personal jurisdiction over private entities holding private property rights – a theory that has not been embraced in any of the previous IPR decisions involving sovereign immunity claims asserted by state university patent owners.

The Mylan panel also found that, even assuming arguendo that the Mohawk Tribe was entitled to assert immunity, the proceedings can continue without the tribe’s participation because the Mohawks had granted essentially all rights under the patent back to the original owner, Allergan.  The Mylan panel stopped short of concluding that the transaction was a sham transaction, but essentially found that none of the rights retained by the Tribe following its exclusive license back to Allergan amounted to anything substantial and that the Tribe was not an indispensable party because “Allergan has at least an identical interest to the Tribe.”