Allergan’s Tribal Troubles: Sovereign Immunity and Patent Protection Measures in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals

* Yitzchak Besser

Major pharmaceutical companies, like their peers in other industries, are often presumed to zealously guard their patents; in fact, patent litigation in the pharmaceutical industry rose nearly 30% in 2017 .  Mike Botta, Report: Pharmaceutical Patent Litigation Increased Nearly 30 Percent in 2017, R&D (May 8, 2018, 7:00 AM), However, Allergan, Inc., has recently found itself in court for attempting to implement a novel approach toward safeguarding intellectual property: transferring ownership of their patents to a Native American tribe, and then filing for exemption from review under a theory of tribal sovereign immunity.  Saint Regis Mohawk Tribe v. Mylan Pharms. Inc., 896 F.3d 1322, 1325 (Fed. Cir. 2018).

The patents at issue in this case relate to Allergan’s “Restasis” product, which was designed to treat the symptoms of chronic dry-eye conditions.  See Saint Regis, 896 F.3d at 1325; Allison Prang, Board Denies Indian Tribe’s Push to End Challenge of Restasis Patents, Wall St. J. (Feb. 26, 2018, 12:46 PM),  Restasis generated $1.47 billion in revenue for Allergan in 2017.   See Prang, supra.

Allergan sued Mylan Pharmaceuticals, Inc.; Teva Pharmaceuticals, Inc.; and Akorn, Inc. in 2015 for infringement.  See Saint Regis, 896 F.3d at 1325.  These companies, collectively known as the “Appellees,” countered the lawsuit by filing in 2016 for inter partes review (IPR) of Allergan’s Restatis patents with the United States Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board (PTAB), herein simply referred to as “the Board.”  Id.

IPR is “an administrative proceeding designed to improve patent quality by giving the USPTO a ‘second look at an earlier administrative grant of a patent.’”  Id. at 1335 (Dyk, J., concurring) (quoting Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016)).  The Board approved the IPR petition and scheduled a hearing on the matter for September 15, 2017.  Id. at 1325.

I.  A Legitimate Use of Tribal Sovereign Immunity or a ‘Sham’ Assignment of Patents?

Prior to the IPR hearing, Allergan entered into an agreement with the Saint Regis Mohawk Tribe, through which Allergan transferred the patents.  Id.  Allergan paid the Tribe $13.75 million in 2017 to assume ownership of the Restasis patents and promised the Tribe ongoing royalties, as well.  Dave Simpson, Allergan, Tribe Want PTAB Immunity Denial Reheard En Banc, Law360 (Aug. 20, 2018, 9:59 PM),  After receiving the patents, the Tribe licensed them back out to Allergan for all uses approved by the United States Food and Drug Administration (USFDA).  Id.

Mylan alleged that this patent reassignment maneuver represented Allergan’s efforts to impermissibly protect its patents by hiding them behind the Tribe’s aegis of sovereign immunity through a “sham” assignment of the patents.  See Saint Regis, 896 F.3d at 1326.

Allergan subsequently recorded its Restasis patent assignment with the USPTO, and then moved to withdraw from the IPR proceedings.  Id.  At the same time, the Tribe moved to terminate the IPR process altogether, claiming that it was entitled to sovereign immunity in this matter.  Id.  The Board rejected both motions, and the two parties appealed the decisions, bringing the case before the United States Court of Appeals for the Federal Circuit, which handed down a decision on July 20, 2018.  Id. at 1329.

II.  Classifying the IPR Process With Regard to Tribal Sovereign Immunity

As part of its analysis, the Court began by affirming the Tribe’s sovereign immunity as a “domestic dependent nation[].”  Id. at 1325.  It then noted that tribal sovereign immunity is not absolute, and that the Court has “recognized a distinction between adjudicative proceedings brought against a state by a private party and agency-initiated enforcement proceedings.”  Id. at 1326.  Tribal sovereign immunity applies with the first category, i.e. actions between private parties, but does not apply in cases regarding the second category.  Id. (citing Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 759 (2002)).

The Court pointed at this distinction when summarizing the two sides’ arguments: while the Tribe argued that the IPR process is akin to a proceeding between private parties, the Appellees argued that the IPR process is more like an agency-initiated action.  Id.  The Court favored neither of these arguments outright, and instead held that the IPR process is a “hybrid proceeding” with characteristics of both categories.  Id.  Nevertheless, after weighing several factors, the Court held that the IPR process is ultimately more like an agency-initiated enforcement action.  Id. at 1327.

The factors the court assessed include: the USPTO Director’s discretion in deciding whether to institute a review of a patent; the Director’s status as a federal official who is politically accountable for their own actions; the Board’s ability to independently pursue review action after a petitioner drops out of the proceeding; the substantial differences between the USPTO’s procedures in IPR proceedings and the Federal Rules of Civil Procedures; and the IPR process’s essential nature as a procedural method for an administrative agency to reexamine its past decisions.  Id. at 1327–29.

Consequently, the Court concluded that, at its core, the IPR process represented the USPTO Director’s ability to act as “the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest” by preventing illegitimate patent monopolies.  Id. at 1329.  Therefore, in the eyes of the Court, the IPR process is an agency matter performed by the U.S. as a superior sovereign, rather than an adjudication of a private dispute.  Id. at 1335 (Dyk, J., concurring).

The court further noted that the Tribe could not use tribal sovereign immunity to bar U.S. actions as a superior sovereign.  Id. at 1329.  Using this logic, the Court established a precedent by affirming the Board’s decisions to deny Allergan’s motion to withdraw and the Tribe’s motion to terminate the IPR process under a tribal sovereign immunity theory.  See id.

III.  Unanswered Questions

On August 17, 2018, Allergan and the Tribe asked the Court to reconsider its decision en banc.  Simpson, supra.  Therefore, it remains to be seen whether the Court’s precedential decision on the IPR process and tribal sovereign immunity will ultimately stand.  See id.  Given the amount of money at stake, it seems likely that massive pharmaceutical companies like Allergan, Mylan, Teva, and Akorn will continue to fight about this issue in the courts.  See Prang, supra.

Moreover, the Court’s analysis in this case could serve as a guideline for addressing other examples of “hybrid proceedings” that exhibit characteristics of both proceedings by a private party and actions initiated by a governmental agency.  See Saint Regis, 896 F.3d at 1326.  While the facts in this case were primarily focused on the world of patent review, the Court may one day shift its considerations to other areas of executive action if it were to find itself once again facing a party seeking to use tribal sovereign immunity as a shield against government oversight.

Similarly, the Court expressly refused to discuss state sovereign immunity in this case, stating that its decision relates only to tribal sovereign immunity.  See Saint Regis, 896 F.3d at 1329.  This leaves open the possibility that a major pharmaceutical corporation could use state sovereign immunity as a legal loophole for protecting their patents.  See id.  One can safely presume that the Court will soon be forced to reckon with this unaddressed issue.

*Yitzchak Besser is a second-year student at the University of Baltimore School of Law, where he serves as a staff editor for the University of Baltimore Law Review. He is also a research assistant for Prof. Kim Wehle, the vice-president of the Jewish Law Students Association, the vice president of the Intellectual Property Law Society, a member of the Royal Graham Shannonhouse III Honor Society, and a member of Omicron Delta Kappa – The National Leadership Honor Society. Last summer, Yitzchak served as an extern at the Kollman & Saucier law firm. Prior to law school, Yitzchak served as an editor at an international newspaper and as the content director at an email marketing firm.


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