In a unanimous decision, an appellate court has resoundingly rejected the legal claim that sovereign immunity, as argued by a Native American tribe, can act as a shield for a patent review process.
On July 20, the United States Court of Appeals for the Federal Circuit found in a 3-0 decision that the inter partes review (IPR) process is closer to an “agency enforcement action”—like a complaint brought by the Federal Trade Commission or the Federal Communications Commission—than a regular lawsuit.
IPR is a process that allows anyone to challenge a patent’s validity at the United States Patent and Trademark Office—it was used famously in 2017 to reject the “podcasting patent.”
This case, Saint Regis Mohawk Tribe, Allergan Inc. v. Mylan Pharmaceuticals et al, really began in September 2015. That was when Allergan, a pharma company, sued rival Mylan, claiming that Mylan’s generics infringed on Allergan’s dry eye treatment known as Restasis.
“This win is a victory in our ongoing efforts to stop patent abuses by brand companies and to help drive access to more affordable medicine,” Mylan CEO Heather Bresch said in a statement on July 20.
“Today’s ruling reaffirms that Allergan’s attempt to leverage the Saint Regis Mohawk Tribe for patent protection represents another inappropriate tactic to delay the availability of generic medicines for patients who need them.”
That case was initially filed in the Eastern District of Texas, known as a judicial region that is particularly friendly to entities that are often dubbed patent trolls.
Let’s make a deal
By 2016, Mylan initiated the IPR. But Allergan, in an attempt to stave it off, struck a strange deal transferring ownership of the six Restasis-related patents to the Saint Regis Mohawk Tribe, based in upstate New York, near the Canadian border.
As part of that deal, Mylan paid $13.75 million to the tribe, with a promise of $15 million in annual payments—if the patents were upheld, that is. (According to , Allergan stood to make $1 billion annually for its monopoly product.)
The Mohawk Tribe attempted to end the IPR, citing sovereign immunity, which was denied. The tribe struck at least one other similar deal with a firm known as SRC Labs, which sued Amazon and Microsoft.
Due to the July 20 ruling, Mylan’s IPR process will now go forward.
As Ars has reported before, “sovereign immunity” is a legal concept that predates the United States and stems from the basic notion that you can’t sue a monarch, like, say, the King of England, in a court of law. It’s codified in the 11th Amendment to the US Constitution, which prohibits “any suit in law or equity, commenced or prosecuted against one of the United States” by an individual.
While the amendment was written to apply to American states, Native American tribes also enjoy the same immunity. State-owned universities have also been able to use their own patents to extract settlements and verdicts without worrying about being subject to accusations of patent infringement.
The theory was, essentially, that because the Mohawk Tribe has sovereign immunity, it can’t be sued.
But the Federal Circuit didn’t buy it, noting that because the Director of the Patent Office has the final executive authority to begin or decline an IPR, ” it is because a politically accountable, federal official has authorized the institution of that proceeding.”
In short, an IPR isn’t a lawsuit. With no lawsuit, there can be no sovereign immunity.
As the three-judge panel concluded: “The Director’s important role as a gatekeeper and the Board’s authority to proceed in the absence of the parties convinces us that the USPTO is acting as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies ‘within their legitimate scope.’”
Allergan can now choose to appeal further, to the Supreme Court of the United States, which only agrees to hear a tiny percentage of cases.
In a blog post, the Electronic Frontier Foundation, which filed an amicus brief on the side of Mylan Pharmaceuticals, applauded the ruling, saying that the advocacy organization was “concerned to see private companies effectively attempt to rent sovereign immunity in order to avoid administrative processes created to protect the public interest. In this case, the tactic was part of an attempt to use bad patents to prop up drug prices for everyone. We are glad the Federal Circuit has rejected the tactic.”
