By Tom Engellenner

If there was any doubt that the sovereign immunity defense was dead for administrative patent invalidity trials after the Supreme Court declined to review the Saint Regis Mohawk case earlier this year, last month’s decision by the Federal Circuit in Regents of University of Minnesota v. LSI Corporation makes it clear that sovereign immunity does not apply to patent challenges brought pursuant to the 2011 America Invents Act (AIA), regardless of whether the immunity claim is raised by a Native American tribe or a state university trying to avoid  patent adjudication.

In a prior decision, the Court of Appeals for the Federal Circuit (“Federal Circuit”) had already ruled that the Saint Regis Mohawk tribe was not entitled to a sovereign immunity defense.  The Saint Regis Mohawk case was complicated by the fact that the patents at issue had been assigned to the Saint Regis tribe by the Irish drug company Allergan specifically in order to shield these key patents (on its dry-eye Allergan’s drug Restasis®) from an administrative trial before the Patent Trial and Appeal Board (PTAB) at the U.S. Patent Office.  The assignment included a license back to Allergan and a commitment by the tribe, as new owner of the patents, to invoke “sovereign immunity” in any inter partes review (IPR) proceeding.  

The Restasis® patents were indeed challenged and the Saint Regis Mohawk tribe duly asserted sovereign immunity.  The PTAB held against the tribe, holding that the AIA is an act of Congress of general applicability and “general acts of Congress apply to Indians . . . in the absence of clear expression to the contrary.”  The PTAB panel also adopted an alternative rationale for continuing with the trial, namely that an IPR trial is an in rem proceeding, not an exercise of personal jurisdiction over a private entity in an adjudicatory proceeding.

When the Saint Regis Mohawk case was appealed to the Federal Circuit, the appellate court agreed that the tribe was not entitled to claim sovereign immunity but reached that conclusion by different reasoning.  The Federal Circuit’s decision in the Saint Regis Mohawk case drew a distinction between adjudicative proceedings brought against a state by a private party (where sovereign immunity does apply) and agency-initiated enforcement proceedings (where the immunity does not apply) – and concluded that AIA trials were more akin to administrative enforcement actions:

The [U.S. Patent Office] 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.”

At the same time, the court opinion in the Saint Regis Mohawk case made clear that the Federal Circuit panel was only deciding on tribal sovereign immunity not state sovereign immunity:

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.

Apparently that “other day” wasn’t very far away.  The University of Minnesota case decided by the Federal Circuit on June 14, 2019, likewise concluded that state universities cannot invoke sovereign immunity to shield their patents from AIA trials.

The University of Minnesota case was a consolidated appeal to the Federal Circuit of several PTAB decisions invalidating University of Minnesota patents.  The university’s defenses at trial included an assertion that the State of Minnesota was a sovereign entity and could not be forced into a federal administrative trial without its consent.

An expanded panel of PTAB administrative patent judges, including the Chief Judge, the Deputy Chief Judge, and two Vice Chief Judges recognized the state sovereign immunity doctrine but concluded that it did not apply in proceedings authorized by the 2011 America Invents Act (AIA) when the University, as patent owner, had asserted the challenged patents in a patent infringement suit in a federal court.

When the PTAB’s decision against University of Minnesota’s immunity claim was appealed to the Federal Circuit, the appellate court declined to follow this “waiver” reasoning but instead returned to the same reasoning it relied upon in Saint Regis Mohawk case.  The University of Minnesota decision by the Federal Circuit emphasized three reasons for refusing to recognize sovereign immunity in IPR proceedings.  First, the Federal Circuit found that the USPTO Director, a politically appointed executive branch official, not the private party, is the decision-maker who ultimately decides whether to proceed against the state university. Second, if an IPR is initiated, the USPTO can choose to continue review even if the petitioner chooses not to participate, thus reinforcing the view that an IPR proceeding is an act by a federal agency reconsidering its own grant of a public franchise.  Third, IPR procedures differ substantially from the Federal Rules of Civil Procedure, which govern ordinary civil litigation.  For example, in an IPR, there is essentially no opportunity for a petitioner to amend its grounds for challenging the patent after the initial petition is filed and discovery, e.g., by written interrogatories or by requests for production of documents, is very limited.

All three Federal Circuit judges joined in the University of Minnesota opinion.  In addition, the entire panel joined in a separate “additional views” concurring opinion, in which they stated that – like the PTAB administrative judges – they also believed that post-grant administrative proceedings such as IPR proceedings were in rem proceedings, in which sovereign immunity does not apply.

There is still a possibility that the University of Minnesota will prevail if the U.S. Supreme Court overturns the Federal Circuit decision.  However, it appears unlikely that the Supreme Court will take this matter up next term since it has already declined to review a similar petition filed by the Saint Regis Mohawk tribe on the sovereign immunity issue.