U.S. administrative court deals major blow to patent transfer deals

(Reuters) - A U.S. administrative court on Tuesday asserted its right to review the validity of patents owned by the University of Minnesota, rejecting the public university’s argument that its “sovereign” status grants it immunity.

The ruling by the U.S. Patent Trial and Appeal Board is a setback to efforts by pharmaceutical and technology companies to shield patents from the court by transferring them to entities like state universities and Native American tribes.

As government entities, they can assert sovereign immunity, a legal doctrine that holds they cannot be subject to litigation without their consent.

In a January ruling in a different case, PTAB said it recognized the defense of sovereign immunity.

But the board said on Tuesday the University of Minnesota had waived its immunity by filing lawsuits in federal court in 2014 accusing telecom equipment maker Ericsson ERICb.ST and several other companies of infringing the same patents.

Ericsson challenged the validity of the University of Minnesota’s patents before PTAB, and the case was put on hold pending a decision by the board.

Neither Ericsson nor the University of Minnesota immediately responded to requests for comment.

Many of the patents the board reviews are also being litigated in federal court, so the ruling cuts back sovereign immunity as a viable defense before the tribunal, said Matthew Rizzolo, a patent lawyer at Ropes & Gray not involved in the case.

The ruling casts doubt on a strategy adopted by the drug company Allergan Plc AGN.N, which in September transferred patents in its bestselling dry-eye treatment Restasis to the upstate New York Saint Regis Mohawk Tribe, which licensed them back in exchange for ongoing payments.

Allergan proceeded to argue PTAB had no jurisdiction over the Restasis patents, which had been challenged there by generic manufacturers.

Lawmakers criticized the deal as a sham designed to allow Allergan to maintain a drug monopoly. U.S. Senator Claire McCaskill, a Missouri Democrat, has introduced legislation aimed at preventing tribes from asserting sovereign immunity in cases before the patent board.

At the time it announced its patent transfer, Allergan noted it remained willing to have its patents subject to review in federal court. A federal judge subsequently found its Restasis patents invalid, rendering its deal with the Mohawk tribe largely moot.

Other patent owners have adopted similar deals with tribes.

Reporting by Jan Wolfe; editing by Anthony Lin and Cynthia Osterman