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Appeals court rejects tribe’s sovereign immunity claim in patent-busting case

August 24, 2018


A United States appellate court unanimously rejected a brand-side pharmaceutical company's claim that sovereign immunity can shield against an important IP review mechanism.

Recently, the United States Court of Appeal for the Federal Circuit upheld a decision of the United States Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board that inter partes review (IPR) can apply even when the patent-holder is a Native American tribe.

IPR is a process administered by the USPTO used by generic pharmaceutical companies and other parties seeking to challenge patents.

In 2016, the generic pharmaceutical companies Mylan, Teva, and Akorn filed for IPR on Allergan’s patents for the eye-dryness therapy Restasis. In response, Allergan struck a lucrative deal to transfer six of its patents related to Restasis to the Saint Regis Mohawk Tribe in upstate New York in an attempt to insulate those patents from challenge under the IPR process through tribal sovereign immunity.

The doctrine of sovereign immunity bars suits against governmental entities including states and Native American tribes. However, the doctrine generally does not apply to block investigations or enforcement actions conducted by an agency of the federal government.

The resulting case, Saint Regis Mohawk Tribe, Allergan v. Mylan Pharmaceuticals, turned on the key distinction between a legal action brought against a state or tribe by a private party, which could be barred by sovereign immunity, and a state-initiated enforcement action, which could not. While acknowledging that “IPR is neither clearly a judicial proceeding instituted by a private party nor clearly a law enforcement action,” the Court ultimately decided that IPR is “more like an agency enforcement action than a civil suit” brought against the government, and therefore that tribal sovereign immunity could not operate to block the process.

The Court’s reasoning on this point focused on two key factors:

  • First, it is important that it is the USPTO Director, a politically-accountable executive branch official, who has the final say on whether and how an IPR process goes ahead. Because of this, the risk of vexatious litigation against governments by private parties is reduced.

  • Second, IPR proceedings themselves are administrative and non-adversarial in nature, and the USPTO Director has extensive discretion to control procedure relative to the parties. In effect, the Court determined that IPR is simply not a privately-initiated lawsuit.

As it stands, the Federal Circuit’s decision undermines the ability of brand-side pharmaceutical companies and other patent-holders to leverage relationships with Native American communities to protect their IP portfolios, and may discourage the growth of what may have been a burgeoning sector for corporate-tribal partnerships.

However, the court emphasized that its decision does not settle the related question of whether state sovereign immunity may provide a shield against the IPR process – a question which may have broad implications for government-held patents.

As a result of the decision, the “patent-busting” IPR process initiated by Mylan, Teva, and Akorn will go forward.


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