Earlier this week, the Supreme Court released their decision in Upper Skagit Indian Tribe v. Lundgren. The opinion effectively held that the simple fact of in rem jurisdiction does not always bar claims of tribal sovereign immunity.
In rem jurisdiction is one argument that might bar the new practice of renting tribal sovereign immunity to a patent owner in order to shield the patent from inter partes review (IPR). That argument, among others, is now being reviewed by the Federal Circuit in the St. Regis Mohawk Tribe v. Allergan case. (CCIA joined an amicus brief in front of the Federal Circuit.)
But the Upper Skagit opinion suggests another reason the Federal Circuit should be skeptical of claims that sovereign immunity should apply to IPRs.
Sovereign Immunity Doesn’t Apply To IPR For Other Reasons
At the outset, let me be clear—there are a plethora of reasons that sovereign immunity should not be available to prevent inter partes review. CCIA’s brief explains that inter partes review, as an action taken by the federal government, isn’t subject to sovereign immunity claims. As the Oil States decision earlier this year acknowledged, patents are a matter that “aris[es] between the government and others.” Such a dispute, between the federal government and a subsidiary sovereign, isn’t subject to claims of sovereign immunity.
In Rem Doesn’t Always Block Sovereign Immunity
CCIA’s brief also addressed the question of whether in rem jurisdiction blocks claims of sovereign immunity. The CCIA brief interpreted the County of Yakima case as having held that sovereign immunity doesn’t always apply to cases where in rem jurisdiction over property exists.
We weren’t alone in this interpretation—numerous courts, including the Washington Supreme Court, interpreted it in the same way. Upper Skagit determined that Yakima only interpreted a specific statute, rather than announcing a rule generally applicable to the common-law doctrine of tribal immunity. At first glance, it seems like Upper Skagit suggests sovereign immunity would apply to IPRs even if they are in rem proceedings.
But Upper Skagit (and particularly Justice Thomas’s dissent)1 discussed a second issue, which the Court didn’t decide—whether the ‘immovable property’ exception to sovereign immunity would apply.
The ‘immovable property’ exception to sovereign immunity is based in the centuries-old principle that a sovereign “by acquiring private property in a foreign country, may possibly be considered as subjecting that property to the territorial jurisdiction . . . and assuming the character of a private individual.”
In other words, where a sovereign acquires property that’s bound to the territory of another sovereign, the acquiring sovereign cannot then assert its own immunity against the sovereign with territorial jurisdiction. This avoids offending the sovereignty of the territorial sovereign (the one who controls the jurisdiction within which the property is located) by ensuring it can apply its own laws to that property.
In the case of property which is susceptible of being moved, that offense can be mitigated by the ability of the owning sovereign to remove the property to its own territory, and sovereign immunity may still apply. But when the property can’t be moved from the area in which it’s situated, there’s no way to mitigate the offense—and sovereign immunity may fail.
Patents Are Situated In The United States
At first glance, it’s not obvious why the immovable property exception is relevant to patents. Patents are public franchises, not land. And patents are intangible property, not land tightly bound to a particular physical location.
But patents are a form of property, as Oil States made sure to emphasize. And patents have territorial limits, the scope of which are being decided in the WesternGeco case right now.
That second statement is important. Patents share an important characteristic with land—they are both geographically limited forms of property, and those geographical limits are fixed and immovable. Land has boundaries; United States patents apply only within the United States. While you can transfer ownership of a patent to a foreign entity, just like you can sell land, the patent itself will still only apply within the United States and the rights associated with the land will only apply within the deeded boundaries.
That means that, like land, patents are (at least in a sense) immovable property permanently situated within the United States. And any decision which allows the application of sovereign immunity to patents thus creates an offense to the sovereignty of the United States in the same way that applying sovereign immunity to prevent a state from determining the status of its own land offends the sovereignty of that state.
While the immovable property exception might or might not apply as a matter of law,2 the policy rationales behind it logically apply with equal force—applying tribal (or state) sovereign immunity to inter partes review creates the same kind of offense against the sovereignty of the United States.
The Decision Is Situated With The Federal Circuit
On June 4, the Federal Circuit will hear argument in Saint Regis Mohawk Tribe v. Mylan et. al. After argument, they’ll be tasked with deciding whether sovereign immunity can be used to bar inter partes review.
There are several reasons to decide that it doesn’t apply in this specific case. The transfer agreement reserves far too many rights to Allergan for it to look like an actual transfer. The transfer happened after the inter partes review was in progress, meaning that the Tribe took the property subject to the pre-existing challenge.
But deciding this case on grounds specific to this case would be a mistake. It would leave open the possibility that some other agreement in some other situation (perhaps the SRC Labs patents or the ProWire/MEC Resources patents) might not eliminate sovereign immunity. And that would leave companies who are, or are likely to be, subject to patent litigation with a real concern. They can go ahead with their business with the knowledge that IPR might not be available if the plaintiff uses a tribe to launder its sovereign immunity, or they can reduce their investments to avoid potential liability.
USPTO Director Iancu has often noted that certainty in the patent system is something that patent owners need—but it’s also something that companies need in order to operate. The Federal Circuit needs to decide this case with an eye towards deciding whether sovereign immunity will apply to all IPRs, not just this one.
And when they do, they should remember immovable property, the territoriality of patents, and respect for the sovereignty of the United States.
- The dissent being by Justice Thomas is worth noting. Justice Thomas has authored a number of important patent law decisions over the past few years—including Oil States. ↵
- Applying it would seem to require extending the doctrine, as I have been unable to locate any case in which property other than real property was treated as immovable property, and 35 U.S.C. § 261 specifies that patents are treated as personal, not real, property. ↵