`
`
`
`PATENT-ASSIGNMENT TRANSACTIONS BETWEEN
`BRAND-NAME DRUG COMPANIES AND NATIVE AMERICAN
`TRIBES WILL UNDERMINE A HEALTHY PATENT SYSTEM
`AND HARM PATIENTS
`
`
`
`
`
`
`
`WILLIAM M. JAY
`JAIME A. SANTOS
`
`Goodwin Procter LLP
`
`October 12, 2017
`
`
`
`MYLAN - EXHIBIT 1152
`Mylan Pharmaceuticals Inc. et al. v. Allergan, Inc.
`IPR2016-01127, -01128, -01129, -01130, -01131, -01132
`
`

`

`
`
`
`
`
`I.
`
`II.
`
`III.
`
`TABLE OF CONTENTS
`
`Page
`
`Executive Summary ......................................................................................................................................... 1
`
`Allergan’s Efforts To Avoid Inter Partes Review .............................................................................................. 2
`
`Allowing The Rental Of Tribal Immunity Could Have Serious Repercussions For Patients And
`Drug Competition ............................................................................................................................................. 3
`
`A. USPTO Review Is A Vital Component Of A Healthy Patent System ...................................................... 3
`
`B. District Court Litigation Is Not A Substitute For Inter Partes Review. ..................................................... 5
`
`IV.
`
`The PTAB Can And Should Resolve Instituted IPRs If A Private Patent Holder Attempts To
`Hide Behind Rented Tribal Immunity ............................................................................................................... 7
`
`A.
`
`B.
`
`Tribal Immunity Does Not Apply In IPR Proceedings. ............................................................................. 7
`
`Instituted IPRs Should Not Be Dismissed Where A Patent Holder Transfers Its Patents To A
`Sovereign To Avoid An Adverse IPR Decision. ...................................................................................... 8
`
`Conclusion ....................................................................................................................................................... 9
`
`i
`
`V.
`
`
`
`
`
`

`

`
`
`EXECUTIVE SUMMARY
`I.
`In September 2017, facing the likely invalidation of the remaining patents shielding a multi-
`billion-dollar drug from generic competition, Allergan Inc. adopted an unprecedented strategy: it
`paid millions of dollars to rent the sovereign immunity of an Indian Tribe, and now it claims that
`its patents are beyond the reach of the U.S. Patent and Trademark Office (USPTO). In effect,
`Allergan’s patents are seeking asylum on tribal lands.
`
`Allergan assigned to the Saint Regis Mohawk Tribe all of its remaining patents covering its
`multi-billion-dollar drug Restasis® without requiring a dime from the Tribe in return; in fact, it
`was Allergan that agreed to pay the Tribe—$13.75 million up front and $15 million per year for
`the life of the patents. And Allergan gave up essentially no rights in the patents, because the
`Tribe agreed to immediately license those same patents right back to Allergan. What Allergan
`has attempted to get in exchange for the money was a purported “shield” for its patents. The
`Tribe agreed that once it acquired the patents, it would seek to invoke its sovereign immunity to
`attempt to force the dismissal of proceedings to review the patents for invalidity (called inter
`partes review, or IPR). Those proceedings, brought by companies seeking to introduce generic
`competition to Restasis, had been pending before the Patent and Trademark Office’s Patent
`Trial and Appeal Board (PTAB) for more than a year and were close to final resolution when
`Allergan unveiled its sovereign-immunity gambit.
`
`Allergan’s transaction is the first of its kind. If successful, it will likely not be the last. Allergan
`and the Tribe have suggested that their business transaction is harmless because potential
`infringers can simply adjudicate patent disputes in federal court. But these types of transactions
`pose serious potential risks to the health of our patent system. One key part of that system is
`review of already-issued patents by the experts in the USPTO, to ensure that they comply with
`the statutory limitations on patent monopolies. USPTO review of issued patents has existed in
`various forms for nearly 40 years.
`
`Congress created expert administrative review mechanisms because litigation is too slow and
`expensive a mechanism to clean up invalid patents. Applicants often seek weak patents—
`patents that do not actually claim a novel, innovative invention, but that allow the applicant to
`effectively extend the life of its existing patent monopoly. And while the validity of these patents
`can be attacked in court, patent litigation in court is expensive (with parties each spending
`millions of dollars per patent infringement lawsuit) and time-consuming, and generalist judges
`and juries lack the expertise of patent examiners. USPTO review is more streamlined, because
`it is focused only on specific reasons why a patent may be invalid; it is strictly time-limited; and it
`is conducted by expert patent judges. This makes valid patents stronger and helps eliminate
`the incentives to clog the USPTO with invalid patents that impair competition.
`
`If brand-name drug manufacturers know they can make themselves invulnerable to IPRs simply
`by paying a tribe a small fraction of the amount they receive in revenues each year, this strategy
`will proliferate. The result will be harm not only to the integrity of the patent system, but to the
`patients who lose access to competing products as long as invalid patents remain on the books.
`
`Though Allergan and the Tribe have argued that the PTAB “must” dismiss the pending Restasis
`IPRs, the PTAB’s hands are hardly so tied. Recent Supreme Court decisions support the
`PTAB’s concluding that tribal sovereign immunity does not apply in IPR proceedings, which are
`fundamentally different from civil litigation between private parties. Moreover, even if tribal
`immunity applies in IPRs, the PTAB is not forbidden by any statute, regulation, or precedent
`
`
`
`1
`
`

`

`from continuing to resolve the IPRs that it instituted nearly a year ago when it found that there
`was a reasonable likelihood that the Restasis patents are invalid. Given Allergan’s transparent
`attempt to avoid the Patent and Trademark Office’s review of its patents issuances, the PTAB
`could readily conclude that fairness and equity warrant in favor of continuing their review of the
`Restasis patents.
`II. ALLERGAN’S EFFORTS TO AVOID INTER PARTES REVIEW
`For nearly 15 years, Allergan has enjoyed a market monopoly on cyclosporine, a prescription
`eye-drop medication for chronic dry eye conditions sold under the brand name Restasis®.
`Restasis is one of Allergan’s largest revenue producers (second only to Botox®), bringing in
`nearly $1.5 billion in 2016 alone—nearly 10% of the company’s annual revenue. Patents that
`prevented generic drug manufacturers from launching a more cost-effective generic version of
`Restasis were set to expire in 2014—but just before then, Allergan obtained half a dozen new
`Restasis patents, which do not expire until 2024.
`
`Allergan’s new patents have been challenged in court and in IPR proceedings before the Patent
`Trial and Appeal Board (PTAB), an administrative tribunal within the USPTO. In IPRs and
`similar proceedings (collectively called “post-grant review”), the PTAB decides whether an
`already-issued patent is invalid. IPR proceedings therefore allow the agency to take a “second
`look” at its earlier decision to grant a patent, this time aided by an adversarial presentation,
`which does not occur during the patent-examination process. And while anyone (even non-
`competitors) can petition the PTAB to take this second look, the PTAB will “institute” an IPR only
`where it finds a “reasonable likelihood” that the patent is invalid.1
`
`The PTAB agreed to review the current set of Restasis patents and granted IPR petitions
`separately submitted by Mylan Pharmaceuticals Inc., Teva Pharmaceuticals USA, Inc., and
`Akorn, Inc. The PTAB consolidated the three instituted IPRs and, after briefing and the
`submission of evidence by Allergan and the three petitioners, scheduled the final IPR hearing
`for September 15, 2017, with a final decision expected in early December 2017.
`
`On September 8, 2017, just one week before the scheduled IPR hearing, Allergan entered into
`an unprecedented transaction: it paid the Saint Regis Mohawk Tribe $13.75 million up front,
`plus $15 million annually, for the Tribe to take ownership of the Restasis patents, immediately
`license those same patents back to Allergan, and then move to dismiss the IPRs on the basis of
`tribal sovereign immunity (which the Tribe did within two hours of signing the assignment and
`licensing agreements). Allergan and the Tribe were remarkably candid about the reason for the
`transaction. Allergan’s Chief Legal Officer stated that the transaction represented an
`“opportunity to strengthen the defense of our RESTASIS® intellectual property in the
`upcoming inter partes review proceedings before the Patent Trial and Appeal Board.”2 The
`Tribe was even more transparent in a “Frequently Asked Questions” document about its newly-
`established “Office of Technology, Research and Patents.” The Tribe stated that it “is not
`investing any money in this business” and that companies like Allergan will “pay the tribe for
`
`
`1 35 U.S.C. § 314(a).
`2 Press Release, Allergan, Allergan and Saint Regis Mohawk Tribe Announce Agreements Regarding
`RESTASIS® Patents (Sept. 8, 2017), https://www.allergan.com/news/news/thomson-reuters/allergan-
`and-saint-regis-mohawk-tribe-announce-agr.
`
`
`
`2
`
`

`

`holding the patents and protecting them” from being invalidated during IPR proceedings, which
`are “very unfair to companies with valid patents and allow[] . . . infringers to void valid patents.”3
`
`Within the past several weeks, the Tribe has issued “clarifications” regarding its transaction,
`arguing in a brief before the PTAB and in a public statement that its patent business utilizes the
`same business model and legal arguments employed by public universities, which engage in
`technological innovation and license intellectual property to corporations and start-ups. The
`Tribe pointed out that such universities enjoy sovereign immunity from patent infringement and
`from challenges to patent validity and stated that it appears that this strategy “is only a concern
`when a Tribe decides to enter the same business for the benefit its community.”4 But no state
`university has accepted a sham patent transfer from a corporate patentee to avoid inter partes
`review, much less one on the eve of the PTAB’s IPR hearings. Unlike the Tribe, universities
`actually engage in research and innovation, for which they seek and obtain their own patents.
`And if there were any question about whether the Tribe’s transaction is unconventional, one
`need only look at the flow of money—from the assignor (Allergan) to the assignee (the Tribe,
`which received the patent portfolio covering a multi-billion-dollar product without having to pay a
`dime).
`
`In short, this case, unlike any other before it, involves a brand-name drug company’s attempt to
`rent tribal immunity for $15 million per year, purely to keep the USPTO from reviewing the
`patents covering its $1.5 billion-per-year drug.
`III. ALLOWING THE RENTAL OF TRIBAL IMMUNITY COULD
`HAVE SERIOUS REPERCUSSIONS FOR PATIENTS AND
`DRUG COMPETITION
`Allergan and the Tribe have suggested that their transaction poses no serious concerns
`because generic drug manufacturers can still challenge patents in federal court. But the
`potential impacts of this scheme on the patent system are profound, for two reasons: (1)
`USPTO review is a vital component of a healthy patent system in its own right, and (2) tribal
`immunity threatens to limit judicial proceedings as well.
`
`A.
`
`USPTO REVIEW IS A VITAL COMPONENT OF A HEALTHY PATENT SYSTEM
`
`Congress has barred the issuance of patents on purported inventions that are not truly novel, or
`are just obvious variations on existing knowledge. But the USPTO examination process does
`not always uncover all the flaws in a patent. And patent owners have incredibly powerful
`incentives to seek and obtain as many patents as possible, even dubious ones: each new
`patent can extend the life of an existing monopoly, and even a weak patent can be a powerful
`deterrent to competition. Indeed, that is exactly what Allergan did here. The patents protecting
`Allergan’s Restasis monopoly expired in May 2014. But in late 2013 and early 2014, Allergan
`obtained six new patents that provided Allergan with ten more years of patent exclusivity.
`These patents attempted to claim essentially the same formulation and methods of treatment
`Allergan had previously claimed, with a bit more detail about the proportions of ingredients.
`
`3 Frequently Asked Questions About New Research and Technology (Patent) Business, Saint Regis
`Mohawk Tribe, https://www.srmt-nsn.gov/_uploads/site_files/Office-of-Technology-Research-and-Patents-
`FAQ.pdf (last accessed Oct. 8, 2017).
`4 Tribe Provides Clarification on Allergan Agreement, Saint Regis Mohawk Tribe, Sept. 14, 2017,
`https://www.srmt-nsn.gov/news/2017/tribe-provides-clarification-on-allergan-agreement.
`
`
`
`3
`
`

`

`Those weak patents were prime candidates for administrative re-examination, and
`unsurprisingly, the PTAB found a reasonable likelihood that all six are invalid.
`
`For nearly 40 years, the USPTO’s ability to reconsider and cancel patents that never should
`have issued has been an important part of the patent system. That process, as improved by
`Congress over time, is necessary to ensure that patents merit full confidence and certainty and
`that they do not unjustifiably restrict competition of vital products such as pharmaceuticals.
`
`Congress created a process for petitioning the USPTO to re-examine issued patents precisely
`because of concerns that patents were being issued with flaws that render them invalid. The
`incredible volume of patent applications (more than 600,000 in 2015, with the number of
`applications rising each year5) and limited staffing at the USPTO leave patent examiners
`constrained in their ability to accurately assess patentability. And the patent examination
`process is an interaction between the patent applicant and the USPTO with little (if any)
`opportunity for third parties to provide evidence or arguments relevant to patentability. Indeed,
`researchers have found that patent examiners spend an average of just nineteen hours on each
`patent application, which includes the time spent reading the application, searching for prior art
`that would render the proposed patent invalid, interviewing the applicant’s counsel, responding
`to the applicant’s arguments, and rendering a decision.6 Given these circumstances, it is no
`surprise that patent applicants are frequently able to obtain weak patents that should never
`have been issued to begin with.
`
`The initial administrative review processes created by Congress suffered from structural
`deficiencies that hampered their ability to weed out bad patents. As a result, numerous
`legislators, including Senators Sessions, Schumer, Leahy, and Whitehouse, expressed
`concerns that poor-quality patents were still escaping re-examination. Legislators recognized
`that simple but robust USPTO review would enable inventors and their competition to spend
`their resources productively, on raising money, commercializing inventions, and manufacturing
`products for patients, rather than spending millions of dollars per lawsuit litigating weak patents.
`It could also provide “additional access to the expertise of the Patent Office on questions of
`patentability”—something that was not possible in district court litigation.7
`
`Thus, Congress reformed the system for re-examining issued patents as part of the America
`Invents Act (AIA) passed in 2011.8 The AIA created new procedures, including inter partes
`review and other forms of post-grant review, “to ensure that the poor-quality patents can be
`weeded out through administrative review rather than costly litigation” to “improve patent quality
`and limit unnecessary and counterproductive litigation costs.”9 Congress provided a greater
`opportunity for third parties to interact with and present evidence to the PTAB (which is now the
`first-line adjudicator), as well as limited discovery. The AIA simultaneously provided patent
`owners with an opportunity to amend their patents during IPR proceedings.
`
`
`5 U.S. Patent Statistics Chart Calendar Years 1963-2015, U.S. Patent & Trademark Office,
`https://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm.
`6 Melissa D. Frakes & Melissa F. Wasserman, Is the Time Allocated to Review Patent Applications
`Inducing Examiners to Grant Invalid Patents?: Evidence from Micro-Level Application Data, Nat’l Bureau
`of Econ. Research (July 2014), http://www.nber.org/papers/w20337.pdf.
`7 157 Cong. Rec. S1352 (Mar. 8, 2011) (Udall).
`8 H.R. Rep. No. 112-98, at 39 (2011).
`9 157 Cong. Rec. S5409 (Sept. 8, 2011) (Sen. Schumer); 157 Cong. Rec. S1348 (Mar. 8, 2011) (Sen.
`Leahy).
`
`
`
`4
`
`

`

`To ensure the efficiency of IPRs and other post-grant reviews, the AIA placed strict time
`limitations on PTAB decisions—no more than one year to resolve an instituted IPR absent good
`cause to extend that deadline for no more than six additional months.10 These time limits
`ensure that those results are reached quickly, compared with the years it often takes to resolve
`patent litigation in federal court. The AIA also established a sufficiently high threshold for
`instituting an IPR to “weed out marginal challenges” and to “prevent abuse of these proceedings
`for purposes of harassment or delay.”11 And to ensure the accuracy of PTAB decisions, the AIA
`provided that no heightened standard of proof would apply: if a patent is found invalid, it will be
`canceled.
`
`Transactions like Allergan’s threaten to undo this valuable reform of the patent system. If
`brand-name drug manufacturers can make themselves invulnerable to IPRs simply by paying
`an Indian Tribe a small fraction of the amount they receive in revenues each year, the cost of
`eliminating flawed patents from our patent system will skyrocket. And if flawed patents are
`harder to eliminate, companies will have greater incentives to pursue even a flawed patent as a
`means of extending a monopoly.
`
`Inter partes review is not simply an alternative venue for patent litigation; it serves a crucial role
`in a healthy patent system. Allowing brand-name drug companies to immunize their flawed,
`improperly granted patents from IPR proceedings, by renting tribal immunity using a fraction of
`the profits that their patents protect, will hurt patients and degrade the patent system. Low-
`quality patents will once again be roadblocks to innovation and competition, and those who will
`suffer most are patients who rely on innovation and competition to deliver affordable medicines.
`
`B.
`
`DISTRICT COURT LITIGATION IS NOT A SUBSTITUTE FOR INTER PARTES REVIEW
`
`Allergan and the Tribe contend that their evasion of the PTAB should not be worrisome because
`if Allergan sues on these patents in district court, the defendant can still argue that the patents
`are invalid. That ignores that administrative review and patent litigation serve two different but
`equally vital functions, and Congress intended to make both systems available. Pointing to the
`district court as an alternative forum also obscures the impact that tribal sovereign immunity
`could have on district court proceedings.
`
`First, a district court case generally takes much longer than an IPR proceeding and costs much
`more. The parties have to litigate infringement as well as the invalidity of the patents. There is
`no analogue to the PTAB’s institution decision, which can streamline the issues. Discovery is
`much more costly, especially expert discovery. Unlike in IPRs, there is no 18-month time limit in
`patent litigation; to the contrary, Congress has approximated that a pharmaceutical patent case
`will take 30 months to resolve in district court, and many take longer. And in district court, even
`if a patent is shown to be invalid by a preponderance of evidence, the patent survives because
`of a heightened burden that limits district courts’ ability to invalidate patents. In IPR
`proceedings, by contrast, the expert adjudicators make their decision without any artificially
`heightened burden, which improves the accuracy of decision-making.
`
`Second, tribal sovereign immunity applies in federal district court proceedings. If transactions
`like Allergan’s are upheld, the tribe renting its immunity to a brand-name manufacturer could
`potentially invoke that immunity to block generic drug manufacturers from bringing declaratory
`
`
`10 35 U.S.C. § 316(a)(11).
`11 157 Cong. Reg. S1041 (Mar. 1, 2011) (Sen. Kyl); 157 Cong. Rec. S1374 (Mar. 8, 2011) (Sen. Kyl).
`
`
`
`5
`
`

`

`judgment actions or counterclaims to declare a patent invalid.12 That threatens the well-
`functioning system for litigating pharmaceutical patent disputes. In the Drug Price Competition
`and Patent Term Restoration Act, a 1984 statute also known as the Hatch-Waxman Act,
`Congress created a pathway for faster approval of generic drugs that promotes prompt litigation
`between brand-name and generic drug manufacturers. Under Hatch-Waxman, if a generic
`manufacturer applies to market a drug and the brand-name manufacturer does not sue within
`45 days, the generic manufacturer can obtain certainty by bringing a civil action for a declaratory
`judgment that the brand company’s patents are invalid or not infringed.13 Generic drug
`applicants who are sued on some patents but not others can also file a counterclaim to litigate
`the validity of the additional patents. But tribal immunity would potentially block declaratory
`judgment actions and counterclaims.
`
`If brand-name manufacturers can shield themselves from generic applicants’ declaratory
`judgment actions by renting tribal immunity, they can effectively delay generic drug launch by
`holding some of their patents in reserve and waiting until after FDA approval of a generic to file
`or threaten suit. Generic drug applicants are typically reluctant to launch their products “at
`risk”—until they have “patent certainty” that the brand-name manufacturer’s patents are not
`infringed or are invalid—because the damages sought for “at risk launch” are potentially quite
`significant, and often greater than the profits that the generic applicant could hope to earn. For
`a blockbuster drug like Restasis, which brought in an average of $4 million per day in 2016, the
`prospect of even delaying (if not preventing) launch is worth the relatively marginal cost of
`renting tribal immunity.
`
`If transactions like Allergan’s are upheld, tribal immunity could also preclude generic drug
`companies from asserting invalidity counterclaims to challenge patents covering brand-name
`drugs even if tribes sue them for infringement. And while generic drug defendants could defend
`their own alleged infringement by arguing that any “asserted claims” (patent claims that the
`patent owner alleges are infringed) are invalid, brand-name manufacturers have historically
`attempted to keep multiple and late-listed patents in reserve, unasserted until the last minute, to
`scare generics away from launching upon receiving approval. With tribal immunity potentially
`blocking counterclaims challenging unasserted patent claims, and generic manufacturers’
`reticence to launch products at risk, brand-name drug companies can again delay generic drug
`launch for the minimal cost of renting tribal immunity.
`
`A tribal immunity rental scheme thus poses serious consequences for federal court litigation
`and, ultimately, patients taking brand-name drugs at brand-name drug prices—upwards of five
`times the cost of a generic alternative.14 Furthermore, these consequences will only increase
`uncertainty, which damages incentives for investment in generic drug competition.
`
`
`12 A123 Sys., Inc. v. Hydro-Quebec, 626 F.3d 1213, 1217 (Fed. Cir. 2010); Quinault Indian Nation v.
`Pearson for Estate of Comenout, __ F.3d __, 2017 WL 3707898, at *4 (9th Cir. Aug. 29, 2017).
`13 35 U.S.C. § 271(e)(5).
`14 Generic Drug Facts, U.S. Food & Drug Admin.,
`https://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/GenericDrugs/ucm
`167991.htm (last updated Oct. 6, 2017).
`
`
`
`6
`
`

`

`IV. THE PTAB CAN AND SHOULD RESOLVE INSTITUTED IPRS
`IF A PRIVATE PATENT HOLDER ATTEMPTS TO HIDE
`BEHIND RENTED TRIBAL IMMUNITY
`The PTAB has at least two options for reaching the merits of instituted IPRs should
`patentholders engage in a tribal immunity rental transaction: it could conclude that tribal
`immunity does not apply in administrative “second look” proceedings, or it could conclude that
`even if tribal immunity does apply and has not been waived, it should continue to exercise its
`Congressionally granted authority to review the patents issued by the USPTO even without the
`Tribe’s participation.
`
`A.
`
`TRIBAL IMMUNITY DOES NOT APPLY IN IPR PROCEEDINGS
`
`Sovereign immunity, including tribal sovereign immunity, unquestionably applies in judicial
`proceedings between private parties. But it does not apply in administrative proceedings in
`which the federal government is “exercising its superior sovereign powers.”15 As the Supreme
`Court held in Federal Maritime Commission v. South Carolina State Ports Authority, it is only
`where an administrative proceeding bears “a remarkably strong resemblance to civil litigation in
`federal courts” and where a sovereign would “be required to answer the complaints of private
`parties” that sovereign immunity shields a sovereign from participating in those proceedings.16
`
`There are fundamental differences between adversarial civil litigation and inter partes review
`that could lead the PTAB to conclude that tribal immunity simply does not apply to IPR
`proceedings. Many of these differences were discussed by the Supreme Court just a year ago
`in Cuozzo Speed Technologies, LLC v. Lee, in which the Court rejected the argument that inter
`partes review is “a ‘surrogate’ for court proceedings” and instead stated that in many ways “inter
`partes review is less like a judicial proceeding and more like a specialized agency
`proceeding.”17
`
`First, and perhaps most fundamentally, the purpose of an IPR is different from the purpose of
`district court litigation. An IPR does not adjudicate a controversy between private parties as civil
`litigation does; rather, it offers the USPTO “a second look at an earlier administrative grant of a
`patent.”18 That is why the patent owner can sometimes amend the patent during the IPR
`proceeding. Because the purpose of an IPR is for the USPTO to reexamine its own earlier
`agency decision, the PTAB also offers a lower burden of proof than civil patent litigation. If the
`PTAB finds by a preponderance of the evidence that the patent is invalid, it will be cancelled.
`
`Second, the universe of potential IPR petitioners is broader. A patent owner chooses whom to
`sue in district court. IPR petitions, however, can be filed by anyone who is not the owner of the
`patent, whether or not they have been sued or threatened with suit on the challenged patent.19
`
`
`15 Quileute Indian Tribe v. Babbitt, 18 F.3d 1456, 1459 (9th Cir. 1994).
`16 535 U.S. 743, 757, 760 (2002).
`17 136 S. Ct. 2131, 2143 (2016).
`18 Id. at 2144.
`19 35 U.S.C. § 311.
`
`
`
`7
`
`

`

`Third, unlike a district court, the PTAB may continue to conduct IPRs even after a petitioning
`party and patent holder have settled. Once the patent is being scrutinized by the PTAB, the
`patent owner can no longer insulate its flaws from review by settling with the petitioner.
`
`Fourth, a key rationale of the Supreme Court in holding that sovereign immunity applies in
`Federal Maritime Commission adjudications of alleged Shipping Act violations was that the
`Commission lacked discretion to refuse to adjudicate complaints brought by private parties, and
`thus sovereigns were truly being “coerced” by private parties into answering private disputes.
`The Court took great care to note that sovereign immunity did not preclude the government from
`investigating and prosecuting “alleged violations of the Shipping Act, either upon its own
`initiative or upon information supplied by a private party, and to institute its own administrative
`proceeding against a state-run port.”20 It further stated that notwithstanding tribal immunity,
`“private parties remain perfectly free to complain to the Federal Government about unlawful
`state activity and the Federal Government [remains] to take subsequent legal action.”21 This is
`precisely the nature of IPR proceedings: private parties supply information to the USPTO
`regarding patentability in the form of IPR petitions, and the PTAB has complete and
`unreviewable discretion about whether or not “to institute its own administrative proceeding.”
`Thus, under the Supreme Court’s reasoning, sovereign immunity poses no barrier to the PTAB’s
`resolution of the IPRs it decided to institute.
`
`PTAB panels have on three occasions concluded that sovereign immunity applies in IPR
`proceedings. Those decisions, however, addressed the issue of state sovereign immunity,
`which has a constitutional foundation, whereas tribal sovereign immunity is a common-law
`concept that Congress is free to abrogate. Furthermore, regardless of that distinction, those
`earlier panel decisions are not binding on future panels, including the Allergan panel, and do not
`take proper account of the Supreme Court’s analyses in the Federal Maritime Commission and
`Cuozzo cases.
`
`Thus, there is no barrier to the PTAB’s concluding that tribal immunity is inapplicable in the
`Restasis IPRs, or any IPRs involving attempts to assign patent rights to tribes in order to thwart
`the PTAB proceedings. The PTAB may also conclude that particular conduct by a tribe
`constitutes a waiver of any claimed immunity.
`
`B.
`
`INSTITUTED IPRs SHOULD NOT BE DISMISSED WHERE A PATENT HOLDER
`TRANSFERS ITS PATENTS TO A SOVEREIGN TO AVOID AN ADVERSE IPR
`DECISION
`
`Even if tribal immunity does apply in IPR proceedings, and even if immunity-renting commercial
`transactions like the Saint Regis Mohawk Tribe’s do not constitute a waiver of that immunity, the
`USPTO should complete its review of the agency’s earlier decision to grant a patent where a
`patent owner transfers its patents to a sovereign entity for the express purpose of avoiding a
`final IPR decision. Nothing in the America Invents Act or the USPTO’s rules or regulations
`precludes the PTAB from resolving instituted IPRs in this situation, just as the inability to include
`a relevant party in litigation does not negate a federal court’s authority to adjudicate disputes
`between the parties who have been joined.22 Indeed, PTAB rules expressly permit IPRs to
`continue even with no parties—even when a petitioner abandons its petition following settlement
`
`
`20 535 U.S. at 768 (citations omitted).
`21 Id. at 768 n.19 (quotation marks omitted and alteration in original).
`22 Fed. R. Civ. P. 19 advisory committee note (1966).
`
`
`
`8
`
`

`

`with the patent holder, “the Board . . . may independently determine any question of . . .
`patentability.”23
`
`Furthermore, in past IPRs involving sovereign state entities, the PTAB has allowed an IPR to
`continue where there is a remaining party that can adequately represent the patent owner’s
`interest.24 That is certainly true in Allergan’s case: Allergan has been involved in these IPRs for
`more than a year, and in a September 11, 2017 telephone conference with the Board following
`Allergan’s assignment and license-back agreements, Allergan stated that it fully intends to
`continue participating in the IPRs. In an attempt to obtain dismissal of the IPRs, the Tribe has
`recently argued that Allergan cannot adequately represent the Tribe’s interests, but most
`observers would likely find this argument to be contri