On July 20, 2018, the Federal Circuit decided the matter of Saint Regis Mohawk Tribe and Allergan v. Mylan Pharmaceuticals Inc., where the petitioners (Allergan) attempted to terminate an inter partes review (IPR) challenge in the USPTO by asserting tribal sovereign immunity. In St. Regis, Allergan, a pharmaceutical company, moved to dismiss Mylan’s IPR challenge by striking a deal with the Saint Regis Mohawk Tribe. The deal comprised of a transfer of six of Allergan’s patents along with money considerations to the tribe in exchange for the promise that the tribe would assert its tribal sovereign immunity in the IPR proceeding. Allergan then argued that this assertion of immunity allowed the tribe to be insulated from the IPR proceedings brought by Mylan against its patents.

The Federal Circuit disagreed with Allergan, holding that sovereign immunity cannot be asserted to shield from IPR challenges because IPRs are more akin to an agency proceeding than civil litigation. Throughout its decision, the court addressed the issue from a more procedural-based point of view rather than a policy-based viewpoint. This decision may be petitioned to the Supreme Court, but the small scope of the Federal Circuit’s ruling may still linger past any Supreme Court decision. Mylan successfully claimed that tribal sovereign immunity should not apply, but questions remain from Mylan’s other arguments. For example, Mylan posed the question whether the Allergan transaction was a “sham deal,” a question that went unanswered by the court.

Additionally, the Federal Circuit explicitly left open the question of whether or not state sovereign immunity should apply in IPRs. Like tribes, states traditionally enjoy the benefit of sovereign immunity. In response to the St. Regis decision, some states have filed briefs in support of the tribe, perhaps anticipating their immunity to be in jeopardy. Some states suggested that to subject state sovereigns to IPR challenges would make public universities an attractive target for parties seeking to take advantage of research done by the university, if the university’s patents are held invalid by the USPTO. This would be true for many public colleges and universities, who hold a variety of patents that generate revenue for the school. Furthermore, states argued that a state university’s patents largely benefit the public, whereas the patent portfolio of a private company mostly benefits the owners.

The most important difference between the states’ arguments and the tribe’s arguments in St. Regis may be the nature of the patent acquisition. Allergan’s maneuver, while perfectly legal in a vacuum, was seen to raise red flags. One of the most glaring issues was likely that the transaction occurred one week before the IPR hearing before the USPTO. Thus, Mylan argued that Allergan attempted to “market an exception” from the IPR hearing and that the transaction was a “sham.” The underlying arguments by state universities seem to rest on the fact that their patents are acquired in a more “traditional” course of business and research. Nonetheless, since the Federal Circuit did not address the whether the Allergan-St. Regis transaction was inappropriate by itself, states may feel threatened by the decision given both its narrowness and its result.

In multiple instances last year, the USPTO has in fact ruled that state sovereign immunity applies in IPRs, allowing patents held by state universities to be shielded from such challenges. However, the Federal Circuit’s holding in St. Regis may call those decisions into question, given the court’s reasoning. Even though state and tribal immunity do not share the exact same traits, state universities may have reason to worry in the wake of St. Regis.

Lucas Paez

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