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

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,

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

In an unusual move to combat the perceived bias in favor of patent challengers at the U.S. Patent Office’s Patent Trial and Appeal Board (PTAB), the Irish drug company Allergan has decided to warehouse its key patents on the dry-eye drug Restasis with the Saint Regis Mohawk Tribe in upstate New York.  Allergan generates over

In Covidien LP v. University of Florida Research Foundation Inc., the Patent Trial and Appeal Board (the “Board”) upheld a defense of sovereign immunity asserted by the University of Florida Research Foundation (the “Foundation”) and dismissed three Petitions for Inter Partes Review (“IPR”) filed by Covidien LP (“Covidien”) against a patent owned by the Foundation. (See IPR2016-01274, IPR2016-01275, IPR2016-01276) The Board relied on the Supreme Court’s decision in Fed. Mar. Comm’n v. South Carolina State Ports Auth., 535 U.S. 743 (2002) (“FMC”) in its determination that the sovereign immunity defense applies to IPR proceedings, and it concluded that the Foundation was eligible to assert the defense as an “arm of the State” under Manders v. Lee, 338 F.3d 1304, *1309 (11th Cir. 2003) (en banc).

The Eleventh Amendment provides that the “judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another state, or by citizens or subjects for any foreign State.” The Supreme Court has interpreted the Eleventh Amendment as a grant of immunity to the States against certain adjudicative proceedings brought against them by private parties. In FMC, the Supreme Court held that the sovereign immunity defense applied to administrative adjudications before the Federal Maritime Commission, grounding its determination in the similarities between the Commission’s proceedings and civil litigation. The Board relied on the Supreme Court’s analysis in FMC in determining whether the sovereign immunity defense could similarly be implicated in IPR proceedings.

Covidien filed IPRs against the Foundation as a counter-action to a breach of license suit brought by the Foundation against it. The Foundation argued that the IPRs should be dismissed, asserting that it was an arm of the State of Florida, and as such entitled to sovereign immunity under the Eleventh Amendment. The Board’s decision was limited to the Foundation’s sovereign immunity defense. This decision appears to be the first extension of the sovereign immunity defense to an IPR proceeding.

Covidien argued that under FMC the sovereign immunity defense should not apply to IPR proceedings, distinguishing IPRs from civil litigation. Most notably, Covidien argued that IPRs are adjudications directed against the validity of a patent itself, unlike civil litigation which resolves disputes between two parties. Thus, Covidien argued, the subject of the IPRs were the Foundation’s patents, not the Foundation itself, and therefore the IPRs were not proceedings brought against the State. Covidien also warned that implicating the sovereign immunity defense in IPR proceedings would effectively insulate invalid patents from scrutiny just because they were owned by a State, an outcome that would thwart the purpose of creating IPRs. In addition, Covidien noted that if the Foundation’s defense was upheld, a private party could never counter a State’s infringement action by petitioning for IPR proceedings, giving States a stronger position in district court actions.

Relying on FMC, the Board rejected Covidien’s distinctions between IPRs and civil litigation. The Board noted that IPRs are adversarial proceedings between two parties decided by an impartial adjudicator, the Board. The Board also likened the discovery rules and procedures of IPRs with those in civil litigation, and noted that final decisions by the Board created issue estoppel. Additionally, the Board noted that the Federal Circuit had previously held that interference proceedings can be characterized as a lawsuit when determining whether sovereign immunity can be applied in Vas-Cath, Inc. v. Curators of University of Missouri, 473 F.3d 1376 (Fed. Cir. 2007). Thus, the Board held that the similarities between civil litigation and IPR proceedings were sufficient to implicate the sovereign immunity defense in IPR actions under FMC.


Continue Reading State Universities Rejoice: PTAB Recognizes Sovereign Immunity Defense