It has been said that the road to ruin is paved with the best intentions. Another take on this aphorism is that the best intentions are usually not enough to overcome the realities of a given situation. In the case of using Native American tribal sovereign immunity to skirt inter partes review (IPR) proceedings, this seems to be the case. As I noted in a previous article addressing this issue, some intrepid legal minds tried to take advantage of such sovereign immunity by assigning patents to Native American tribes in exchange for a grant-back license and attendant royalties. This novel approach just got trampled by the Court of Appeals for the Federal Circuit (CAFC), and I can’t say I am all that surprised by it.

Why all the attention? A little recap will help — the America Invents Act of 2012 (AIA) accounted for some of the most profound changes to patent law since the passage of the Patent Act in 1952. Once of the many changes implemented by the AIA was the institution of the Patent Trial and Appeal Board (PTAB) , an administrative body within the United States Patent & Trademark Office (USPTO) that, at its core, is designed to address issues of patentability. Its Trial Section has become a popular destination for contenting patent validity in IPRs. Ostensibly intended to address the heavy volume of patent infringement litigation (much of it by non-practicing entities attempting to monetize patent portfolios), this adversarial process created an alternate mechanism for post-grant review of patent claims at least insofar as prior art is concerned. The problem: IPRs in PTAB have resulted in far more patents being invalidated, significantly impacting patent portfolios.

So what is a potent owner to do given these odds? In the case of Allergan PLC, it transferred its patents covering its dry eye drug Restasis to the St. Regis Mohawk Tribe in the State of New York in exchange for a grant-back license to Allergan for an upfront fee and ingoing royalty. The theory: those attempting to attack the validity of the Retasis patents in IPR proceedings would be faced with bringing an action against a Native American tribe (the now-owner of the patents) that enjoys sovereign immunity, defeating the institution of the action. The theory was novel, and I give high marks to thinking outside the proverbial USPTO box. That said, it was never on sound footing. Mylan Pharmaceuticals brought an IPR proceeding in the PTAB attacking the validity of the Restasis patents, and the St. Regis Mohawk Tribe brought its motion to dismiss based upon sovereign immunity. On February 26, 2018, the PTAB issued a decision denying the tribe’s motion, and the decision was appealed to the CAFC.

Affirming the PTAB holding that “tribal sovereign immunity cannot be asserted in IPRs”, Judge Moore stated in his decision that “IPR is neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government.” Instead, he held it to be “a ‘hybrid proceeding’ with ‘adjudicatory characteristics’ similar to court proceedings, but in other respects it ‘is less like a judicial proceeding and more like a specialized agency proceeding.’” Using this foundation, Judge Moore asserted “several factors” in support of this rationale, from the USPTO Director’s “broad discretion in deciding whether to institute review” to “the role of the parties in IPR,” all of which suggest that sovereign immunity simply does not apply to IPRs.

While I continue to believe that architecting tribal sovereign immunity in this fashion is improper, this holding is problematic for s number of reasons, not the least of which related to the CAFC’s rationale regarding the jurisdiction of the PTAB. The problem is that the PTAB, at best, asserts quasi in rem jurisdiction over the patents as opposed to in personam jurisdiction (i.e., over the patent owners) or direct in rem jurisdiction over the patents (as the PTAB panel only addresses the invalidity arguments brought by those bringing the IPR proceeding and does not adjudicate the rights of all other persons related to the patents). I realize that I am getting into the weeds here, but the point is that the CAFC’s rationale is not entirely correct. As a result, the underlying basis for the ruling appears headed for either a CAFC rehearing en banc or, more likely, perfectly situated for a trip to the Supreme Court. That said, the underlying rationale may morph, but I would be surprised if the end-result were any different.



The smoke signals have been heralding an early end to this approach, and the CAFC decision has only added more fuel to that fire. Without question, the St. Regis Mohawk Tribe will likely petition for reconsideration, and if not granted, likely petition the Supreme Court to hear the case. Without question, It would be unwise to undertake the costs necessary to implement this approach for what would be an uncertain (if not nonexistent) gain. Whether via the CAFC rehearing the matter or, more likely, from a decision of the United States Supreme Court, tribal sovereign immunity being asserted in IPRs is not just looking questionable — it seems to be going up in smoke in the process.

Tom Kulik is an Intellectual Property & Information Technology Partner at the Dallas-based law firm of Scheef & Stone, LLP. In private practice for over 20 years, Tom is a sought-after technology lawyer who uses his industry experience as a former computer systems engineer to creatively counsel and help his clients navigate the complexities of law and technology in their business. News outlets reach out to Tom for his insight, and he has been quoted by national media organizations. Get in touch with Tom on Twitter (@LegalIntangibls) or Facebook (www.facebook.com/technologylawyer), or contact him directly at tom.kulik@solidcounsel.com.