Source: https://www.patentdocs.org/articles_cases_miscellaneous/
Timestamp: 2019-04-19 11:01:53+00:00

Document:
Zheng Cai DBA Tai Chi Green Tea Inc. appealed an opinion of the U.S. Patent and Trademark Office Trademark Trial and Appeal Board (TTAB) cancelling registration of his mark "WU DANG TAI CHI GREEN TEA" due to a likelihood of confusion with Diamond Hong, Inc.'s registered mark, "TAI CHI," pursuant to 15 U.S.C. § 1052(d) (2012).
The Federal Circuit affirmed the decision, and despite the two marks (shown below) looking substantially different in appearance at first glance, other factors weighed in favor of the cancellation.
Section 1052(d) provides that a trademark may be refused if it consists of or comprises a mark which so resembles a mark registered in the USPTO, or a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive (15 U.S.C. § 1052(d)).
In Application of E.I. DuPont DeNemours & Co., the Court articulated thirteen factors to consider when determining likelihood of confusion (DuPont factors). Not all of the DuPont factors are relevant to every case, and only factors of significance to the particular mark need be considered.
The thirteen factors are as follows: (1) similarity of the marks; (2) similarity and nature of goods described in the marks' registrations; (3) similarity of established trade channels; (4) conditions of purchasing; (5) fame of the prior mark; (6) number and nature of similar marks in use on similar goods; (7) nature and extent of actual confusion; (8) length of time and conditions of concurrent use without evidence of actual confusion; (9) variety of goods on which mark is used; (10) market interface between applicant and owner of a prior mark; (11) extent to which applicant has a right to exclude others from use of its mark; (12) extent of potential confusion; and (13) any other established probative fact on effect of use.
Between the two marks, in its likelihood of confusion analysis, the TTAB considered the first three DuPont factors, treating the remainder as neutral because neither party submitted evidence related to them.
Mr. Cai argued that the TTAB improperly weighed these three DuPont factors to arrive at an incorrect conclusion regarding likelihood of confusion. A summary of the analysis of these factors is included below.
With respect to the similarity and nature of the goods, the goods covered by each mark overlap. Mr. Cai's WU DANG TAI CHI GREEN TEA mark identifies the goods as "Green tea; Tea; Tea bags."
In turn, among many goods identified in its registration, Diamond Hong's TAI CHI mark identifies "tea." Given this plain overlap, the TTAB's determination that the parties' goods are identical in part is supported by substantial evidence.
With respect to similarity of the established trade channels through which the goods reach customers, the TTAB followed case law and presumed that the identical goods move in the same channels of trade and are available to the same classes of customers for such goods—here, general consumers who consume or purchase tea.
Since the marks cover identical goods (tea), this presumption attaches. Mr. Cai failed to produce evidence to rebut this presumption.
With regard to the similarity of the marks themselves, the TTAB must examine the similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation, and commercial impression.
The Federal Circuit noted that the proper test is not a side-by-side comparison of the marks, but instead whether the marks are sufficiently similar in terms of their commercial impression such that persons who encounter the marks would be likely to assume a connection between the parties.
Where the goods at issue are identical, the degree of similarity necessary to support a conclusion of likely confusion declines.
Here, the marks were considered similar by the Federal Circuit, when considered as a whole, because they both invoke a large yin-yang symbol and prominently display the term TAI CHI.
Specifically, the WU DANG TAI CHI GREEN TEA mark to Mr. Cai is described as follows: the color(s) green and white is/are claimed as a feature of the mark, and the mark consists of a circle outlined in green, that divides to be half green and half white, with a single dot located at each half with the opposite color; on the top of the mark, it has words "Tai Chi Green Tea"; at the bottom of the mark, it has words "Wu Dang." The mark is reproduced below.
Similarly, the TAI CHI mark of Diamond Hong is presented in the following terms: the mark consists of a man engaged in a tai chi position atop a yin-yang symbol with the term "Tai Chi" below the symbol and a Chinese character on each side of the symbol. The mark is reproduced below.
The Federal Circuit noted that color is not claimed as a feature of Diamond Hong's mark, and this further highlights the likelihood of confusion because, as the TTAB correctly identified, Diamond Hong's mark could be presented in a green-and-white color scheme like Mr. Cai's mark.
The Federal Circuit agreed with the TTAB's findings as to the DuPont factors, and found that the findings were supported by substantial evidence. Thus, the Federal Circuit affirmed the Opinion of the U.S. Patent and Trademark Office's Trademark Trial and Appeal Board.
Despite the two marks looking quite different, the DuPont factors weighed heavily in factor of cancellation of Mr. Cai's mark since the nature of goods described in the marks' registrations were identical and the established trade channels were identical.
There were other DuPont factors that Mr. Cai could have perhaps argued, however, he encountered errors through submission of evidence, and further briefs by Mr. Cai were not considered.
On April 17th, the American Bar Association provided a formal opinion regarding the requirement that attorneys disclose errors to clients. Its opinion was based on Rule 1.4 of the Model Rules of Professional Conduct, which governs communications with clients. The ABA concluded that attorneys have a duty to disclose material errors to clients, but no duty to disclose errors to former clients. In this context, an error is material if a disinterested attorney would believe that the error would likely cause harm or prejudice to the client, or that the error would reasonably cause a client to consider terminating the practitioner's representation -- even if there would be no prejudice to the client.
Rule 1.4 of the Model Rules of Professional Conduct is the widely-adopted basis for the duty of disclosure to clients. Forty-nine of the fifty states have adopted versions of the Model Rules of Professional Conduct, along with the U.S. Patent and Trademark Office and four of the five U.S. territories.
(5) Consult with the client about any relevant limitation on the practitioner's conduct when the practitioner knows that the client expects assistance not permitted by the USPTO Rules of Professional Conduct or other law.
(b) A practitioner shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.
37 C.F.R. § 11.104. The obligation to disclose errors arises primarily out of sections (a)(1) and (a)(3), but also relies upon sections (a)(2) and (a)(4). Specifically, a material error is the sort of information that forms an important part of the status of a case or matter and would lead the client to have to make informed decisions. In light of those provisions, numerous states (both courts and bar associations) have found that an attorney has an obligation to disclose any errors that could cause prejudice to a client, underlie an ethics complaint, or give rise to a malpractice claim.
The ABA found that the obligation of disclosure would go further, however. Even if there is no prejudice to the client, it concluded that there would be a duty to disclose errors that an independent, disinterested attorney would believe would cause a reasonable client to lose confidence in the erring practitioner. Notably, no jurisdiction has yet found such an obligation of disclosure, and the issue would not come up in the context of a malpractice case. However, it could come up in the context of an ethics complaint, and the risk of non-disclosure (or covering up) a non-prejudicial error is likely greater than the cost of disclosing it with an explanation.
In determining the scope of the obligation of disclosure, however, the ABA found a clear limit. Namely, the obligation to disclose extends only to current clients. Rule 1.4 describes the obligation of communication as relating to a "client," not to former clients. As a result, if the error is not identified until after the representation ends -- and the representation has been terminated in accordance with Rule 1.16 -- there is no obligation to disclose an error. There may be practical reasons, such as goodwill or business development, for such a disclosure, but there is no ethical obligation under this ABA opinion.
Thus, the ABA has drawn a clear division between current and former clients with regard to the disclosure of errors. For a current client, a practitioner must disclose errors that a reasonable, disinterested practitioner would believe (a) would be reasonably likely to harm or prejudice the client or (b) would reasonably cause the client to consider terminating the representation. For former clients, as long as the representation has been properly terminated, there is no ethical duty to disclose any errors whatsoever.
 California has not adopted the Model Rules, but has a provision analogous to Rule 1.4 in its rules. Furthermore, the bar has proposed adoption of the Model Rules to the California Supreme Court. The only territory that has not adopted the Model Rules is Puerto Rico.
On March 20, 2018, Rep. Elise Stefanik (R-NY) introduced a bill (H.R. 5356) in the United States House of Representatives in an effort to establish a new National Security Commission on Artificial Intelligence. The Commission itself would be considered an independent establishment in the Executive Branch under 5 U.S.C. § 104.
The bill, entitled the National Security Commission Artificial Intelligence Act of 2018, directs the Commission to review advances in "artificial intelligence, related machine learning developments, and associated technologies." Specifically, the Commission will consider how to advance such technologies so as to "comprehensively address the national security needs of the Nation, including economic risk, and any other needs of the Department of Defense or the common defense of the Nation."
The bill appropriates up to $10 million from the Department of Defense budget to fund the Commissions activities. Upon introduction, the bill was referred to the Committee on Armed Services, as well as the Committees on Education and the Workforce, Foreign Affairs, Science, Space, and Technology, and Energy and Commerce for a period of consideration and comment.
(5) An artificial system designed to act rationally, including an intelligent software agent or embodied robot that achieves goals using perception, planning, reasoning, learning, communicating, decision making, and acting.
Recent legislative activity in this technology area of seems to suggest increasing public interest in artificial intelligence and its potential for positive and negative effects on society. Time will tell whether H.R. 5356 -- and its national security focus -- will enjoy increased traction as the bill is considered, as compared to similar AI legislation proposed under the Secretaries of Commerce (H.R. 4625 and S. 2217) and Labor (H.R. 4829).
In reversing an appellate court decision that had caused concerns throughout the patent world, the Texas Supreme Court recognized that communications between patent agents and clients could be covered by the attorney-client privilege. In Patent Office proceedings and patent litigation, patent agent-client communications could already be protected; in non-patent litigation, however, it is far less clear -- and the prior Texas appellate court decision suggested such communications could be revealed in discovery. By reversing the appellate court decision, the Texas Supreme Court should have patent agents feeling more confident that their representation of clients in patent prosecution is no different than that provided by patent attorneys . . . and their clients breathing a sigh of belief.
In this case, Mr. Silver was the named inventor on a patent application related to a stand-alone tablet designed to allow restaurant customers to order food and pay without having to interact with a waiter or waitress. He hired a patent agent to prosecute the application before the U.S. Patent and Trademark Office, which the agent did successfully. Mr. Silver sold the patent to Tabletop Media, LLC, who then licensed it to restaurant chains. Tabletop allegedly failed to pay him, and Mr. Silver sued Tabletop for breach of contract. In the breach of contract case, brought by Mr. Silver in Texas state court, Tabletop sought production of communications between Mr. Silver and his patent agent.
The trial court compelled production of the communications, and the Texas Court of Appeals refused to overturn the trial court's decision in responding to Silver's petition for writ of mandamus. It did so because it understood Mr. Silver as requesting the court to establish a patent agent-client privilege separate from the attorney-client privilege, which it indicated that it was not empowered to do. One of the appellate court judges dissented from the panel opinion, understanding Mr. Silver's request not as the creation of a new privilege, but as an application of the existing attorney-client privilege to the patent agent-client relationship. Ultimately, the Texas Supreme Court unanimously agreed with the dissent.
In Texas, claims of attorney-client privilege are governed by Texas Rule of Evidence 503. Under that rule, "[a] client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made to facilitate the rendition of professional legal services to the client [between, among others] between the client or the client's representative and the client's lawyer." In that context, a "lawyer" is defined as "a person authorized, or who the client reasonably believes is authorized, to practice law in any state or nation." Thus, the key question was whether a patent agent was a person "authorized to practice law" in a state or nation.
While not controlled by Federal decisions, the Texas Supreme Court's answer to that question was informed by them. Over five decades ago, in Sperry v. State of Florida ex rel. Florida Bar, the Supreme Court had held that a patent agent's prosecution of applications before the U.S. Patent and Trademark Office did not constitute the unauthorized practice of law. Then, in In re Queen's University at Kingston, which was decided just months before the Texas appellate court's decision, the Federal Circuit had determined as a matter of Federal common law that the attorney-client privilege included "a patent-agent privilege extending to [a client's] communications with non-attorney patent agents when those agents are acting within the agent's authorized practice of law before the Patent Office." In both cases, the Federal courts had reached the conclusion based on the belief that a patent agent's role in patent prosecution was not just law-like activity, it was the practice of law itself.
The Texas court also looked to Texas statutes and dictionary definitions for its decision, since Rule 503 does not itself define what "the practice of law" entails. The Texas State Bar Act includes a definition of the practice of law in the context of unauthorized practice of law, but it is not necessarily coextensive with Rule 503. Similarly, both Webster's and Black's provide dictionary definitions. The definition in Black's Law Dictionary includes "preparing papers to bring about various transactions," which is exactly what patent prosecution involves. Both the Texas statutes and dictionaries also require that a lawyer's services be provided directly to a client, but that unquestionably occurs with patent agents within the scope of patent prosecution.
For the privilege to apply, Rule 503 also requires a lawyer to be authorized to practice by a state or nation. The defendant argued that meant that a person had to be licensed as a lawyer by a state or nation, regardless of authorization by the U.S. Patent and Trademark Office. Again, the Texas court considered the Sperry and Queen's University cases as persuasive authority. But more importantly, it focused on the distinction between being "authorized" to practice law and being "licensed" to practice law. It found the latter to be a subset of the former, not coextensive therewith. Under U.S. Patent and Trademark Office regulations, a patent agent is authorized to practice before it even if he or she is not licensed to do so. Accordingly, the Texas Supreme Court found that a patent agent is a "lawyer" for purposes of the application of the attorney-client privilege in relation to communications regarding patent prosecution.
While it might otherwise seem that the Texas Supreme Court's decision in In re Silver is merely one more case supporting the existence of a patent agent-client privilege, it bears greater importance because it reversed a decision to the contrary. The Texas Appellate Court's decision had raised great concerns that states, in breach of contract or other state law claim litigation, would not extend privilege to such communications. The appellate court's decision had a chilling effect on clients' choice of practitioners: to ensure the application of attorney-client privilege, they were opting for patent attorneys or patent agents supervised by attorneys. Now, with that decision reversed, there is less reason for fear of revelation of communications and greater freedom to discuss patent applications directly with patent agents. Thus, today, all precedent points to patent agent-client communications being privileged.
 In re Silver, Case No. 16-0682 (Tex. Feb. 23, 2018).
 If you've used a Ziosk tablet or Abuelo's, Chili's, or Red Robin, you may be part of Mr. Silver's damages claim.
 In re Silver, 500 S.W. 3d 644, 647 (Tex. App. 2016).
 Id. at 650 (Evans, J., dissenting).
 For a more complete discussion of the Texas Appellate Court's decision, and other recent patent agent privilege decisions and regulations, see "Patent Office Ethics Developments: Patent Agent Privilege and Duty of Disclosure," Snippets (Winter 2017).
 820 F.3d 1287, 1302 (Fed. Cir. 2016). For an excellent recap of the Queen's University case, see "In re Queen's University at Kingston (Fed. Cir. 2016)".
 See Tex. Gov't Code § 81.101.
 The Court showed its respect for patent prosecutors by not only acknowledging that patent applications are legal documents, but actually constitute "one of the most difficult legal instruments to draw with accuracy."
 In the interim between the Texas Appellate Court's decision and the Texas Supreme Court's decision, the Patent and Trademark Office adopted patent agent privilege as a rule for Patent Trial and Appeal Board proceedings. See "USPTO Issues Final Rule Establishing Patent Agent Privilege".
The authors and contributors of Patent Docs wish their readers and families a Happy Thanksgiving. Publication of Patent Docs will resume on November 25th.
Views on Venue -- Take Two: Did the District of Delaware Get It Right?
We recently reported that Chief Judge Stark of the District of Delaware interpreted the second prong of the patent venue statute, 28 U.S.C. § 1400(b), in Bristol-Myers Squibb Company v. Mylan because the first prong was no longer applicable in view of the Supreme Court's TC Heartland LLC v. Kraft Foods Group Brands LLC case. Specifically, Judge Stark anticipated how the Federal Circuit would now address venue in the ANDA context. With impeccable timing, the Federal Circuit provided an answer to at least one of the questions considered by the Delaware Court: what is a regular and established place of business? In this post, we look to see if the conclusions and guidance found in the Bristol-Myers Squibb case were correct (or at least on the right track).
28 U.S.C. § 1400(b). Because Mylan is not incorporated in Delaware, it appropriately alleged that BMS could not establish venue pursuant to the first prong after the Supreme Court's TC Heartland decision. However, Judge Stark concluded that Mylan was unable to meet its burden in establishing that it "does not have a regular and established place of business in Delaware." He also determined that the "acts of infringement" in the Hatch-Waxman context would be all of the acts that would constitute ordinary patent infringement related to a filed ANDA if, upon FDA approval, the generic drug product is launched into the market. Correspondingly, he denied the motion to dismiss for improper venue without prejudice and allowed BMS to take jurisdictional discovery in advance of a renewed motion by Mylan.
Last week, in In re Cray Inc., the Federal Circuit granted a petition for a writ of mandamus and directed transfer of a case from the Eastern District of Texas to the Western District of Wisconsin. As we explained in our previous post, the Federal Circuit concluded that the Texas District Court had abused its discretion by applying an incorrect legal standard. But did the Delaware Court correctly interpret what a "regular and established place of business" means?
In analyzing the statute, both the Federal Circuit and the Delaware Court looked to In re Cordis, 769 F.2d 733 (Fed. Cir. 1985). The Cordis decision held that "in determining whether a corporate defendant has a regular and established place of business in a district, the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not . . . whether it has a fixed physical presence in the sense of a formal office or store." Judge Stark had noted that Cordis was a mandamus case, and therefore the standard used by the Federal Circuit was more deferential to the lower court. The Federal Circuit similarly cautioned overreliance on Cordis because "the court did not, in its opinion, evaluate venue in light of the statutory language of § 1400(b). The court simply determined that, under the facts presented, a writ was not justified." Of course, because the Court granted Cray's writ of mandamus even in view of the heightened requirement for deference, the conclusions reached in that case are likely to apply in most other situations.
First, the Federal Circuit concluded that § 1400(b) is unique to patent law, and therefore it was required to apply its own law and not that of the regional circuit from which the case arose. This is consistent with the conclusion in the BMS case. Even though Judge Stark looked to Third Circuit law to see which party bears the burden of proof in a motion to dismiss for improper venue, he acknowledged that substantive questions relating to § 1400(b) are controlled by the Federal Circuit.
Next, Judge Stark had concluded that there are three elements that must be met: there be a (i) place of business that is (ii) regular and (iii) established. The Federal Circuit similarly parsed the second prong of the patent venue statute into three elements, but they were not identical: "(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant." In essence, the Federal Circuit combined the second two elements articulated by the Delaware Court, and separated the "place of business" element into one that is "physical" and one that is "of the defendant." Of course, the question in Cray was whether two employees working in Texas was sufficient to establish venue for their employer in that district. Nevertheless, even though there was a difference in the parsing of the statute, the Delaware Court still likely addressed all the required elements as identified by the Federal Circuit.
The Federal Circuit then explained that "the first requirement is that there 'must be a physical place in the district.'" Importantly, the Court noted that the statute "cannot be read to refer merely to a virtual space or to electronic communications from one person to another." This is consistent with Cordis. Indeed, Judge Stark had similarly concluded that there needs to be "some sort of meaningful physical manifestation in the district," an inquiry which is a factually driven.
Next, the Federal Circuit pointed out that the "place" must be "regular." As such, "sporadic activity cannot create venue." This conclusion, according to the Court, is bolstered by the "established" limitation. Based on the definition of this term, the place must be of sufficient permanence. Therefore, "while a business can certainly move its location, it must for a meaningful time period be stable, established."
The Delaware Court came to a similar conclusion. It first noted what has not sufficed in other cases to establish venue: (1) simply doing business or being registered to do business in a district, (2) having sufficient "minimum contacts" with the district for the purposes of personal jurisdiction, (3) maintaining a website accessible within the district, and (4) shipping goods into a district, whether to an individual or for distribution by third parties. Accordingly, it concluded that it "must determine whether a defendant has a regular and established place of business by conducting a fact-intensive inquiry focused on whether the defendant does its business in this District through a permanent and continuous presence here." This legal framework is not too dissimilar from that articulated in Cray.
Finally, the Federal Circuit pointed out that the place of business must be "the place of the defendant." Correspondingly, "the defendant must establish or ratify the place of business," while an employee "on his or her own" will not suffice. The Delaware Court did not delve into such an analysis, perhaps because the actions of individual employees were not at issue in that case. It did consider as relevant the fact that "the Mylan family includes at least 55 U.S. subsidiaries, more than 40 of which are incorporated in Delaware." Nevertheless, the Delaware Court was likely more concerned about the relationship of the entities, and not whether the entities themselves could establish venue for the parent. For example, the Court indicated that discovery could "include understanding the relationship among the 40 Delaware Mylan entities and" the Mylan entities involved in the present suit.
As a result, it does not appear that the Delaware Court's BMS case is inconsistent with the Federal Circuit's Cray case. If anything, the two Court's appeared to similarly analyze the patent-specific venue statute, even if they did not arrive at exactly the same conclusions. However, because the Plaintiff in the Cray case could only "show that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer," the issues addressed to establish venue in the two cases were or will be different. Nevertheless, it would behoove both parties in the BMS case (and any other party to patent litigation going forward) to pay close attention to the Federal Circuit's analysis in Cray when participating in venue-related discovery or in conjunction with any renewed motion to dismiss for improper venue.
The application of this principle in patent cases has been controversial, both in litigation (see "The Wall Street Journal's Problem with the U.S. Constitution") and as a shield against inter partes review, by states and in particular state universities claiming the immunity as "arms of the state" (see Covidien LP v. University of Florida Research Foundation Inc. and Neochord, Inc. v. University of Maryland). Nonetheless, immunity is well established as to the several States. Last week, Allergan creatively availed itself of this immunity by assigning patents challenged in IPR proceedings to the St. Regis Mohawk Nation (SRMN), which also has the capacity to invoke the protection of sovereign immunity against suit.
Allergan is not alone in entering into such arrangements; in August SRC (Cray) Labs LLC transferred patent rights to the tribe, and "dozens and dozens of tribes" are pursuing such arrangements, according to David Pridham, chief executive of Dominion Harbor Group as quoted by Reuters (see "Tech entity has tribal patent deal similar to Allergan's").
The concept of sovereign immunity stems from British common law, banning lawsuits against the king. Although not explicitly stated in the Amendment, the Supreme Court has interpreted 11th Amendment immunity to extend to actions of a citizen against the state in which she resides. Hans v. Louisiana, 134 U.S. 1 (1890). The rationale behind the immunity conferred by the Amendment is that the "States entered the federal system with their sovereignty intact," Blatchford v. Native Village of Noatak, 501 U.S. 775 (1991), and that "the sovereign immunity of the States neither derives from nor is limited by the terms of the Eleventh Amendment. Rather, . . . the States' immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today," Alden v. Maine, 527 U.S. 706 (1999). However, the immunity is not absolute. It can be waived, and many states (as well as the federal government) have waived sovereign immunity in suits for tort and contract. Certain U.S. Constitutional provisions trump the immunity, such as the Bankruptcy Clause and the 14th Amendment. However, patent law does not fall within any federal law exemption, and the Supreme Court has decided expressly that States enjoy sovereign immunity against suits for patent infringement. Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999).
The various tribes of Native Americans have also been held to enjoy sovereign immunity, albeit with certain limitations that do not apply to the States. The immunity stems from common law rather than by statute or Act of Congress, Turner v. United States, 28 U.S. 354 (1919), and has been applied both to state action and private suit. United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 (1940); Puyallup Tribe, Inc. v. Department of Game of State of Washington, 433 U.S. 165 (1977); and Kiowa Tribe of Oklahoma v. Mfg. Technologies, Inc., 523 U.S. 751, 755 (1998).
Congress has the power to abrogate tribal sovereign immunity, under the Supreme Court's decision in United States v. Lara, 541 U.S. 193, 200 (2004), that "the Constitution grants Congress broad general powers to legislate in respect to Indian tribes, powers that we have consistently described as 'plenary and exclusive.'" However, Congress can do so only if the intent is "clear and unambiguous" or "unequivocally expressed." Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978); see also Michigan v. Bay Mills Indian Cmty., 134 S.Ct. 2024 (2014).
For some this development, while on its face consistent with the law, rankles. In earlier sovereign immunity cases the inventors (usually university personnel) were obligated (inter alia, under the Bayh-Dole Act) to assign their inventions to the university and state universities were readily recognized as arms of the state for whom the immunity applied. Here, Allergan is unabashedly obtaining the benefit of tribal sovereign immunity in a commercial transaction. While such a transfer is well within Allergan's rights to alienate these patents as a private property right, avoidance of IPR as not only a consequence but the express intent of the transfer distinguishes this use of sovereign immunity from other instances. (And of course it remains to be seen whether patents are exclusively a private property right or more in the nature of a government grant, see Oil States Energy Services, LLC v. Greene's Energy Group, LLC).
Recent history suggests that, at a minimum, Congress will want to hear from the parties on this arrangement. But in light of earlier controversies like Mylan's Epi-Pen cost increase and the Martin Shkreli affair at a Turing Pharmaceuticals, as well as more general concerns about patent quality and validity and increasing drug costs, it is likely that there will be some effort in Congress to prevent maneuvers such as this one. The courts have made it clear that any limitation on SRMN's sovereign immunity is solely within the "plenary power" of Congress. But passage of such a measure must remain in doubt in the current political climate, given the inability of Congress to pass legislation its members seem to be much more committed to than such an esoteric question as sovereign immunity, no matter how relevant the issue may be to their constituents' access to affordable drugs.
Allergan issued a press release on the transfer.

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