Federal Circuit rules tribal sovereign immunity cannot be asserted in IPRs

By Gene Quinn
July 20, 2018

The Federal Circuit , in an opinion authored by Judge Moore, affirmed the determination of the PTAB, holding that ‘tribal sovereign immunity cannot be asserted in IPRs.”

On 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. On February 26, 2018, the PTAB issued a decision denying the Motion to Dismiss filed by the Saint Regis Mohawk Tribe.

Earlier this morning, the Federal Circuit, in an opinion authored by Judge Moore, affirmed the determination of the PTAB, holding that “tribal sovereign immunity cannot be asserted in IPRs.”

I suspect the St. Regis Mohawk Tribe will file a petition for reconsideration and for en banc hearing. If that is not granted, I anticipate this case will be headed to the Supreme Court. As explained more fully below, the decision of the Federal Circuit is rather seriously flawed. The PTAB is simply not capable of exercising jurisdiction over a patent through in rem jurisdiction. The ruling of the PTAB  only implicates the rights of certain persons, and because the patent and all patent claims remains open to challenge by others in the future. That truth means the PTAB acts, at best, quasi in rem, which thanks to Supreme Court jurisprudence should be extremely relevant when determining the applicability of tribal sovereign immunity.

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Federal Circuit: No Tribal Sovereign Immunity in IPR

“[I]mmunity does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action,” wrote Judge Moore. “There is not, however, a blanket rule that immunity does not apply in federal agency proceedings.”

Much of the Federal Circuit’s analysis seems to track the analysis of the PTAB, and is based on the premise that “IPR is neither clearly a judicial proceeding instituted by a private party nor clearly an enforcement action brought by the federal government.” Rather, according to the Federal Circuit citing the Supreme Court’s decision in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016), 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.”

The Federal Circuit found IPR to be more like an agency action than a litigation where private parties initiate because “[t]he Director bears the political responsibility of determining which cases should proceed.” While that reads nice, and probably sounds good logically, it is not correct. While the statute gives the Director the authority and responsibility to determine whether to institute IPRs, that statutory responsibility and authority has always been delegated to the Administrative Patent Judges of the PTAB. Thus, the Director plays no role whatsoever in deciding what cases to institute, and in fact has never taken any action to exercise discretion to step in and end harassing filings even though such authority explicitly exists in the America Invents Act. Therefore, the first rationale provided by the Federal Circuit for why tribal sovereign immunity does not apply in IPRs is at least misleading.

But the PTAB Cannot Exercise Jurisdiction Over the Patent

The second rationale provided by the Federal Circuit relates to the fact that the PTAB may continue to decide petitions even if the patent owner does not participate. The PTAB explains this power because they have power over the patent. Sadly, the Federal Circuit made the same error the PTAB made, which I previously pointed out here.

If the PTAB is really exercising jurisdiction over the challenged patent and not the patent owner that by definition means the PTAB exercises only quasi in rem jurisdiction, not in personam jurisdiction, or even in rem jurisdiction as the panel incorrectly suggested in footnote 6 of its decision. As explained by the United States Supreme Court:

“A judgment in personam imposes a personal liability or obligation on one person in favor of another. A judgment in rem affects the interests of all persons in designated property. A judgment quasi in rem affects the interests of particular persons in designated property.”

Hanson v. Denckla357 U.S. 235, 246 n. 12 (1958).

The PTAB does not have power to impose an obligation, and by their own admission they did not act in personam. The PTAB also cannot act in rem because, as we know, a decision does not settle rights as to all persons in the designated property, but rather only at best extinguishes invalidity arguments available to the challenger and their privies. Because a decision of the PTAB only implicates the rights of certain persons, and because the patent and all patent claims remains open to challenge by others in the future, that must mean the PTAB is actually claiming they are asserting quasi in rem jurisdiction.

In Shaffer v. Heitner, 433 U.S. 186 (1977) the Supreme Court extended the notions of fundamental fairness expressed in International Shoe v. Washington326 U.S. 310, (1945) relating to in personam jurisdiction to the exercise of in rem jurisdiction. The Supreme Court in Shaffer explained the difference between in rem jurisdiction and in personam jurisdiction:

If jurisdiction is based on the court’s power over property within its territory, the action is called “in rem” or “quasi in rem.” The effect of a judgment in such a case is limited to the property that supports jurisdiction and does not impose a personal liability on the property owner, since he is not before the court. In Pennoyer‘s terms, the owner is affected only “indirectly” by an in rem judgment adverse to his interest in the property subject to the court’s disposition.

Shaffer, 433 U.S. at 199 (footnote omitted).

The Supreme Court in Shaffer went further to recognize the obvious: “[A]n adverse judgment in rem directly affects the property owner by divesting him of his rights in the property before the court.” Shaffer, 433 U.S. at 206.

The Supreme Court wasn’t finished, however, going one step further to conclude that modern practice demands abandonment of the fiction that in rem jurisdiction does not act as an assertion of jurisdiction over property owners. In their own words the Supreme Court, in a decision authored by Justice Thurgood Marshall, held: “The fiction that an assertion of jurisdiction over property is anything but an assertion of jurisdiction over the owner of the property supports an ancient form without substantial modern justification.”

Conclusion

Few things in law are as predictable as this: This case is headed for the Supreme Court. There is simply no chance this politically motivated Supreme Court will miss an opportunity to weigh in on an issue like this.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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.

Discuss this

There are currently 14 Comments comments.

  1. EG July 20, 2018 1:23 pm

    Hey Gene,

    What a joke-IPRs are not analogous to court actions as being adjudications? Dyk’s concurring is particularly a disgrace. Time to move forward promptly with HR 6264 and “blow up” IPRs once and for all time.

  2. angry dude July 20, 2018 1:36 pm

    Time to unbury the tomahawk of war…

    Seriously, when enough is enough ???

  3. BP July 20, 2018 2:02 pm

    Excellent post. However, what if rehearing en banc is denied and the SCt does not take it on? Might that put any additional pressure on Congress to address the sorry state of patent law?

    Today, we also see Judge Plager concurring-in-part and dissenting-in-part in Interval Licensing:

    This emperor clearly has no clothes; we need not wait for our children to tell us this. The legitimate expectations of the innovation community, as well as basic notions of fairness and due process, compel us to address this § 101 conundrum.

    I believe patent law will continue to suffer without any fix to the PTAB/IPRs and 101. The monopolies that ushered in the chaos run the show and care not about “basic notions of fairness and due process”. They seek to extinguish existing patent rights and curtail the genesis of new ones.

  4. Non Sequitur II July 20, 2018 2:25 pm

    “The PTAB also cannot act in rem because, as we know, a decision does not settle rights as to all persons in the designated property, but rather only at best extinguishes invalidity arguments available to the challenger and their privies.”

    I believe that your analysis of in rem jurisdiction is based on an incorrect identification of the “designated property.” An IPR proceedings resolves the validity of claims, which therefore must be the “designated property” at issue. The rights associated with valid claims are both property and applicable to everyone.

    In contrast, “statutory estoppel” is a potential consequence of filing a petition, but I don’t see how it could be described as the “designated property”. Technically speaking, a petitioner loses the right to argue that a claim is invalid regardless of the outcome of an instituted proceeding because a cancelled claim is also immune from a direct validity challenge. (I’m defining a challenge to a claim dependent on a cancelled claim an “indirect validity challenge.”) Therefore, an instituted IPR surrenders the right to make the invalidity arguments subject to estoppel before a district court without regard to outcome.

  5. Brian Keith Buchheit July 20, 2018 6:16 pm

    Non Sequitur II – The petitioner does not have any estoppel if a petition is not instituted. The estoppel only applies to a final decision on the merits. Hence, a petitioners often does not lose the right to make the invalidity argument in district court (good old two bites at the apple trick; assuming a proper real party brings a petition). As an aside, using Unified Patents or some other straw-man to avoids estoppel entirely. Most instances of a proper party bringing a petition is due to the litigation advantage of delaying an existing Fed Case by 1 year per a stay. Efficient infringers, who are by far the predominant petition filers other than straw men, love delays and increased costs. Gotta love the “fair and balanced” IPR process.

    Gene, good article. I hate reading Fed Cir opinions that do not appear to address the arguments and legal positions brought by the parties. The briefs seemed strong to me. I was looking forward to seeing how the precedent and law would be applied to this fact pattern … I must have missed something because the order appeared light in that regard.

  6. Non Sequitur II July 20, 2018 8:13 pm

    @Brian Keith Buchheit #5 – I was limiting my statement to an “instituted proceeding” that results in a final written decision, but I can see that was unclear. My point is that once there is a final written decision, a reviewed claim will either be cancelled or it won’t. If the claim is cancelled, invalidity is moot. If the claim isn’t cancelled, estoppel applies. Either way, some invalidity arguments will be extinguished.

  7. Paul Morgan July 21, 2018 9:57 am

    The Sup. Ct. is not going to be any more supportive of a clever “assignment” [so-called] scheme to avoid validity testing of a drug patent than either the PTAB or this (unanimous) Fed. Cir. panel. [Do not be misled by the Fed. Cir. saying it did not need to address the “assignment” issue by only deciding the tribal immunity issue. This is a classic “bad facts” case.] Also, the Court specifically said it was not addressing State immunity in this case.

  8. Night Writer July 21, 2018 10:01 am

    There is no surprise here.

  9. Paul Morgan July 21, 2018 2:56 pm

    Also note that this was an unusual interlocutory appeal interrupting long pending IPRs on the sole issue of alleged immunity, before even any final PTAB decisions [which could now be quickly concluded], much less a final Fed. Cir. decision on all the remaining issues from the PTAB final decisions. The Sup. Ct. would not normally even consider cert before a final decision, and these cases could be moot by then.

  10. Joachim Martillo July 22, 2018 12:33 pm

    I may be wrong, but during the oral hearing I had the impression that Judge Moore was sympathetic to the tribe’s case, but there seems tremendous reluctance in the court system to allowing tribes to find a new benefit in dependent sovereignty.

  11. Paul Morgan July 22, 2018 12:42 pm

    JM at 10, by “dependent sovereignty” I assume you meant pseudo or limited partial assignment versus IP from from the tribe itself or at least a true and full assignment, as referenced in 7 and 9 above.

  12. Anon July 22, 2018 4:31 pm

    Mr. Morgan,

    Type of assignment has no intersection whatsoever with differing levels of sovereignty.

  13. Valuationguy July 23, 2018 2:15 pm

    I totally agree with EG’s initally assessment of Dyk’s concurrence…I almost threw up as a read it. His attempts to position IPRs as a reexam not an adjudication is ridiculous….cherry-picking comments out of the legislative record to support his reexam argument while IGNORING others which supported the procedure as an adjucation.

    Doesn’t he realize Joe Matal deliberately wrote the legislation to be ambiguous to allow the efficient infringement lobby to argue whichever side of the argument was most advantageous as needed in the specific case being tested?

    While I agree that this is a politically charged case….I see the Supreme’s taking a pass on it…as not sufficiently important (despite my personal disagreement).

  14. Night Writer July 26, 2018 7:33 pm

    @13 Valuationguy and EG

    Just no integrity at the CAFC.

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