Federal Circuit Denies Tribal Sovereign Immunity from PTAB Proceedings

Last Friday, the Federal Circuit affirmed the Patent Trial & Appeal Board’s (PTAB) denial of tribal sovereign immunity as a patent owner defense to an AIA trial challenge. The decision tracks my November prediction that the Court would follow its reasoning in Ultratec, Inc. v. Captioncall, LLC, 2017, (Fed. Cir. Aug. 28, 2017), which explained that PTAB proceedings were not “trials” in an Article III sense. You can find Friday’s decision in St. Regis Mohawk Tribe v Mylan Pharm., Inc. (here)

The Board noted that the question of state sovereign immunity was left for another day, but was it really?

The decision explains that, as a threshold matter, tribal immunity is secondary to the superior sovereign, explaining:

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.” See Cuozzo, 136 S. Ct. at 2144. The United States, through the Director, does “exercise . . . political responsibility” over the decision to proceed with IPR. FMC, 535 U.S. at 764 (quoting Alden, 527 U.S. at 756). The Tribe may not rely on its immunity to bar such an action. See Miccosukee Tribe of Indians of Fla. v. United States, 698 F.3d 1326, 1331 (11th Cir. 2012) (“Indian tribes may not rely on tribal sovereign immunity to bar a suit by a superior sovereign.”).

While the decision does rely upon some case law specific to tribal immunity, nevertheless, it is hard to see a distinction for state immunity. This is because the decision is largely based on the threshold determination that an IPR is not akin to an Article III proceeding.

IPR is neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government. It is 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.” . . .

IPR is more like cases in which an agency chooses whether to institute a proceeding on information supplied by a private party. In FMC, the Court recognized that immunity would not apply in such a proceeding. . . .

Once IPR has been initiated, the Board may choose to continue review even if the petitioner chooses not to participate. 35 U.S.C. § 317(a). The Director has also been granted the right to participate in appeals “even if the private challengers drop out.”  . .

[T]he USPTO procedures in IPR do not mirror the Federal Rules of Civil Procedure.  Although there are certain similarities, the differences are substantial. While the Federal Rules of Civil Procedure provide opportunities for a plaintiff to make significant amendments to its complaint, see Fed. R. Civ. P. 15, the Board has determined
that in IPR a petitioner may only make clerical or typographical corrections to its petition. At the same time, a patent owner in IPR may seek to amend its patent claims during the proceedings, an option not available in civil litigation. 35 U.S.C. § 316(d). . . . Moreover, in civil  litigation and the proceedings at issue in FMC, parties have a host of discovery options, including the use of interrogatories, depositions, production demands, and requests for admission.  In IPR, discovery is limited to “(A) the deposition of witnesses submitting affidavits or declarations; and (B) what is otherwise necessary in the interest of justice.” 35 U.S.C. § 316(a)(5); see also 37 C.F.R. § 42.51. In FMC, the Court rejected the idea that sovereign immunity could be circumvented by merely moving a proceeding from an Article III court to an equivalent agency tribunal. FMC, 535 U.S. at 760. An IPR hearing is nothing like a district court patent trial. The hearings are short, and live testimony is rarely allowed. In IPR, the agency proceedings are both functionally and procedurally different from district court litigation. In short, the agency procedures in FMC much more closely approximated a civil litigation than those in IPR.

Finally, while the USPTO has the authority to conduct reexamination proceedings that are more inquisitorial and less adjudicatory than IPR, this does not mean that IPR is thus necessarily a proceeding in which Congress contemplated tribal immunity to apply.

(internal citations omitted)

This PTAB vs. Article III analysis will be the same when the state immunity cases reach the Court. I don’t see how the outcome can be any different under the above analysis.

To the extent any unanswered questions truly remain as to immunity before the PTAB, it would be in the realm of derivation. The earlier Vas-Cath decision still stands for patent interference (holding state immunity applies). Derivation, like interference is an ownership dispute between private parties, but there are some important distinctions. I’ll leave this discussion for another day. (This is a largely academic debate a single derivation has been instituted to date, and it seems unlikely that such proceedings will ever be anywhere near as commonplace as IPR).