Source: https://www.ipwatchdog.com/2018/02/26/ptab-denies-st-regis-sovereign-immunity/id=94148/
Timestamp: 2019-04-23 23:52:46+00:00

Document:
Late Friday afternoon the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO) issued a decision denying the Motion to Dismiss filed by the Saint Regis Mohawk Tribe.
The Saint Regis Mohawk Tribe had filed a Motion to Dismiss in six separate inter partes review (IPR) proceedings relating to the Allergan drug RESTASIS®. The RESTASIS® patents were all assigned by Allergan to the Tribe, with the Tribe granting back to Allergan an exclusive license. The purpose of this transaction was so that the Tribe could assert sovereign immunity and defeat the jurisdiction of the PTAB, which has been a much criticized tribunal that heavily favors challengers and significantly disadvantages patent owners (see here, here, here and here, for example).
Upon consideration of the record… we determine the Tribe has not established that the doctrine of tribal sovereign immunity should be applied to these proceedings. Furthermore, we determine that these proceedings can continue even without the Tribe’s participation in view of Allergan’s retained ownership interests in the challenged patents. The Tribe’s Motion is therefore denied.
While this decision is hardly shocking given the PTAB recently denied Eleventh Amendment sovereign immunity to the State of Minnesota, it is still an extraordinary example that clearly demonstrates just how far removed from mainstream judicial thinking the PTAB has strayed. Sovereign immunity is sacrosanct in our judicial system, but the PTAB casts it away for both States and Indian Tribes as if is merely an inconvenience for them — almost as if it is nothing more than a speed bump along the way to eventually invalidating the patents in question.
If this panel really believes this, if the entire PTAB really believes this, god help patent owners!
How utterly naive and tone deaf can this tribunal be? They exercise jurisdiction over the patent and not the patent owner? That is simply wrong on the facts and wrong on the law.
Hanson v. Denckla, 357 U.S. 235, 246 n. 12 (1958).
The PTAB does not have power to impose an obligation, and by their own admission they are not acting in personam. The PTAB also cannot act in rem because, as we know, a decision does not settle rights as to all persons in the designated property, but rather only at best extinguishes invalidity arguments available to the challenger and their privies. Because a decision of the PTAB only implicates the rights of certain persons, and because the patent and all patent claims remains open to challenge by others in the future, that means the PTAB really believes they are asserting quasi in rem jurisdiction.
In Shaffer v. Heitner, 433 U.S. 186 (1977) the Supreme Court extended the notions of fundamental fairness expressed in International Shoe v. Washington326 U.S. 310, (1945) relating to in personam jurisdiction to the exercise of in rem jurisdiction.
If jurisdiction is based on the court’s power over property within its territory, the action is called “in rem” or “quasi in rem.” The effect of a judgment in such a case is limited to the property that supports jurisdiction and does not impose a personal liability on the property owner, since he is not before the court. In Pennoyer‘s terms, the owner is affected only “indirectly” by an in rem judgment adverse to his interest in the property subject to the court’s disposition.
Shaffer, 433 U.S. at 199 (footnote omitted).
The Supreme Court in Shaffer went further to recognize the obvious: “[A]n adverse judgment in rem directly affects the property owner by divesting him of his rights in the property before the court.” Shaffer, 433 U.S. at 206.
The PTAB defends its assertion that IPRs are an exercise of jurisdiction over property and not a person by pointing out that “a patent owner’s participation is not required, and inter partes reviews have proceeded to a final written decision under 35 U.S.C. § 318(a) even where the patent owner has chosen not to participate.” Decision at pg. 17. “The Board’s authority to proceed without the parties’ participation underscores its independent role in ensuring the correctness of granting patentable claims.” Decision at pg. 18.
Of course, this shows a frightening misunderstanding of basic, fundamental procedural rules. Even if a tribunal is exercising in personam jurisdiction the tribunal cannot mandate or order participation under pains and penalty of fine or imprisonment, at least not in America. It is always up to the parties in a proceeding to decide whether they participate. When a party does not participate with respect to an in personam proceeding the party ought to expect the issuance of a default judgment, but the tribunal’s authority to proceed without the participation of a party who has been properly notified of the action is completely irrelevant. This justification is wholly without meaning.
And therein lies the problem the PTAB faces. The Administrative Patent Judges routinely demonstrate an acute lack of understanding relative to very basic legal matters.
In this case all three of the APJs on the panel became Administrative Patent Judges less than 10 years after they graduated from law school. One of the APJs on the panel became an Administrative Patent Judge within 5 years after graduating from law school. These APJs are conducting trials and deciding motions and cases where the loss of property rights will at times cost the patent owner millions of dollars; in some cases losing a patent can cost billions of dollars. Yet, it is all too common for APJs to have been given this extraordinary power when they were either Associates or at best Junior Partners in large firms.
The post grant challenge system operates on the basis that the procedures are an alternative to district court litigation, but the proceedings are conducted by those who are sometimes novice attorneys who still wouldn’t have the qualifications to warrant appointment as an Article III federal judge. It is no wonder they make so many mistakes, don’t understand the importance of what they write or how it either doesn’t support what they are saying or is simply flat wrong. It is also understandable how significant matters of ethical misconduct arose last year.
Many APJs are not experienced enough to have the wide breadth of knowledge and experience that supports their awesome powers. And that is perhaps more than anything the reason to explain how this tribunal has strayed so far from its original purpose. Originally this tribunal was estimated to accept 500 cases a year, but so successful have infringers become the tribunal accepts 1700 to 1800 cases a year. What was supposed to be a relatively extraordinary remedy to fix egregiously bad patents has become a routine part of virtually every patent dispute.
Whether you believe the Saint Regis Mohawk tribe deserves to dismiss these IPR proceedings by asserting sovereign immunity isn’t really the issue. Even if this winds up being the correct legal determination (which I seriously doubt), patent owners deserve better.
 IPR2016-01127 (8,685,930 B2); IPR2016-01128 (8,629,111 B2); IPR2016-01129 (8,642,556 B2); IPR2016-01130 (8,633,162 B2); IPR2016-01131 (8,648,048 B2); and IPR2016-01132 (9,248,191 B2).
 U.S. Patent Nos. 8,685,930, 8,629,111, 8,642,556, 8,633,162, 8,648,048, and 9,248,191.
Seriously….what do you EXPECT the PTAB to say as justification to ignore sovereign immunity of the Tribe? They are throwing spaghetti on a wall and hoping to get the ‘right’ (or more correctly, a ‘socialist’) panel at the CAFC to support them and for the SCOTUS to be to disinterested to pick a fight.
Dazzle them with BS when neither the facts or law support your position….
I posted this comment earlier, but it is more relevant on this thread.
To sum up my discussion below, in their quest to murder the US patent system and do possibly unrecoverable damage to the US political, economic, and social system, the APJ clowns of the PTAB simply don’t care about the law as Gene has so ably pointed out in the article that starts this thread.
A long time ago I consulted for the State Department with respect to the international telecommunications legal regime, which was defined by the CCITT-ITU back then. The CCITT-ITU seems to have been renamed ITU-T. The telecommunications and telegraphy standards constitute treaties between sovereigns even though only AT&T had real interest in the case of the USA before the breakup. Thus the US State Department consulted with AT&T to obtain advice on a given issue. In the event of a genuine dispute between sovereigns, the parties would agree to adjudication by the ICJ or in rare cases by ITLOS. I think now a trade related telecommunications case might go before the Appellate Body of the WTO, but WTO adjudication of this sort post-dates my time, and I would have to review the rules and regulations with respect to international telecommunications. Before the breakup, the USA would be a party in such a proceeding, which would be directed by the State Department. AT&T would provide consultation.
As I understand, a sovereign is immune to civil and criminal proceedings unless the sovereign agrees (or — in cases of tribal sovereign immunity — until Congress defines tribal sovereign immunity to be defeasible in a specific situation).
All the discussion of real party in interest or essential party seem irrelevant to the Doctrine of Sovereign Immunity. The agreement is not a sham legally, and action by the PTAB might deprive a tribal sovereign of a revenue stream and thus constitutes a civil action to which a tribal sovereign is supposed to be immune unless Congress says the tribal sovereign is not immune.
I understand that the anti-patent mafia is already attempting to tear the heart of the US legal, political, and social fabric. Thus from the standpoint of the USPTO capos and button men, trying to claim a power heretofore reserved only to Congress makes perfect sense, but it is just one more stab to the heart of the USA.
I also must point out that the decision would not apply if Dubai (or the UAE) had made the deal with Allergan. The UAE and Dubai are full independent sovereigns. Dubai has announced it will encourage local tech startups, many of which might seek US patents. It would make perfect sense for Dubai to purchase IP from its startups on the model of the St. Regis sale. If one full sovereign evaded the post-grant review proceedings today, they all will tomorrow.
Then many foreign startups would be immune to the PTAB con scam, and post-grant review proceedings become an open gate through which foreigners storm and seize the US tech markets that depend on IP.
This logic makes it clear that the anti-patent mafia constitutes an anti-American seditious conspiracy, which is killing American hi-tech in a despicable un-American effort to eliminate new disruptive local competitors.
If Trump can fling the accusation of “treason” at Democrats, who don’t applaud him, patent system advocates have much more reason to fling the accusation of treason at the anti-patent mafia.
The Administrative Patent Judges routinely demonstrate an acute lack of understanding relative to very basic legal matters.
Because they are NOT judges. Many of them are examiners who went to law school, and didn’t have the legal chops to make it private practice. Others are refugees looking to escape the rigors of private practice with a cushy government job. This isn’t to say that there are some quality people at the PTAB, but by and large, the legal acumen of the attorneys working at the PTAB leave a lot to be desired.
Gene, I respectfully submit that you are assuming your conclusion. Your criticism of APJs is premised on your presumption that your legal analysis is correct. Sovereign immunity being sacrosanct is irrelevant if the action is in rem, which is a threshold question.
“The PTAB also cannot act in rem because, as we know, a decision does not settle rights as to all persons in the designated property, but rather only at best extinguishes invalidity arguments available to the challenger and their privies.” This doesn’t make sense because the Petitioner does not assert rights in the designated property. The fact that estoppel may apply to the Petitioner depending on whether the Petitioner has been sued for patent infringement is irrelevant. As far as the patent is concerned, any claims held to be invalid are invalid in the hands of the Patent Owner and any future assignee.
The administrative branch in MCM, Oil States, UMinn, and St. Regis has tried its best to redeem the legislatively created infirmities of the PTAB. The crux of these recent positions is that the PTAB is merely rendering advisory opinions. Under the public rights / error correction / in rem (ex parte) theory, any resulting opinion cannot be considered binding in an infringement action between private parties. It is time to revisit Fresenius v. Baxter in light of recent developments.
If I recall, the whole “in rem” gambit was tired and failed (in relation to a State sovereign immunity item) – in the post AIA era.
Are you suggesting that somehow circumstances have changed and that “in rem” has somehow been revived and is now viable?
First, I’d just say that even when a tribunal acts in rem sovereign immunity can exist, although it is at its lowest ebb when the proceeding is in rem. (I forget which case I read that in yesterday). I still stand behind what I said about sovereign immunity being sacrosanct, but I’m certainly willing to recognize the obvious — which is it doesn’t always apply to the facts.
Second, you say the Petitioner doesn’t assert rights in the designated property. I understand your point, but the reality is the Petitioner is asserting some kind of interest in the patent claims challenged. In almost all of the IPRs they are brought by those who are engaged in litigation defending their trespass. So they are asserting they have a right to do what they are doing free and clear from the property rights of the patent owner.
Third, you are right that any patent claims held invalid are invalid in the hands of the patent owner and future assignee(s). Having said that, I disagree with your analysis. The Supreme Court explained in rem jurisdiction in this way: “A judgment in rem affects the interests of all persons in designated property.” I wish to emphasis the word “interests.” Clearly, a decision by the PTAB does not affect the rights of the interests of all persons (or entities). The only persons or entities that are bound are the parties (and privies). There remain numerous other parties that have not had their interests adjudicated, which means the property itself does not settle or become quieted. This is a major flaw (in my opinion) of the post grant process, but it is also a feature that prevents the PTAB from actually acting in rem.
Given that only the interests of the parties and their privies are adjudicated it seems by definition that the PTAB must be acting either quasi in rem, or in personam.
This really needs further exploration and is a VERY important part of this case. As I started, sovereign immunity is at its lowest ebb when the proceeding is in rem. There are important issues that need to be addressed here to determine whether the PTAB is actually acting quasi in rem or in personam. If it is in personam then sovereign immunity is indeed sacrosanct with an exclamation point. That is why the PTAB needs this to be an in rem proceeding, but it just can’t be in rem because the title to the patent never quiets.
Gene, this is the best post (inclusive of your comment/reply above) on this topic. The Allergan patent does not illicit much sympathy, but this sovereign immunity issue has exposed the duplicity of the USPTO. They want the power of adjudicating property rights AND the legitimacy of merely correcting errors. These are mutually exclusive in the USA.
Thanks Josh. As I wrote my response above I was thinking this needs to be a stand-alone article. Will work on that in the coming days.
(b) not to be private property, which the government may take from an unwilling owner only after trial by jury.
b) in homestead law, wherein government property is patented into private property.
It will be interesting to see what the Fed. Cir. does on appeal. It would appear that they might even be able to dodge the whole sovereign immunity issue in this case by relying on the PTAB fact-finding that the alleged “assignment” and exclusive license back with control left Allegan as still the true de facto patent owner and “real party in interest” as it was when these IPRs started?
The below views are mine, and mine alone.
The panel first notes that Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743, 754-56 (2002) only “held that State sovereign immunity extends to adjudicatory proceedings before federal agencies that are of a ‘type . . . form which the Framers would have thought the States possessed immunity when they agreed to enter the Union.” Order at 7.
MWS Note: This is of course because South Carolina was a State, not a tribe. It is not surprising that the FMC analysis was focused on States’ sovereignty. That does not mean a Tribe’s sovereignty would be treated differently when in fact Tribal sovereignty is broader than that of the States in many respects.
The panel then noted that the Tribe and its supporting amici “have not pointed out any authority suggesting that FMC’s holding with respect to state sovereignty can or should be extended to an assertion of tribal sovereignty in similar federal administrative proceedings.” Order at 8.
MWS: The panel ignored the only cases cited for the point, including the clearly stated precedent in In re Kanj v. Viejas Band of Kumeyaay Indians where the Department of Labor Administrative Review Board stated, “nothing in existing sovereign immunity jurisprudence indicates that tribes cannot invoke sovereign immunity in administrative adjudications such as this”, a point that stood unrebutted by the Requesters in their briefing.
MWS: Sovereign immunity is not a defense. Those decisions have no application. The Panel does not seem to understand that sovereign immunity is a bar to jurisdiction, not a defense, and once a prima facie showing of sovereignty is made, the inquiry is over unless the other party can show waiver or an express abrogation by Congress, neither of which was established or even attempted.
The decision is grounded upon IPRs, and the American Invents Act, being generally applicable federal statutes. The panel, then states that none of the three exceptions apply, citing Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113, 1116 (9th Cir. 1985). The Tribe never argued that the AIA was not a statute of general applicability. That is a red herring.
This represents a fundamental misunderstanding by the Panel of the difference between laws of general applicability applying to tribes and means of private litigants to file suit against tribes to enforce them for the private entity’s benefit. There is no doubt IPRs are brought by private parties for their benefit — to avoid infringement findings and damages — and that the private parties control the proceedings.
The next position the Panel takes is to claim that “we are not adjudicating any claims in which Petitioners may seek relief from the Tribe, and we can neither restrain the Tribe from acting nor compel it to act in any manner based on our final decisions.” Order at 16.
This is ridiculous, absurd. The relief sought is the invalidation of a duly issued property right held by the Tribe that is indisputably worth $120 million if the patents remain valid. A decision by the Panel that invalidates the patents shields the Requesters from suit, damages, injunctive relief and any other form of relief from the enforcement of the Tribe’s patent rights.
This decision marks a low point in the PTAB’s relentless pursuit of power over the U.S. Patent System, and demonstrates they are willing to ignore any precedents, even Supreme Court precedents, that get in their way. This was a badly written, poorly researched, cribbed piece of turf protection. I have no idea who wrote it, but I am willing to be it was not the Panel hearing the case.
What I find truly amazing about this whole case is that even the US Supreme Court has stated that absent Congressional action, the Court itself has no authority to limit or qualify the scope or Native American sovereign immunity.
Of course, that didn’t stop the PTAB in this case from claiming to have the right and power to limit tribal sovereign immunity even if the the US Supreme Court does not have such authority.
A shining example of the administrative state running amok.
The PTAB took this position because they have hired 200+ APJs and are building a fiefdom that controls who can enforce a patent and what kind of patents will be enforced. This is a power worth billions of dollars and it is has been transferred from impartial, Senate-confirmed Article III judges appointed for life to political appointees whose boss runs for office every 4 years and needs about $1 billion per election cycle to be competitive. Infringers did not like a strong patent system, at least not strong patents asserted against them, so they set out to destroy any ability of a patent monopoly to defeat their economic monopoly. Congress aided and abetted it by passing legislation the infringer lobby wanted.
The PTAB is doing exactly what it was bought to do, kill the US patent system. The Courts will either step in and stop it or abdicate the field completely and let Congress kill off the primary engine of US innovation.
I hope there are enough judges left who understand and care about the issue. I am doubtful, seeing as how Google, Microsoft, Apple, Amazon, Oracle and other tech behemoths told Obama for 8 years which patent killers to put on the Federal Circuit. There is no reason to think they cannot or will not buy Trump as well.
At some point, we can just change the name of the country to The United Corporations of America because the people are quickly becoming nothing more than consumers and data points.
The Court (and Congress) should be paying attention.
I would be remiss if I did not point out that Mr. Heller’s anti-inalienable rights view practically guarantees the very outcome (among a spectrum of “the winner is the one with the Might” – as I elucidated recently on another thread).
With his cart of “Might” dictating the horse of “Right,” Rights become subservient to (and eminently liable to) capture by those who would wield Might.
“Corporatism” received an extremely outsized helping with the decision in Citizens United, and the entity known as a juristic person was amplified in their ability to buy the ears of Congress.
By “completely dodge,” I take it that first the CAFC would have to nullify the PTAB position on that matter – is that what you are implying?
With that lid opn on Pandora’s box, not addressing it – not closing the lid – does nothing in the grand scheme of things (if the CAFC only comments on the “sham” factor, for example).
The “sham” angle is itself a sham argument. Sovereigns get to decide what transactions they enter into and for what reasons. If a sovereign wants to hold patents to profit from helping patent holders avoid an unfair system, that is a decision of the sovereign and no tribunal has the right or power to tell a sovereign what contracts it can enter into and whether those contracts are to be respected.
There is no legal basis that allows a court to hold a sovereign’s decision on how to use its sovereignty for LEGAL purposes is a sham. Holding patents is not illegal. It is not like violating usury laws in payday lending. So unless a court wants to get into the business of micromanaging a sovereign’s right to contract where the contracts are not on their face illegal, the sham transaction argument is utter nonsense that only an extremely activist/radical/result oriented/bought and paid for court would engage in.
In principle I agree with you Mr. Shore.
That’s why the diligent start but ending in a fizzle of NOT expressly finding the arrangement to be a sham is so disappointing. Had they done so (if they were able to so complete the analysis) and shown that the deal was legally a sham, then THAT would have been a proper legal basis.
As it is, they did not complete that analysis and compounded that with taking a legally incorrect view on sovereignty.
My point to Mr. Morgan was that any reviewing court will not be able to let the sovereign answer stand as is, even if the decision is set to hinge on the (full and complete) sham analysis. The PTAB rung a bell that cannot be unrung, and the reviewing court will need to do something about it.
Gene, as always, good job.
He, like you and I, believes that the PTAB, via IPR, are fundamentally changing the U.S. patent system in ways that deny patent owner essential due process in addition to denying them access to an independent judiciary with a right to a trial by jury that Congress has no power override or to impose as a condition of grant.
Professor Epstein could have stated the problem of using BRI more forcefully.
Using BRI (Broadest Reasonable Interpretation) in post-grant review proceedings inherently contradicts 35 U.S. Code § 316 (e) and 35 U.S. Code § 326 (e).
BRI is intended to force the patent applicant to demonstrate by clear and convincing evidence that the metes and bounds of the claim only encompasses invention embodiments clearly described, enabled, and possessed.
By using BRI the PTAB inherently transforms the petitioner’s burden of demonstrating unpatentability by preponderance of the evidence into the patent owner’s burden of demonstrating patentability by clear and convincing evidence.
In the case of the Telebrands v Tinnus PGR, the PTAB made the patent owner’s burden of demonstrating patentability to be unbearable because the PTAB used linguistic chicanery and pettifogging to conclude that an inherent feature of the English language was indefinite.
I would add that the reply to the often used rebuttal of “but it hardly makes a difference whether BRI is used or not” – the reply of “if it hardly makes a difference, then do not use BRI and you should be happy” – NEVER sees the dialogue continue past that point.
Your provision of a(nother***) sound reason NOT to use BRI simply indicates that such use should be stopped.
*** a separate argument sounds in the difference between an affirmative right to amend and what the AIA actually provides: the right to ASK for an amendment. BRI in its original context is ONLY supported because the applicant has that affirmative right to amend. Such is not only NOT present in a post grant situation, such even if it were to be present would be associated with a lost-profits scenario.
Another aspect here that remains (especially to the likes of Mr. Heller) somewhat ungrasped is that both the status and level of the presumption of validity are affected and intertwined with the use of BRI.
Using the (typically well known and well understood) property law adage of “a bundle of sticks,” sticks in the bundle of rights of a granted patent include the presumption of validity, Other sticks then reflect that BRI is not permissible.
At the point in the AIA post grant process of institution, several sticks from the bundle of property rights suffer a legislative taking.
As can be seen in the results of the later legal proceedings, this taking at the institution point engenders a real loss in property value.
Now mind you, the government CAN ENGAGE in takings (think eminent domain). But such takings are carefully proscribed.
Congress, in the AIA did NOT carry over those careful proscriptions.
This then is a(nother) indicator of the Constitutional infirmity of the AIA.

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