Year in Review: Changes in PTAB Practice in 2018

By Tom Engellenner
A number of significant changes occurred in 2018 at the U.S. Patent and Trademark Office (USPTO). To begin with, in February 2018, a new USPTO Director took office.  Director Andrew Iancu, a former patent litigator with law firm experience, appears to have brought a different perspective than that of his corporate predecessors – Michel Lee (Google) and David Kappos (IBM) – to the job at the helm of the USPTO.  In his Senate confirmation hearings, Iancu made it clear that he felt that better balance was needed in the administrative review of issued patents by the USPTO under the America Invents Act (AIA).   He pledged to assess “improvements in the AIA trial standards and processes.”  Iancu identified “institution decisions, claim construction, the amendment process, and the conduct of hearings” as areas that warranted study.  In fact, Director Iancu did a lot more than study these aspects of practice before the Patent Trial and Appeal Board (PTAB) in 2018. Continue reading “Year in Review: Changes in PTAB Practice in 2018”

Allergan’s Mohawk Gambit Fails at the PTAB

By Tom Engellenner
The Patent Trial and Appeal Board (PTAB) has not taken kindly to a move by the Irish drug company Allergan to shield its key patents on its dry-eye drug Restasis from challenge at the U.S. Patent Office by assigning these patents to the Saint Regis Mohawk Tribe in return for a commitment by the tribe, as new owner of the patents, to invoke “sovereign immunity.”  In a decision rendered last Friday (February 23, 2017), the PTAB panel handling these cases rejected the Tribe’s claim to immunity and denied the new patent owner’s motion to terminate.

However, the PTAB panel decision denying the motion to terminate in these IPR cases (Mylan Pharmaceuticals, et al. v. Allergan, Inc., PR2016-01127, etc.) is surprising because the panel declined to take the easy way out, that being to follow the reasoning of a recent PTAB ruling in another sovereign immunity case, Ericsson Inc. v. Regents of the University of Minnesota, IPR2017-01186.

The enlarged PTAB panel in the Ericsson case (which included the PTAB’s Chief Judge and three other additional panel members selected by the Chief Judge) found that sovereign immunity was waived when a Patent Owner chose to enforce its patent rights in a federal district court action.  The easiest resolution would have been to extend the Ericsson reasoning to find a waiver of immunity equally applies to sovereign assignees of patents already in litigation.

Instead, the panel in the Mylan cases chose a frontal assault on tribal immunity.  The Mylan panel held that the AIA was 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 panel also appears to have adopted the position that IPR trials are in rem proceedings, not exercises of personal jurisdiction over private entities holding private property rights – a theory that has not been embraced in any of the previous IPR decisions involving sovereign immunity claims asserted by state university patent owners.

The Mylan panel also found that, even assuming arguendo that the Mohawk Tribe was entitled to assert immunity, the proceedings can continue without the tribe’s participation because the Mohawks had granted essentially all rights under the patent back to the original owner, Allergan.  The Mylan panel stopped short of concluding that the transaction was a sham transaction, but essentially found that none of the rights retained by the Tribe following its exclusive license back to Allergan amounted to anything substantial and that the Tribe was not an indispensable party because “Allergan has at least an identical interest to the Tribe.”

Allergan’s Mohawk Gambit May Be Doomed – PTAB Rethinks the Scope of Sovereign Immunity

By Tom Engellenner
A few months ago, the Irish drug company Allergan moved to shield its key patents on its dry-eye drug Restasis from challenge at the Patent Trial and Appeal Board (PTAB) of the U.S. Patent Office by assigning these patents to the Saint Regis Mohawk Tribe in return for a commitment by the tribe, as new owner of the patents, to invoke “sovereign immunity” and request that the PTAB dismiss pending administrative challenges.

However, a recent decision in an unrelated case before the PTAB casts doubt on the viability of this strategy.  In Ericsson v. Regents of the University of Minnesota, IPR2017-01186 (Paper 16 PTAB Dec. 19, 2017), an expanded panel of seven PTAB judges denied the University of Minnesota’s motion to dismiss an inter partes review (IPR) proceeding on the basis of sovereign immunity.  According to the PTAB panel, by filing a patent infringement suit that asserted the challenged patent, the University had waived its immunity at least with respect to the defendants.  One of defendants in that suit, Ericsson, Inc., had initiated the IPR proceeding.

The Ericsson decision involved the questionable practice of “panel-packing” by the PTAB’s chief judge, David Ruschke.  In this instance, the Chief Judge added himself and three of his deputies to the original three judges assigned to the case for the purpose of deciding the University’s motion to dismiss, ostensibly to address the “exceptional nature of the issues presented.”

Two prior PTAB decisions by different panels of judges involving University-owned patents have upheld the sovereign immunity principle.  In Covidien LP v. Univ. of Fla. Research Found., Inc., Case IPR2016-01274 (PTAB Jan. 25, 2017) and NeoChord, Inc. v. Univ. of Md., Balt., Case IPR2016-00208 (PTAB May 23, 2017), prior panels of PTAB judges faced with this issue had found that an IPR proceeding was an adjudicatory proceeding of a federal agency from which state entities are immune.

Judge Ruschke’s opinion on behalf of the enlarged panel confirmed that the sovereign immunity defense was generally available to state universities (and, by implication, other sovereigns like native American tribes) but the immunity was not absolute.  By suing in federal court, Ruschke reasoned that University of Minnesota had waivered this immunity.  He distinguished the prior PTAB panel decisions dismissing IPR petitions on sovereign immunity grounds because they did not involve “a State that filed an action in federal court alleging infringement of the same patent.”  (The Covidien v. Florida case arose out of a licensing dispute in which the university had sued to enforce a patent license agreement and the disgruntled licensee then challenged the patent via an IPR petition.  The Neochord v. Maryland case likewise involved a licensing dispute.)

Nonetheless, Judge Ruschke’s opinion has a logical weakness.  The panel’s finding of a waiver appears to turn on the fact that an invalidity challenge to a patent in a federal infringement case is a compulsory counterclaim.  Because the invalidity challenge must be brought or “be forever barred from doing so, it is not unreasonable to view the state as having consented to such counterclaims.”  The opinion fails to explain why the counterclaim inherent in an infringement suit (i.e. a trial of the invalidity issue in the federal court) is not sufficient in and of itself or why the compulsory nature of the counterclaim should spawn a right to raise this issue in an alternative forum with significantly different (challenger-friendly) rules.  Continue reading “Allergan’s Mohawk Gambit May Be Doomed – PTAB Rethinks the Scope of Sovereign Immunity”