Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc.
Opinion of the Court
Moore, Circuit Judge.
*1325Mylan Pharmaceuticals, Inc., petitioned for inter partes review ("IPR") of various patents owned by Allergan, Inc., relating to its dry eye treatment Restasis. Teva Pharmaceuticals USA, Inc., and Akorn, Inc. (together with Mylan, "Appellees") joined. While IPR was pending, Allergan transferred title of the patents to the Saint Regis Mohawk Tribe, which asserted sovereign immunity. The Board denied the Tribe's motion to terminate on the basis of sovereign immunity and Allergan's motion to withdraw from the proceedings. Allergan and the Tribe appeal, arguing the Board improperly denied these motions. We affirm.
BACKGROUND
This appeal stems from a multifront dispute between Allergan and various generic drug manufacturers regarding patents related to Allergan's Restasis product (the "Restasis Patents"), a treatment for alleviating the symptoms of chronic dry eye. In 2015, Allergan sued Appellees in the Eastern District of Texas, alleging infringement of the Restasis Patents based on their filings of Abbreviated New Drug Applications. On June 3, 2016, Mylan petitioned for IPR of the Restasis Patents. Subsequently, Teva and Akorn filed similar petitions. The Board instituted IPR and scheduled a consolidated oral hearing for September 15, 2017.
Before the hearing, Allergan and the Tribe entered into an agreement Mylan alleges was intended to protect the patents from review. On September 8, 2017, a patent assignment transferring the Restasis patents from Allergan to the Tribe was recorded with the USPTO. The Tribe moved to terminate the IPRs, arguing it is entitled to assert tribal sovereign immunity, and Allergan moved to withdraw. The Board denied both motions.
Allergan and the Tribe appeal. We have jurisdiction pursuant
ANALYSIS
As "domestic dependent nations," Indian tribes possess "inherent sovereign immunity," and suits against them are generally barred "absent a clear waiver by the tribe or congressional abrogation." Okla. Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Okla. ,
*1326Fed. Power Comm'n v. Tuscarora Indian Nation ,
In FMC , the Supreme Court considered whether state sovereign immunity precluded the Federal Maritime Commission from "adjudicating a private party's complaint that a state-run port ha[d] violated the Shipping Act of 1984."
The Tribe argues that tribal sovereign immunity applies in IPR under FMC . It asserts that like the proceeding in FMC , IPR is a contested, adjudicatory proceeding between private parties in which the petitioner, not the USPTO, defines the contours of the proceeding. Appellees dispute this comparison, arguing that the Tribe may not invoke sovereign immunity to block IPR proceedings because they are more like a traditional agency action. They argue the Board is not adjudicating claims between parties but instead is reconsidering a grant of a government franchise. They also argue that even if the Tribe could otherwise assert sovereign immunity, its use here is an impermissible attempt to "market an exception" from the law and non-Indian companies have no legitimate interest in renting tribal immunity to circumvent the law. Appellees further argue the Tribe may not assert immunity because the assignment was a sham, and the Tribe waived sovereign immunity by suing on the patents.
Although the precise contours of tribal sovereign immunity differ from those of state sovereign immunity, the FMC analysis is instructive. We hold that tribal sovereign immunity cannot be asserted in IPRs.
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." Cuozzo Speed Techs., LLC v. Lee , --- U.S. ----,
In *1327Oil States Energy Services v. Greene's Energy Group, LLC , --- U.S. ----,
In contrast, in SAS Institute Inc. v. Iancu , --- U.S. ----,
Ultimately, several factors convince us that IPR is more like an agency enforcement action than a civil suit brought by a private party, and we conclude that tribal immunity is not implicated. First, although the Director's discretion in how he conducts IPR is significantly constrained, he possesses broad discretion in deciding whether to institute review. Oil States , 138 S.Ct. at 1371. Although this is only one decision, it embraces the entirety of the proceeding. If the Director decides to institute, review occurs. If the Director decides not to institute, for whatever reason, there is no review. In making this decision, the Director has complete discretion to decide not to institute review. Oil States , 138 S.Ct. at 1371 ("The decision whether to institute inter partes review is committed to the Director's discretion."). The Director bears the political responsibility of determining which cases should proceed. While he has the authority not to institute review on the merits of the petition, he could deny review for other reasons such as administrative efficiency or based on a party's status as a sovereign. See Wi-Fi One, LLC v. Broadcom Corp. ,
In FMC , the Federal Maritime Commission lacked the "discretion to refuse to adjudicate complaints brought by private parties," FMC ,
Second, the role of the parties in IPR suggests immunity does not apply in these proceedings. Once IPR has been initiated, the Board may choose to continue review even if the petitioner chooses not to participate.
Third, unlike FMC , the USPTO procedures in IPR do not mirror the Federal Rules of Civil Procedure. See FMC ,
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. The Tribe acknowledged that sovereign immunity would not apply in ex parte or inter partes reexamination proceedings because of their inquisitorial nature. Oral Arg. at 6:30-8:10. The mere existence of more inquisitorial proceedings in which immunity does not apply does not mean that immunity applies in a different type of proceeding before the same agency. Notably, the Supreme Court in Cuozzo recognized inter partes reexamination and IPR have the same "basic purposes, namely to reexamine an agency decision."
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 ,
In this case we are only deciding whether tribal immunity applies in IPR. While we recognize there are many parallels, we leave for another day the question of whether there is any reason to treat state sovereign immunity differently.
CONCLUSION
For the foregoing reasons, the decision of the Board is affirmed .
AFFIRMED
Concurring Opinion
I fully join the panel opinion but write separately to describe in greater detail the history of inter partes review proceedings, history that confirms that those proceedings are not adjudications between private parties. While private parties play a role, inter partes reviews are fundamentally agency reconsiderations of the original patent grant, proceedings as to which sovereign immunity does not apply.
As the panel makes clear, it is well established that tribes cannot assert sovereign immunity in proceedings brought *1330by the federal government.
The Supreme Court held that state sovereign immunity barred the FMC from adjudicating the complaint, but noted that it would not bar the FMC from "institut[ing] its own administrative proceeding against a state-run port," even if that proceeding were prompted by "information supplied by a private party."
Under FMC , it is clear that sovereign immunity cannot bar agency denial of an original patent application filed by a sovereign entity or, consequently, agency reconsideration of an original patent grant. Such reconsideration simply does not involve agency adjudication of a private dispute, but rather agency reconsideration of its own prior actions.
At oral argument, counsel for the tribe acknowledged that sovereign immunity would not apply in either ex parte or inter partes reexamination proceedings, and even suggested that the USPTO could continue to provide post-grant review of tribe-owned patents by simply converting the inter partes reviews to ex parte reexaminations. Oral Arg. 6:30-7:08, 54:48-55:15. But inter partes review is not fundamentally different from other reexamination procedures. Rather, inter partes review is a direct successor to ex parte and inter partes reexamination. It shares many of the same procedural features and is designed to address the same problems. And like the reexaminations from which it descends, it is fundamentally agency reconsideration, assisted by third parties, rather than agency adjudication of a private dispute.
Post-grant administrative review of issued patents is a relatively new feature of the patent system. It was first enacted in 1980 to address longstanding concerns about the reliability of the original examination process. Patlex Corp. v. Mossinghoff ,
*1331
In considering the enactment of reexamination, Congress was well aware of constraints on the accuracy of initial examination and the adverse effects of the issuance of bad patents. The Senate report on patent reexamination emphasized that the USPTO faced "a situation where a limited staff is trying to cope with a constantly increasing workload and is under pressure to make speedy determinations on whether or not to grant patents." S. Rep. No. 96-617, at 8 (1980); see also Patent Reexamination: Hearing on S. 1679 Before the Comm. on the Judiciary , 96th Cong. 3 (1980) (statement of Sen. Bayh) (characterizing the USPTO as "an understaffed and overworked office trying to handle an ever increasing workload."). The USPTO Commissioner testified that these resource constraints led to uncertainty in the patent system "because pertinent prior patents and printed publications ... often are discovered only after a patent has issued and become commercially important." S. Rep. No. 96-617, at 9 (1980). The Commissioner also explained that
The main reason reexamination is needed is because members of the public interested in the validity of a patent are sometimes able to find pertinent prior patents and printed publications not known or available to the PTO....
The patent owner's competitors will devote great effort and expense to invalidating a patent that affects their business. They can afford to look for documentary evidence of unpatentability in library collections, technical journals and other sources not within the PTO's search file. Because of budgetary and time constraints, the examiner's search seldom extends beyond the PTO's 22 million document collection.
Industrial Innovation and Patent and Copyright Law Amendments: Hearing on H.R. 6033, H.R. 6934, H.R. 3806, and H.R. 2414 Before the Subcomm. on Courts, Civil Liberties & the Admin. of Justice of the H. Comm. on the Judiciary , 96th Cong. 576 (1981) (statement of Sidney A Diamond, Commissioner of Patents and Trademarks).
As a result of these problems, there was a perception that the public lacked confidence in the patent system, which in turn contributed to judicial skepticism about the USPTO's work. See S. Rep. No. 96-617, at 3, 14 (1980). Indeed, "judicial opinions and commentaries from the time" evince "a fundamental lack of trust in the competency of the PTO to discover sources of relevant prior art and apply them properly under the statutory standards, particularly in the context of a confidential ex parte examination process." Mark D. Janis, Rethinking Reexamination: Toward A Viable Administrative Revocation System for U.S. Patent Law ,
Some kind of reexamination procedure was therefore desirable, particularly as to issues of anticipation and obviousness where prior art has always played a central role. "After reexamination," the Commissioner testified, "the presumptive validity of the patent as it leaves the reexamination process will be enhanced. The court will have greater confidence that the patent claims are of exactly the right scope and that any unpatentable original claims have been canceled." Industrial Innovation and Patent and Copyright Law Amendments: Hearing on H.R. 6033, H.R. 6934, H.R. 3806, and H.R. 2414 Before the Subcomm. on Courts, Civil Liberties & the Admin. of Justice of the H. Comm. on the Judiciary , 96th Cong. 580-81 (1981) (statement of Sidney A Diamond, Commissioner of Patents and Trademarks). Reexamination would allow the USPTO to cure its own errors, thereby improving patent quality, bolstering the presumption of patent validity, and restoring the public's and the judiciary's confidence in the USPTO.
In 1980, Congress enacted the Reexamination Act and created ex parte reexamination, the first post-issuance proceeding to review patent validity. See Act of Dec. 12, 1980, Pub. L. No. 96-517,
The objective of reexamination was to "strengthen[ ] investor confidence in the certainty of patent rights by creating a system of administrative reexamination of doubtful patents," H.R. Rep. No. 96-1307, pt. 1, at 3 (1980), and to "permit efficient resolution of questions about the validity of issued patents without recourse to expensive and lengthy infringement litigation,"
Nevertheless, ex parte reexamination had several limitations with the result that it was rarely used. H.R. Rep No. 106-464, at 133 (1999). First and foremost, a "third party challenger had no role once the proceeding was initiated while the patent holder had significant input throughout the entire process." S. Rep. No. 110-259 at 18 (2008). Additionally, there was no right for a requestor to appeal the USPTO's reexamination decision either administratively or in court.
In light of these deficiencies, Congress sought to introduce a new system that would make reexamination more effective and broaden its use. H.R. Rep 106-464 at 133 (1999). In 1999, it enacted a new procedure, known as inter partes reexamination, adding to the 1980 Reexamination Act's ex parte option. Act of Nov. 29, 1999, Pub. L. No. 106-113,
Over the next few years, Congress revised inter partes reexamination in an attempt to make it more effective. In 2002, the procedure was amended to allow requests based solely on prior art already considered by the USPTO, Pub. L. 107-273, § 13105,
It was against this background that, in 2011, Congress enacted the Leahy-Smith America Invents Act, which replaced inter partes reexamination with new post-grant review procedures, such as inter partes review, covered business method review, and post-grant review, while retaining ex parte reexamination. See Pub. L. No. 112-29, § 6,
Inter partes review, like inter partes reexamination, begins with a third party's filing a petition challenging the validity of one or more claims in a patent on the basis of prior art. The USPTO may institute review if the petitioner demonstrates a "reasonable likelihood that [it] would prevail" in the dispute, rather than instituting if it demonstrates a "substantial new question of patentability," as was the case in reexamination. See
In inter partes review, the federal agency tasked with patent examination of patent applications takes a "second look" at its own decision to issue a patent. As the Supreme Court concluded in Cuozzo :
[T]he purpose of [inter partes review] is not quite the same as the purpose of district court litigation. The proceeding involves what used to be called a reexamination (and, as noted above, a cousin of inter partes review, ex parte reexamination,35 U.S.C. § 302 et seq. , still bears that name). The name and accompanying procedures suggest that the proceeding offers a second look at an earlier administrative grant of a patent. Although Congress changed the name from "reexamination" to "review," nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely, to reexamine an earlier agency decision.
While inter partes review has some features similar to civil litigation, see SAS Institute Inc. v. Iancu , --- U.S. ----,
As the panel describes, significant features of the system confirm that inter partes review is an agency reconsideration rather than an adjudication of a private dispute and does not implicate sovereign immunity. Inter partes review brings to bear the same agency expertise as exists in initial examination. There is no requirement that a third party petitioner have any interest in the outcome of the proceeding, much less Article III standing. See
These features distinguish inter partes review from the proceeding in FMC and bolster the view that it is, like ex parte and inter partes reexamination, an executive proceeding that enlists third-party assistance. As the panel concludes, in such a reexamination proceeding, sovereign immunity does not apply.
See Washington v. Confederated Tribes of Colville Indian Reservation ,
The USPTO did have the authority to reissue patents to cure errors in the original. See Grant v. Raymond , 31 U.S. (6 Pet.) 218, 244,
See also Thomas E. Popovich, Patent Quality: An Analysis of Proposed Court, Legislative, and PTO-Administrative Reform-Reexamination Resurrected (Part I), 61 J. Pat. Off. Soc'y 248, 269 (1979) (concluding that the issuance of low quality patents was attributable to the USPTO's failure to discover and adequately to consider the most relevant prior art and that patent reform should be directed at these failures).
See U.S. Gov't Accountability Office, GAO-16-490, Patent Office Should Define Quality, Reassess Incentives, and Improve Clarity 25 (2016) (reporting that "examiners' time pressures are one of the central challenges for patent quality"); see also Michael D. Frakes & Melissa F. Wasserman, Does the U.S. Patent and Trademark Office Grant Too Many Bad Patents?: Evidence from a Quasi-Experiment ,
The proceedings created by the AIA continued Congress' efforts to channel the work of third party challengers in order to help the USPTO achieve its mission. See H.R. Rep. No. 112-98, pt. I, at 39-40 (2011) (characterizing post-grant proceedings as "a more efficient system for challenging patents that should not have issued"). Indeed, the AIA also expanded the role of private parties in the pre-grant examination process. Previous USPTO procedure allowed third parties to submit prior art patents and other printed publications of potential relevance to a pending examination but did not allow explanations of "why the prior art was submitted or what its relevancy might be."
Reference
- Full Case Name
- SAINT REGIS MOHAWK TRIBE, Allergan, Inc., Appellants v. MYLAN PHARMACEUTICALS INC., Teva Pharmaceuticals USA, Inc., Akorn, Inc., Appellees
- Cited By
- 14 cases
- Status
- Published