[co-author: Scott Hughes]

On February 23, 2018, in a much-anticipated decision, the PTAB ruled that tribal sovereign immunity could not be used to shield certain Allergan Inc. (“Allergan”) patents from review in a number of IPRs. Allergan had assigned its patents to the Saint Regis Mohawk Tribe (the “Tribe”) on September 8, 2017, one week before hearing in the IPRs. Under an arrangement between Allergan and the Tribe, the Tribe granted Allergan an exclusive license back to the patents and received royalty payments in return. The Tribe then moved to terminate the IPRs, urging that its sovereign immunity prevented the PTAB from issuing an invalidity opinion.

The PTAB issued its 42-page decision this past Friday denying the motion, finding that the Tribe did not show that tribal sovereign immunity applies in IPRs. The Tribe argued that Supreme Court and PTAB precedent confirmed sovereign immunity should apply in administrative proceedings, such as IPRs, but the PTAB disagreed. It concluded that the precedent the Tribe cited involved only state sovereign immunity claims. It distinguished this from tribal sovereign immunity, which other Court precedent had held was not co-extensive with state sovereign immunity. The PTAB also disregarded the Tribe’s citation to decisions of other administrative agencies, stating that it was not bound by those decisions and that none squarely addressed the issue. Given the apparent lack of precedent, as well as a PTAB preference against non-statutory defenses, the PTAB said it was not persuaded that it should apply tribal sovereign immunity for the first time in IPRs. The PTAB also based this conclusion on its view that “general Acts of Congress apply to Indians,” and that the Patent Act is a “generally applicable” statute, i.e., applicable to any patents.

The PTAB went on to conclude that termination is not warranted even if tribal sovereign immunity applied in IPRs, as the IPRs could proceed with Allergan, the effective patent owner. The PTAB explained that while the Tribe had “licensed” the patents to Allergan, this characterization was not conclusive; an examination into whether Allergan was granted “all substantial rights” (and thus was the effective owner) was necessary. Interestingly, the bulk of the opinion was dedicated to this alternative conclusion. In this case, the PTAB found that the license from the Tribe to Allergan was effectively an assignment, because the Tribe had not retained, among other things, any meaningful right to enforce, license, or commercialize the patents. The Tribe had contended it would still be an “indispensable party” to the IPRs, even if Allergan was the effective owner. But, the PTAB disagreed with this too, concluding that “indispensable parties” need not necessarily be joined in IPRs, and that the Tribe was not an indispensable party in any event because its interests in the patents’ validity were more than adequately represented by Allergan.

This decision was closely watched, given the unique legal strategies and issues raised. It generated fifteen amicus submissions, including from several other Native American tribes, academics, and interest groups. With such public focus, it is not surprising that the PTAB tried to find a legal avenue to curtail the effectiveness of sovereign immunity, particularly here, where the sale of patents to the Tribe was only a week before the hearing was scheduled to commence. And with an apparent rise in sovereign immunity claims, the trend of curtailing this doctrine seems likely to continue, absent Federal Circuit intervention. In this regard, this case should continue to be monitored. It will almost certainly be appealed, which could shed further light on the viability of the sovereign immunity defense. The PTAB itself seems to have anticipated this; it dedicated a significant portion of its opinion to an alternative conclusion under the assumption that sovereign immunity would apply. So, it seems there will be more to come…