Federal Circuit Hears Oral Arguments on St. Regis Appeal of Tribal Sovereign Immunity

By Steve Brachmann
June 14, 2018

Oral argumentOn Monday, June 4th, the Court of Appeals for the Federal Circuit heard oral arguments in St. Regis Mohawk Tribe v. Mylan Pharmaceuticals, a case appealed from the Patent Trial and Appeal Board (PTAB) which asks the appeals court to determine whether tribal sovereign immunity can be asserted to terminate inter partes review (IPR) proceedings at the PTAB. The Federal Circuit panel consisting of Circuit Judges Kimberley Moore, Timothy Dyk and Jimmie Reyna lobbed tough questions at counsel representing appellants St. Regis and Allergan, appellees Mylan and Teva as well as the respondent for the U.S. federal government, without giving much clue as to whether the panel favored the argument offered by any particular side.

“Our position is the tribal immunity in the IPRs is the logical conclusion of the system enacted by Congress,” said Jonathan Massey, counsel representing St. Regis, said at the top of his remarks. He noted that the adjudicatory party-based model put in place for IPR proceedings differed from the agency-led inquisitorial process for adjudicating patentability in original patent prosecutions or ex parte reexaminations, a difference which was highlighted by the recent U.S. Supreme Court decision in SAS Institute v. Iancu. The Federal Circuit panel questioned whether this position was undermined by SCOTUS’ recent holding in Oil States v. Greene’s Energy Group, which held that patents were public franchises that were granted with an expectation that they could be reviewed and cancelled. Massey argued that Oil States supports St. Regis’ position when the Supreme Court recognized that IPRs employed adjudicatory court-like procedures that could potentially trigger sovereign immunity claims.

Massey discussed court precedent from two cases to support St. Regis’ position on sovereign immunity applying in IPRs: Vas-Cath Inc. v. Curators of University of Missouri, a 2007 Federal Circuit case which decided against Eleventh Amendment state sovereign immunity in a USPTO interference proceeding; and Federal Maritime Commission v. South Carolina State Ports Authority, a 2002 Supreme Court case which upheld state sovereign immunity barred the FMC from adjudicating a private party’s rights against a nonconsenting state. Though Vas-Cath held against a sovereign immunity defense, Massey noted that, in that case, the USPTO Director had to actively declare an interference proceeding which wasn’t filed like a normal federal civil action. In both cases, the agency actions bore differences to civil litigation whereas IPRs followed a more adversarial approach between parties.

Of the judges on the Federal Circuit panel, Judge Moore seemed especially feisty in her questioning of Massey’s arguments. “You can’t say Congress made this decision, Congress didn’t speak to tribal immunity anywhere in the statute,” Judge Moore said. “So for you to come in and to suggest to me that Congress decided this case in 2011 is nonsense.” In response, Massey cited to a House report to argue that Congress deliberately choose an adjudicative model.

“I don’t care what the House report says, and if you knew anything about me, you’d know that. But beyond that, you’ve got a Supreme Court Justice saying that three times over, you don’t need to rely on some House report, we’ve got to follow them, I don’t have to follow a House report… So you’re on better footing telling me what the Supreme Court said than you are what some random House report said, which is not the law.” – Judge Kimberley Moore

Massey was further questioned by the Federal Circuit panel as to whether Allergan’s patent arbitrage deal with the St. Regis tribe was a deliberate circumvention of Congressional statutes regarding PTAB trials. Although Massey conceded that part of the deal involved the tribe’s commitment to raising sovereign immunity in the IPR proceedings, he argued that it wasn’t actual circumvention. “We believe that was the system created by Congress,” Massey said. “Using that system is not circumvention… Allergan retains substantial rights under this court’s precedent.” The tribe’s right to sovereign immunity in IPRs unless that right is specifically abrogated by Congress was further underscored by Supreme Court decisions in 1998’s Kiowa Tribe v. Manufacturing Technologies and 2013’s Michigan v. Bay Mills Indian Community, according to Massey. “We think Congress enacted [IPRs] in 2011 after nine years previously the courts had made clear that if you create an administrative adjudication between private parties to enforce the federal statute, that will trigger sovereign immunity,” Massey said. “If that’s the system created by Congress, it’s not a circumvention of it.”

Eric Miller, counsel for appellees, began his oral argument period discussing the line that is drawn between proceedings where sovereign immunity applies and proceedings where it doesn’t. He noted two distinctions to IPRs which he argued took them out of the rule laid out by the Supreme Court in FMC, namely how the IPR process begins and the effects resulting from the end of IPR trials. Unlike in FMC, where the executive agency adjudicator had no choice but to adjudicate the complaint, the USPTO Director may decline to institute the IPR. As she did earlier with Massey, Judge Moore questioned Miller’s basis for his argument, albeit on a less personal level:

“After SAS, the Director has almost no discretion. He doesn’t have discretion to come up with his own grounds, he doesn’t have discretion to refuse to address the grounds that were presented in the petition. He doesn’t have the discretion to have a partial institution. The Director has almost no discretion. His discretion is limited to institute, or don’t institute. And that’s it. So why isn’t this exactly like an adversarial proceeding adjudicating rights between private parties when the Director has no discretion to pursue any grounds that he or she may think ought to result in the invalidation of this patent, but is limited to the precise and only arguments raised by the petitioner in the petition. So why isn’t this the adjudication of issues raised by one private party against another private party just being held in the forum of an administrative agency rather than a court?” – Judge Moore

Miller continued to assert throughout that the USPTO Director’s discretion whether or not to institute the IPR proceeding, although limited to the grounds raised by the petitioner, was a critically important piece of discretion afforded the Director which was not present in FMC. Further, Miller argued that the IPR process can only end in the cancellation of a patent, not in any monetary relief, marking another difference between IPRs and civil court actions where St. Regis could raise tribal sovereign immunity. Because the St. Regis tribe had entered into a patent infringement civil action in the Eastern District of Texas, Miller argued that this amounted to waiver of the sovereign immunity defense in front of the PTAB. “The tribe has brought an action to enforce the patents, invoking the benefits of the patent system, and at the same time trying to assert its immunity to bar another aspect of the very same system,” Miller said.

Appearing on behalf of the U.S. government as the federal respondent of the case was Mark Freeman who argued that the Supreme Court recently upheld IPRs as a reconsideration of a decision made by a government agency and thus doesn’t resemble private litigation. “That is the express ground on which the Court upheld the proceedings against arguments exactly like those advanced by my friend today,” Freeman argued. “Namely, that inter partes review is just private civil litigation transplanted into a federal agency. These are our proceedings.” Once again, the ire of Judge Moore was raised by what she felt was an improperly stated argument.

“He didn’t say that it’s simply civil litigation. I mean, I thought that he took what felt to me like a very honest approach of it being a hybrid but it fell on the side of one or the other. I mean, anybody who stands up in this court and says it’s all of one or all of the other has no credibility because it’s clearly not. The Supreme Court has made it clear. How do you reconcile Oil States and SAS? They came out on the same day, one written by the guy who made the dissent in the other one.” – Judge Moore

Freeman argued that the way to reconcile those two cases was to understand that, under the statute, the petitioner frames the question and the Director has unreviewable discretion to answer that petition. Freeman also pushed the oft-used analogy of the English Privy Council’s ability to cancel patent grants through the 18th century, an aspect of the British legal system which provides a basis for executive branch cancellation of patents and an analogy which received wide support by those supporting IPRs in Oil States briefs filed with the Court.

Freeman argued that there are some types of proceedings where sovereign immunity doesn’t apply, citing to the Supreme Court’s 2004 decision in Tennessee Student Assistance Corporation v. Hood. That case arose out of a bankruptcy proceeding created by debt to a state loan-granting institution and the Court held that the bankruptcy procedure was different than a civil suit and is therefore not barred by sovereign immunity.

“What the Supreme Court said was, ‘No, look, the nature of bankruptcy,’ and the court had held for many years that states can be subject to bankruptcy proceedings, and they said, ‘It didn’t matter that those proceedings were adversarial in nature, it didn’t matter… that the state or petitioner had something to lose by having an estoppel-like effect for having brought the claim in the first place.’ The point was, in bankruptcy, the states just didn’t have an immunity objection to raise, and so the adversarial nature of the proceeding was irrelevant. I think the same thing is true here.” – Mark Freeman

Massey had reserved some time from his initial argument period and used the remainder to answer some of the arguments raised by opposing counsel. “We do not disagree that the PTO has the authority to reconsider the grant of a patent,” Massey said. “The question is the means by which it does so. We concede that it could proceed by reexam. We concede that the United States could file an IPR and there would be no tribal immunity. But if the means selected to accomplish the reexamination or reconsideration objective resembles a private adjudication as in FMC, then there is sovereign immunity.” As to the type of remedy offered in IPRs, such as the invalidation of a patent, being different than the monetary remedies available in civil district court, Massey noted that FMC held that the type of remedy didn’t matter in determining whether sovereign immunity applied. Further, despite the Director’s limited discretion whether to institute the IPR or not, the private party bringing the IPR controls the proceeding. “That’s exactly the SAS point about IPRs,” Massey said. “The IPR is controlled by the private party, not by the Director. The Director makes the decision to institute but then doesn’t have political responsibility.”

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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There are currently 3 Comments comments. Join the discussion.

  1. Matt June 14, 2018 9:47 am

    Massey discussed court precedent from two cases to support St. Regis’ position on sovereign immunity applying in IPRs: Vas-Cath Inc. v. Curators of University of Missouri, a 2002 Supreme Court case which decided against Eleventh Amendment state sovereign immunity in a USPTO interference proceeding; and Federal Maritime Commission v. South Carolina State Ports Authority, a 2007 Federal Circuit case which upheld state sovereign immunity barred the FMC from adjudicating a private party’s rights against a nonconsenting state.

    You’ve got these two backwards — FMC is the 2002 Supreme Court case.

  2. Anon June 14, 2018 12:54 pm

    Less of Moore is best…

    That being said, what a horrible panel for the patent holder to draw.

  3. Bemused June 14, 2018 4:26 pm

    Gotta agree with Anon on that one. Dumb & Dumber (& Dumbest)…

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