Richard Lloyd

The debate over the use of sovereign immunity to protect patents from post-issuance reviews at the USPTO’s Patent Trial and Appeal Board (PTAB) has taken another turn. Late last week Apple filed an IPR against a patent held by MEC Resources, an entity owned by the Native American Three Affiliated Tribes, which had previously filed an infringement suit against the iPhone maker in a California district court.

Sovereign immunity as an IPR defence has become one of the patent stories of the year. It was used first (successfully) by several state universities and more recently has been claimed by a number of tribes including the Saint Regis Mohawk, who have taken on patents owned by pharma company Allergan and tech entity SRC Labs.

Allergan has been embroiled in a number of disputes with generics businesses over patents relating to its blockbuster drug Restasis and has been targeted in numerous IPRs filed by generics manufacturer Mylan. The patents assigned to the Saint Regis tribe from SRC have since been asserted in separate lawsuits against Microsoft and Amazon.  

What gives the latest IPR an extra edge is that it has been brought by Apple which naturally commands a lot of attention. In patent terms the company remains one of the most targeted in infringement lawsuits and in the five years since IPR was created, has brought by far the largest number of reviews in a strategy to aggressively fight its corner. In other words, no other company has the same kind of PTAB experience. This puts Apple in a strong position to challenge the sovereign immunity defence (if it remains in place by the time of the institution decision).

It’s interesting to note, therefore, that Apple’s petition makes no mention of sovereign immunity. Instead, it focuses on the claims that it is challenging in the patent in question. That might mean that the tech giant is biding its time while the issue is addressed in the Saint Regis IPRs (the PTAB has allowed parties to file amicus briefs on sovereign immunity as it considers a St Regis Mohawk request to terminate two Restasis-related IPRs), or is simply waiting for the defence to be raised by MEC.

The infringement lawsuit that MEC filed was originally brought in March in Delaware by a Texas-based business called Prowire LLC. In September the case was transferred to the Northern District of California. By this time it had been reassigned to MEC. The patent was originally filed by the Industrial Technology Research Institute (ITRI), the Taiwan-based R&D organisation.    

Since it was announced that the Saint Regis had taken ownership of the Allergan and SRC patents, the story has become a dominant patent narrative and has been catapulted into the mainstream media. Although the PTAB has yet to weigh in on the Saint Regis IPRs, the tactics employed by Allergan were criticised in October by Judge Bryson in the Eastern District of Texas when ruling that the patents were invalid: “Sovereign community should not be treated as a monetisable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibility.”

Although it’s not clear what the financial terms are between Prowire and MEC, such is the concern among some patent owners over the threat of IPRs that the original deal that Saint Regis struck with Allergan could see the tribe receive tens of millions of dollars (assuming the patents remain in force). As Michael Shore, the lawyer behind the deal, told the recent IP Dealmakers conference: “Within 11 days of us contacting them, Allergan were prepared to pay $120 million to avoid IPR of their patents. That’s amazing to me.”  

Should sovereign immunity work as a defence against a review brought by Apple then we could see a big jump in patent transfers to Native American tribes and even more money backing these kinds of deals.