PTAB Rejects Allergan’s Tribal Sovereign Immunity Claim

Eye Cross-Section

On Friday, the Patent Trial and Appeal Board (PTAB) issued a ruling rejecting Allergan’s sovereign immunity claims.

As Patent Progress has previously described [1][2][3], Allergan sold their patents to a Native American tribe, licensed them back, and required the tribe to claim sovereign immunity against inter partes reviews.  But, as also previously described here, there are real problems with that assertion, problems the PTAB identified in their decision.

The PTAB ruled on two major issues—whether tribal sovereign immunity applies to inter partes reviews (IPR) in general and whether this particular IPR could continue even if sovereign immunity applied.

Does Tribal Sovereign Immunity Apply To IPRs?

The PTAB’s answer to this question was a resounding no.  First, the PTAB noted that there’s neither case law nor statutory reasons to apply tribal sovereign immunity to agency proceedings like IPR.  Second, as I noted back in October, tribal sovereign immunity does not apply to federal administrative proceedings like IPR.  The PTAB agreed, finding that tribal sovereign immunity does not apply to IPRs, which are of course federal administrative proceedings.  And third, the PTAB noted that in an IPR, the ultimate remedy is applied only to the challenged patent, not to the patent owner.  This sort of proceeding isn’t the type of “suit” which traditionally triggers sovereign immunity.

This might also have impacts on state sovereign immunity going forward.  While there are good case law reasons to consider the applicability of state sovereign immunity, unlike tribal sovereign immunity, state sovereign immunity also doesn’t apply to federal administrative proceedings and IPR’s structure makes it not the sort of suit which traditionally triggers state sovereign immunity.

Can This IPR Proceed Even If Immunity Applies?

The second question was, assuming immunity does apply—which it doesn’t—could the IPR proceed anyway with Allergan remaining in the case?  Allergan, per the PTAB decision, remains an effective patent owner even after the transfer—a transfer that Federal Circuit Judge Bryson (sitting by designation) characterized as a “rental” of sovereign immunity.  Judge Bryson had “serious concerns about the legitimacy” of the transaction, concerns the PTAB reiterated.

In particular, the PTAB noted that the Tribe retained only “illusory” rights to sue on the patent.  They also noted that, despite Allergan and the Tribe’s insistence that the Tribe has real rights to license the patent for non-FDA uses, the Tribe is actually barred from licensing the patent in any way that might result in a product competing with Allergan’s product, whether FDA-approved or not.  This provision essentially bars the Tribe from actually licensing their patent in any way, meaning that only Allergan retains any real rights with respect to the patent.

The PTAB also pointed out that the Tribe’s argument that they retained real rights to practice their patent runs in complete contrast to the Tribe’s own claims that they wouldn’t be investing any money in the patent, but only holding the patent.

Based on these factors, the PTAB determined that Allergan, not the Tribe, is the effective patent owner and thus determined that the IPR can continue whether or not sovereign immunity applies to IPRs.

In other words, not a single judge—whether of the PTAB or Federal Circuit variety—who’s looked at the Allergan transaction has been impressed.

What’s Next?

The IPR schedule resumes, with a final decision due by June.  The Tribe and Allergan are likely to appeal the decision on immunity, along with any adverse decision on the patents at issue, to the Federal Circuit.

Given Judge Bryson’s existing opinion of the Allergan deal, that doesn’t seem likely to be a productive appeal.

Joshua Landau

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

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