Sovereign Immunity Does Not Extend to IPRs, Says Court in Long-Running Restasis Battle

On July 20, the United States Court of Appeals for the Federal Circuit ruled in the case of the St Regis Mohawk Tribe v Mylan Pharmaceuticals that sovereign immunity does not extend to inter partes review (IPR) proceedings.

The ruling arose from a dispute in which drug maker Allergan, seeking to shield its patents for the dry-eye drug Restasis from IPR challenges from rival drug makers who hoped to develop generic products, transferred its patents covering Restasis to the Saint Regis Mohawk Tribe. The tribe agreed to invoke sovereign immunity against IPRs in exchange for a bulk payment of $13.75 million and an additional $15 million per year in royalties on drug sales.

The gambit drew wide criticism, with representatives of the generics industry calling it “bad-faith behavior,” and United States senators calling for investigations into the matter and introducing a legislative solution to prohibit such patent transfers in the future.

While the United States Patent Trial and Appeal Board previously decided that the tribe could not claim sovereign immunity in this case, Allergan and the tribe appealed that ruling.

In its newly issued decision in the appeal, affirming the prior ruling, the court explained that, while the Tribe argued that its immunity extended to IPRs because they are proceedings between private parties, the court holds that IPRs are more similar to agency enforcement actions—to which sovereign immunity does not apply—than they are to civil suits.

The decision cited recent Supreme Court ruling in the Oil States case, in which the court emphasized the government’s “central role” in IPR proceedings. The appellate court also emphasizes the fact that IPR proceedings have substantial differences from civil proceedings, and once an IPR has been instituted, the Patent Trial and Appeal Board may continue a review even if a petitioner chooses not to participate; “this reinforces the view that IPR is an act by the agency in reconsidering its own grant of a public franchise,” wrote the court.

Finally, “the Director’s important role as a gatekeeper and the Board’s authority to proceed in the absence of the parties convinces us that the [United States Patent and Trademark Office] 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,’” according to the decision.