A Federal Circuit decision that tribal sovereign immunity cannot be asserted in inter partes reviews (IPRs) could be the slippery slope that eventually makes biopharma and med-tech patents held by state universities fair game for IPR challenges.

In writing the unanimous decision handed down Friday in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., Federal Circuit Judge Kimberly Moore concluded, "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."

Much of the analysis and case law the three-judge panel cited in reaching its decision applied to "sovereign immunity" – not just tribal sovereign immunity. For instance, the Federal Circuit leaned on Federal Maritime Commission (FMC) v. South Carolina State Ports Authority, a state sovereign immunity case in which the Supreme Court distinguished between adjudicative proceedings brought against a state by a private party and federal agency-initiated enforcement proceedings.

In his concurring opinion, Federal Circuit judge Timothy Dyk wrote, "Under FMC, it is clear that sovereign immunity cannot bar agency denial of an original patent application filed by a sovereign entity or, consequently, agency reconsideration of an original patent grant. Such reconsideration simply does not involve agency adjudication of a private dispute, but rather agency reconsideration of its own prior actions."

Dyk traced the history and need for post-grant patent reviews, characterizing an IPR as "an agency reconsideration rather than an adjudication of a private dispute." As such, an IPR doesn't "implicate sovereign immunity," Dyk said.

His assessment of what an IPR is echoed Moore's decision. Citing the Supreme Court's recent Oil States opinion, Moore said the high court "recognized that IPR is 'simply a reconsideration of' the PTO's original grant of a public franchise, which serves to protect 'the public's paramount interest in seeing that patent monopolies are kept within their legitimate scope.'" (See BioWorld, April 25, 2018.)

However, the Patent Trial and Appeal Board (PTAB) has routinely exempted patents owned by state universities from IPR challenges on the basis of sovereign immunity. It is that practice that led to the Saint Regis Mohawk Tribe acquiring patents and then licensing them back to companies as a way to diversify its revenue streams to support tribal programs and community services. (See BioWorld, Sept. 20, 2017.)

One of those licensing deals was with Dublin-based Allergan plc and involved six patents protecting blockbuster dry eye drug Restasis (cyclosporine). Several generic drug companies were already challenging the patents through the IPR process when Allergan transferred the patents to the tribe and then licensed them back.

Although the U.S. Court of Appeals for the Federal Circuit skirted the state sovereign immunity question in Friday's decision, it is a question the court may have to answer soon in the form of Ericcson Inc. v. University of Minnesota. In that case, the PTAB ruled that the university had waived sovereign immunity from an IPR challenge when it prosecuted the patents in court. The analysis the Federal Circuit used in Saint Regis could be raised in Ericcson to question whether states ever have sovereign immunity from IPRs.

Regardless of Ericcson, the Federal Circuit may not have the last word on what boils down to a constitutional issue and the definition of an IPR. Dale White, general counsel for Saint Regis, told BioWorld that the tribe is reviewing the appellate court's decision with its attorneys and considering further appeals. He said the tribe was "very disappointed" with the decision and "fundamentally disagrees" with the court's characterization of IPRs.

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