The Patent Trial and Appeal Board (PTAB) overstepped its jurisdiction when it determined that tribal sovereign immunity doesn't apply to inter partes review (IPR), according to the U.S. Court of Appeals for the Federal Circuit.

"Exclusive jurisdiction to resolve the threshold issue of whether these proceedings must be terminated vests in this court, and . . . the Board may not proceed until granted leave by this court," the Federal Circuit said in an order issued Wednesday that stayed a PTAB oral argument involving Restasis (cyclosporine) patents Allergan plc transferred to the Saint Regis Mohawk Tribe and then licensed back. (See BioWorld, Sept. 20, 2017.)

That argument – in an IPR challenge filed by Mylan NV, Teva Pharmaceuticals USA Inc. and Akorn Inc. – had been set for April 3, with the board's final decision due by June 6. Whether the proceeding gets rescheduled will depend on what the Federal Circuit decides when it holds an expedited oral argument in June on whether sovereign immunity exempts tribe-owned patents from PTAB review.

In its ruling last month, PTAB distinguished between tribal sovereign immunity and state sovereign immunity, which the board has recognized in rejecting IPR challenges to patents owned by state universities. It also noted the lack of statutory authority or precedent in determining whether tribal sovereign immunity applies to IPRs. Rather than viewing that lack as a reason to stop the IPR, the board saw it as a reason to continue. (See BioWorld, Feb. 27, 2018.)

"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," PTAB said in the decision.

The Saint Regis Tribal Council immediately appealed PTAB's decision to the Federal Circuit, saying the administrative panel had contradicted appellate court and Supreme Court precedents and placed "sovereign governments on the same footing as private corporations."

Legislative fix?

Should the Federal Circuit hold that tribal sovereign immunity is an IPR safe harbor, it likely will push Congress to advance bipartisan legislation to close the loophole. The Preserving Access to Cost Effective Drugs (PACED) Act is aimed at patent transactions such as the one between the Mohawk tribe and Dublin-based Allergan, which sponsors of the bill characterized as an attempt to stifle competition and prevent access to cheaper generic drugs. However, PACED is not intended to prevent biopharma companies from partnering with tribes for research, development and licensing of drugs, the sponsors said.

"Sham transactions involving the transfer of patent ownership from a pharmaceutical company to a tribe for the sole purpose of shielding the patent from challenges are a clear abuse of our patent system and set a dangerous precedent for other consumer products," Sen. Pat Toomey (R-Pa.), one of the sponsors, said when the bill was introduced in the Senate earlier this month. "The PACED Act will improve our patent system and protect patients and consumers from higher drug prices by eliminating this egregious loophole."

In a hearing last year before the House Judiciary Subcommittee on Courts, IP and the Internet, Philip Johnson, of Johnson-IP Strategy & Policy Consulting, explained why companies might try to use sovereign immunity to shield patents from abuses of the IPR system. In his written testimony, he described those abuses as "serial jeopardy," which "has led to 'gang tackle' IPR filings that force all but the most well-heeled patent owners into submission, as petitioners 'file, file and file again' to find combinations of prior art that one PTAB panel or another will find sufficient for invalidation." (See BioWorld, Nov. 9, 2017.)

Members of the House subcommittee agreed that the merits of the IPR system should be debated, but Ranking Member Jerrold Nadler (D-N.Y.) pointed out that it's up to Congress to fix the problem – not for companies to do an end run around the law and make a mockery of congressional authority.

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