Law Professor Notes PTAB’s Decision on Sovereign Immunity Goes Well Beyond the Constitution

On Friday, February 23rd, the Patent Trial and Appeal Board (PTAB) issued a decision denying a motion to terminate an inter partes review (IPR) proceeding involving patent owner St. Regis Mohawk Tribe. The decision allows petitioners, pharmaceutical firms Mylan and Teva, to move forward with a challenge to the validity of patents covering the eye treatment RESTASIS, marketed by drug company Allergan.

The PTAB’s decision in this case has elicited some strong reactions from industry insiders. The way the PTAB crafted its decision has raised some question as to whether that administrative tribunal is following basic legal precepts in adjudicating the validity of property rights which are sometimes worth over one billion dollars. On Twitter, this decision was the focus of a 20-part post, which was published by Jacob S. Sherkow, an associate professor of law at New York Law School. Sherkow noted that the PTAB could have narrowly crafted its decision to focus on the licensing agreement between St. Regis and Allergan if it was going to decide that St. Regis wasn’t the real party in interest in the IPR:

“And to [the PTAB’s] credit, it did review the licensing agreements and come to some conclusions about how much [Allergan] gave up. But then it went beyond that — well, well beyond. It also determined that it was ‘not persuaded that the tribal immunity doctrine applies to our proceedings’ as a *constitutional* matter.”

Such a finding by the PTAB flies in the face of existing federal agency precedent, which has previously found that Native American tribes can invoke sovereign immunity defenses to shield themselves from federal administrative proceedings. Citing to such a case decided by the Department of Labor Administrative Review Board, the PTAB noted that that decision was based upon the fact that Congress had abrogated tribal immunity from certain whistleblower complaints. (Congress has also tried to abrogate tribal sovereign immunity specific to IPR proceedings.)

In the legal background of its decision, the PTAB cites to a 1998 decision by the Oklahoma Court of Civil Appeals in Kiowa Tribe v. Manufacturing Technologies. In citing to Kiowa, the PTAB found that the sovereign immunity of Native American tribes is not co-extensive with the sovereign immunity enjoyed by states; the PTAB also cited to language from that case which stated that, “There are reasons to doubt the wisdom of perpetuating the [tribal immunity] doctrine.” The PTAB explained:

“In view of the recognized differences between the state sovereign immunity and tribal immunity doctrines, and the lack of statutory authority or controlling precedent for the specific issue before us, we decline the Tribe’s invitation to hold for the first time that the doctrine of tribal immunity should be applied in inter partes review proceedings.”

As Sherkow’s Twitter critique notes, however, this hesitation to extend sovereign immunity to tribes in proceedings at the PTAB without precedent for doing so presumes that such an immunity defense would be denied by default, a presumption Sherkow called “painfully, absolutely wrong.” The abrogation of tribal sovereign immunity can be legislated by Congress, (which, as has been noted, was already attempted by Sen. Claire McCaskill [D-MO]) but without Congressional action specific to this abrogation, the default presumption would be that tribes have sovereign immunity to assert. “Hesitancy extending the immunity where immunity is unclearly presented is one thing,” Sherkow wrote. “But upending the Constitutional scheme on Kiowa’s dicta is another.”

Further, Sherkow points out that the scheme laid out in Kiowa regarding the limitation of sovereign immunity for Native American tribes exists between Congress, the courts and the Constitution, not federal Executive Branch agencies like the PTAB. This gets to the issue of the PTAB being an Article I tribunal outside of the Article III federal courts, which should render moot any ability of the PTAB to make rulings which interpret the Constitution in a precedential way.

“So let’s call this what it is: a few hundred patent attorneys got knighted as ‘judges’ one day — even though that’s not an accurate title — and now they’re actually starting to believe it.”

In Sherkow’s view, there was a correct way for the PTAB to decide the case. The PTAB could have recognized that it only had the authority to determine who the real party in interest, and it could have decided that the St. Regis tribe wasn’t the real party in interest based on the terms of the licensing deal with Allergan. If there was a sovereign immunity claim to be made, the PTAB could have stepped aside from the issue, saying that it had no authority to decide that issue, and note that the sovereign immunity claims could be raised on appeal to the Federal Circuit.

While Sherkow’s criticism is targeted to this single case and not the PTAB generally, it’s would be easy to understand critics of the PTAB seeing this as yet another example of the agency’s arrogant stance on its own jurisprudence. This is the same agency that stacks administrative patent judge (APJ) panels to achieve policy objectives outlined by the agency’s director. It’s an agency which operates without always following the Congressional statute which created the tribunal in the first place. Members of the agency may have also violated the Administrative Procedures Act based on allegations of potential ex parte communications, either written or oral, made to APJs on case matters before them which haven’t been publicly disclosed. That the PTAB would issue a very politicized decision in the St. Regis trial also isn’t surprising given that this case was the one PTAB case which the agency invited amicus briefings as if it were a real federal court of law.

The PTAB’s decision on sovereign immunity could both dissuade Native American tribes from exploring patent ownership strategies and encourage further litigation to challenge the scope of tribal immunity said Forrest Tahdooahnippah, partner at Dorsey & Whitney’s intellectual property litigation group who also specializes in tribal and non-tribal businesses in Native American country.

“The PTAB could have reached its result based on its alternative holding that Allergan remained the effective patent owner as the result of terms of its license to the patents. Instead of relying on this holding, the PTAB opened its decision by ruling that tribal sovereign immunity does not apply to inter partes review (‘IPR’) proceedings. This is surprising because the PTAB previously held that state sovereign immunity does apply to IPR proceedings, and tribal immunity, while not ‘coextensive’ with state immunity, is generally considered broader than state immunity. The result of this holding is certainly to chill tribes’ burgeoning practice of acquiring patents, a trend that was not limited to the Saint Regis Mohawk.”

Litigation that challenges Native American tribal immunity is also encouraged thanks to the PTAB’s decision as well as recent mixed signals issued by the U.S. Supreme Court on the issue, according to Tahdooahnippah. In 2017, SCOTUS decided Lewis v. Clarke, 137 S.Ct. 1285 (2017), finding that the sovereign immunity doctrine did not apply to an individual tribal member involved in a lawsuit. “As a result of these mixed signals, tribal sovereign immunity is being litigated with greater frequency and fervor,” Tahdooahnippah said. “The PTAB’s decision will likely contribute to this trend.”