Yesterday Senators Cotton, McCaskill, Toomey, Ernst, and Perdue introduced the Preserving Access to Cost Effective Drugs (PACED) Act, a bill which would help prevent sovereign immunity from being abused to prevent invalid patents from being struck down by the U.S. Patent and Trademark Office.
As Patent Progress has previously described, sovereign immunity has been abused in exactly this way, most notably by Allergan’s sale of their evergreened dry eye patents to a Native American tribe. The PACED Act would bar this practice, eliminating sovereign immunity as a defense in inter partes review to the fullest extent permitted by the Constitution. It would also prevent tribal sovereign immunity from being used in declaratory judgment actions, where a company that expects to be accused of infringing files a suit to invalidate a patent.
The PACED Act also clarifies an important area of sovereign immunity law with respect to the PTAB and foreign governments. Foreign nations also receive a type of sovereign immunity. However, the Foreign Sovereign Immunity Act (FSIA), which governs when foreign sovereign immunity is applied by U.S. courts, does not appear to apply to inter partes and other post-grant reviews, leaving the scope of that immunity unclear. The PACED Act makes clear that the FSIA’s provisions will be applied to post-grant reviews, so that patents can’t generally be sold to foreign government entities in order to avoid review.
While the PTAB has determined that tribal sovereign immunity is inapplicable in IPR, that ruling is currently being appealed. Passing the PACED Act would ensure that, regardless of the appeal, it would be impossible to abuse sovereign immunity to shield patents from review.