Trick or Treat!…or Troll or Tribe? Questions in Need of Answers

By: Suzanne Lecocke

The latest approach to try to save a patent from an inter partes (IPR) proceeding is to transfer the patent to a Native American tribe.  Patent owners hope to thwart America Invents Act (“AIA”) validity challenges based on the doctrine of sovereign immunity.  This comes at a time when the entire AIA IPR proceedings are in a state of flux.  Depending upon your perspective in a given case, this could be a treat or a trick!

It began with Prowire, Inc. assigning its patent to MEC Resources, wholly owned by the Mandan, Hadatsa, and Arikara Indian Nations, in a suit against Apple alleging the iPad 4 infringed the patent, in an attempt to frustrate an AIA validity challenge.[1]  Similarly, in the past few months, a major pharmaceutical corporation (Allergan) and a leader in computer technology (SRC Labs) transferred high-revenue producing patents to another sovereign American Indian tribe – the same tribe in these two cases (Saint Regis Mohawk Tribe (“SRMT”)).  SRMT then filed a patent infringement suit against Amazon and Microsoft on the “formerly SRC Labs patents,” expecting to prevent Microsoft and Amazon from being able to challenge the patents in an IPR proceeding.[2]  SRMT also filed a motion for dismissal, based on sovereign immunity, of an IPR proceeding filed by Mylan Pharmaceuticals involving “the formerly Allergan patents.”[3]

Large technology companies (like Apple) generally like IPR proceedings because they are often defendants in patent infringement lawsuits initiated by startup companies or non-practicing entities (commonly referred to as “NPEs” or” patent trolls” in district court, and IPR proceedings gives a second and faster venue to invalidate patents owned by such entities.  So far, trolls have been undesirable by many in the patent world.  They are entities (sometimes a group of lawyers) that acquire patents for the sole purpose of licensing those patents to generate revenue without ever creating any commercial products that practice the inventions of their patents.  Smaller tech companies and large pharmaceutical companies generally do not like IPR proceedings because they are often plaintiffs asserting infringement in district court, and thus do not want to fight invalidity in a forum that is easier, faster, and cheaper for defendants (usually a large tech company or a generic manufacturer, respectively) to get invalidity rulings.

Will the sovereignty of American Indian tribes become an available and coveted defense to avoid being sued in a patent context even where the tribe has no real relation to the patent other than as a way of generating income?  Will tribes become patent trolls?  Will major corporations change their view on patent trolls?  There are competing theories upon which the answer may be based.

Under United States law, sovereign nations and states generally cannot be sued unless they consent to the suit or unless that immunity is abrogated by Congress or treaty.  Individual states in the United States are granted immunity by the Eleventh Amendment of the Constitution.  Foreign states are granted limited sovereign immunity by the 1976 Foreign Sovereign Immunities Act (“FISA”).  The sovereign immunity of Native American tribes has been more complex, as tribes are neither foreign governments nor U.S. states.  Granting sovereign immunity to American Indian tribes has been drawn from the U.S. Constitution, tribal treaties with the federal government, and various court decisions.  Native American tribes have for some time been considered to be “domestic dependent nations” that manage their own affairs but exist within and are protected by the sovereign United States.  Tribal members are United States citizens.  However, in 2014, the United States Supreme Court ruled that Indian tribal governments have an inherent right of sovereign immunity against lawsuits, leaving it to Congress to determine in what instances that immunity should not apply.[4]

Taking state sovereignty one step further, the Federal Circuit upheld sovereignty for public universities and medical centers as arms of the state, precluding them from having their patents challenged in IPR proceedings – but the universities and medical facilities are not only licensing the patents, but usually have spent much time and effort developing the inventions and doing research on and/or using the inventions that they have patented.  The Patent Trial and Appeal Board (“PTAB”) has itself determined on more than one occasion that state agencies are immune from PTAB proceedings, unless Congress clearly retracts that immunity.  However, in restricting sovereignty for foreign agencies, also arms of the state, the Federal Circuit has held that a foreign state agency can be sued based upon the agency’s commercial activity.[5]  That commercial activity was “obtaining and asserting a United States patent.”  As would be the case for a foreign government, the court’s ruling was based upon FISA, or Congressionally-enacted law.

Currently, it is the U.S. judicial system, not Congress, that is defining the limits of tribal sovereign immunity.  Case law can be more readily modified and many questions remain.  Will the U.S. judicial system consistently apply the same rationale to Native American Tribes as it did to a foreign agency or as it did to state government agencies, or will it be one rationale in some cases and another rationale in others?  Will obtaining a patent, asserting a patent, and/or generating revenue from licensing a patent amount to “commercial activity,” thereby revoking sovereign immunity for American Native tribes?  Even if sovereignty is upheld unless waived, will bringing suit in a federal district court amount to a waiver of sovereignty in the PTAB over the same patent?  Will American Indian tribes become just another entity in the now-expanded group of NPEs?

Already NPEs have begun to include asset management companies, licensing companies, capital management firms, and other entities whose only corporate objective is to buy and sell patents.  It is no longer merely individuals and small companies that are forming or using NPEs; major corporations, long critical of NPEs, have now joined the fray.  And now they are taking it one step further by attempting to use NPEs that can claim Indian tribal sovereignty as a means to avoid at least IPR proceedings.  If the AIA and/or IPR proceeding fall by the wayside, will these corporations want their patents back from the tribes, and will they be able to get them back?  If the original asset-transfer to the Indian tribe placed any restrictions on the sale of the patent to anyone other than the original patent holder, then does the tribe really hold all of the patent rights, or is the asset transfer just a sham, and is the original patent holder still the real party in interest?  If the asset transfer is indeed a complete transfer, then the tribes could conceivably sell those patents to a competitor of the original patent holder.

Currently up for possible Supreme Court consideration is a case questioning “whether a generally applicable federal statute, which is silent as to its applicability to Indian Tribes, should nevertheless be presumed to apply to Tribes.”[6]  The question is important because of its generality as to how laws may be applied to Indian tribes and also because the specific pleadings by the Tribes in that case somewhat correlate to the pleadings by the Saint Regis Mohawk Tribe in SRC Labs.  In both cases the Indian Tribes are trying to raise revenues – a worthy goal, but is the combination of revenue-raising and sovereignty good or bad for the patent system in this country?  Will sovereignty also apply to litigation concerning the Abbreviated New Drug Application (“ANDA”) under the Hatch-Waxman Act?  What happens if the original patent holder and the tribe have a disagreement or if the tribe breaches the agreement with the original patent holder?  Will the tribe then claim sovereignty against the party with whom it was once allied?

These questions foresee patents becoming just another tradeable commodity.  The intertwining combination of issues in these cases will impact patent holders, patent infringers, NPEs, and Native American Indian tribes, as well as states and foreign governments.[7]  It will be fascinating to see how these questions are answered over the next few months and years.

[1] Prowire LLC v. Apple, Inc., District of Delaware, No. 17-cv-223.

[2] SRC Labs, LLC and The Saint Regis Mohawk Tribe v. Amazon Web Services, Inc., et al., Eastern District of Virginia, No. 17-cv-00547.

[3] Allergan, Inc. and The Saint Regis Mohawk Tribe v. Teva Pharmaceuticals USA, Inc., et al., Eastern District of Texas, No. 15-cv-1455.  On October 16, 2017, the court invalidated the asserted claims of Allergan’s patent on Restasis, so a further IPR proceeding is not likely.


[4] Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024 (2014).

[5] Intel Corp. v. Commonwealth Sci. & Indus. Research Org., 455 F.3d 1364 (Fed. Cir. 2006).

[6] Petition for Certiorari, Great Plains Lending, LLC, and Plain Green, LLC v. Consumer Finance Protection Bureau, U.S. Supreme Court, No. 17-184.

[7] For instance, one South Korean sovereign fund has recently transferred some of its patent portfolio to a U.S. non-practicing licensing entity, which in turn sells and buys patent rights to/from other NPEs.