An Empirical Study of Gender and Race in Trademark Prosecution

This Article is the first to empirically examine the extent to which women and minorities succeed in prosecuting trademark applications before the United States Patent and Trademark Office (“USPTO”). Trademark registration is an important measure of entrepreneurial activity and progress in business, education, and the arts. To explore how women and minorities are succeeding in this domain, we compared 1.2 million trademark applications over thirty years with demographic information on race and gender.             We analyze whether trademark prosecution reflects systematic underrepresentation of women and minorities similar to those reported in patent and copyright prosecution. We found that trademark data showed significant differences from the other two federal intellectual property (“IP”) regimes. Our analysis reveals that women regularly secure trademark registration at a higher rate than men. Women are underrepresented in the pool of trademark applicants compared to their presence in the population, but not all minority groups are underrepresented. For women and underrepresented minorities, the disparity is decreasing at a rate not seen in other IP registration systems.

       While recent work has significantly advanced our understanding of trademark prosecution, no published studies consider the race and gender of trademark applicants. By filling that void, this Article substantially contributes to our understanding of minority intellectual property ownership and provides a new foundation for policy shifts and further research to assure that intellectual property ownership paths, theory, law, and reform are grounded in equality.

Trademark’s “Ship of Theseus” Problem by Mathew T. Bodie*

Postscript | Intellectual Property Law
Trademark’s “Ship of Theseus” Problem
by Matthew T. Bodie*

Vol. 95, Postscript (Nov 2021)
95 S. Cal. L. Rev. Postscript 27 (2021)

Keywords: Intellectual Property Law, Trademark

The “Ship of Theseus” is a classic philosophical problem posed about the continuity of identity. In Plutarch’s telling, the ancient Athenians preserved for posterity the famous ship piloted by Theseus after the slaying of the Minotaur.1 Once a year, a delegation would travel on the ship to the island of Delos with a tribute to the god Apollo.2 Over time, the wood began to rot, and the decaying planks were replaced with new ones. The ship became “a standing example among the philosophers, for the logical question of things that grow: one side holding that the ship remained the same, and the other contending that it was not the same.”3 The conundrum was recently referenced in the Marvel Comics Universe, as two versions of the organic android Vision puzzled over their identities in the climax of WandaVision.4 A wrinkle was added: what if the boards from the original ship were saved and used to recreate a version of the ship? Would that also be the ship of Theseus?

Trademark has long had a problem with identity. The purpose of trademark is to identify the source of goods or services and thereby make life easier for consumers. But trademark does not make an effort to ensure that the company that holds the mark still reflects the entity that developed the mark’s identity. Rather, trademark has turned largely into an alienable property right, unmoored from its created context.5 The law has severed the connection between the mark and the entity beyond the formalities of organization law, with the result that whoever controls the mark’s owner controls the mark. As a result, new owners can take advantage of reputation capital they never earned, and those with a true connection to the success of the original business can be shut out.6

This Essay argues against the law’s presumption that the corporate entity should have exclusive control over the mark, no matter the continuing connection (or lack thereof) that the entity has with the original business and goodwill. Trademark should instead reflect the potential that the identity will change over time, changing the meaning of the trademark along with it. Rather than blindly empowering individual corporations, trademark law should either pay closer attention to identity issues or allow a wider variety of participants to use the mark in various ways. Either of these approaches to trademark would be messier but would reflect more accurately our complicated reality.

* Callis Family Professor, Saint Louis University School of Law. This Essay is based in part on an ongoing research project presented at the Intellectual Property Scholars Conference and the biannual meeting of the Labour Law Research Network; I very much appreciate comments from Erika Cohn, Mark Lemley, Laura Heymann, Yvette Liebesman, Jake Linford, and Mark McKenna. Thanks to Danielle Dur- ban for excellent research assistance.

Not a Vara Big Deal: How Moral Rights, Property Rights, and Street Art Can Coexist

Note | Intellectual Property Law
Not a Vara Big Deal: How Moral Rights, Property Rights, and Street Art Can Coexist
by Mary Daniel*

94 S. Cal. L. Rev. 927 (2021)

Keywords: Street Art, Copyright Law, VARA, 5Pointz

“Art Murder”—the accusation was sprayed in red paint onto the side of real estate developer Jerry Wolkoff’s Long Island City building.1 Underneath the denunciation was a patchy layer of white paint, and underneath that layer, decades of graffiti art that once made up 5Pointz, “the world’s premier graffiti mecca.”2 Aerosol artists from around the world travelled to the Queens neighborhood for a chance to contribute to the de

facto street art museum.3 However, the buildings that served as the artists’ canvas belonged to Wolkoff, and in 2013, hoping to benefit from the growing housing market in Long Island City, Wolkoff announced plans to raze the former factory buildings to make room for luxury high-rise condominiums.4 The potential destruction of 5Pointz caused a frenzy in the art community as artists scrambled to prevent the popular site’s demolition.5 Then, all hopes of preserving the artwork ended on the morning of November 19, 2013, when 5Pointz’s curator, Jonathan Cohen,6 awoke to discover that, at the direction of Wolkoff, more than 10,000 artworks covering 200,000 square feet were unceremoniously covered over with white paint in the middle of the night.7

Artists responded to the whitewashing by bringing suit under the Visual Artists Rights Act of 1990 (“VARA”), codified at 17 U.S.C. §106A, claiming that the destruction of the artwork was a violation of the artists’ moral rights.8 Moral rights are a relatively new feature of United States law and a feature that seemed improbable through much of the development of copyright law.9 However, in a surprising decision, the district court found in favor of the artists. Holding that painting over 5Pointz was unlawful, Judge Block ordered Wolkoff to pay the artists $6.7 million in damages.10 The decision marked the first time graffiti art was extended VARA protection.11 Wolkoff immediately appealed the district court’s decision, but in February 2020, the Second Circuit upheld Judge Block’s decision in its entirety.12

The ruling has been heralded by many as a big win for artists’ rights

that signifies courts’ growing recognition and respect for artists working in atypical mediums.13 However, many others have expressed concern that such an expansion of VARA is at odds with property law and signifies a dangerous trend of artists’ rights superseding property owners’ rights.14 Moral rights run counter to the United States’ traditionally utilitarian approach to copyright law, and the 5Pointz ruling exemplified the inevitable conflict between moral rights and property rights. Additionally, the street art movement has a reputation as a fringe community, with the term “street art” often used to describe both lawfully and unlawfully created artwork. By extending VARA protection to the unconventional medium, opponents worry that the court lowered VARA’s standard and opened the door for other mediums to push the limits of the statute.15 Fueling this anxiety, there have been other artists seeking the shelter of VARA following the 5Pointz ruling. For example, the Blued Trees movement, started by artist and activist Aviva Rahmani, is an art installation affixed to trees along planned natural gas pipeline pathways.16 Rahmani has successfully filed the project for copyright registration and hopes to use the moral rights granted by VARA to prevent the removal of the trees.17 These concerns have led to demands for the 5Pointz ruling to be overturned or for VARA to be amended, or even repealed, so as to limit its interference with property rights.18

This Note argues that VARA’s application to street art is appropriate and not something for property owners to fear. While moral rights undoubtedly conflict with property rights, it is important for the United States to recognize moral rights in order to keep up with international standards and encourage creation. Additionally, street art is no longer the fringe movement it once was; artists such as Jean-Michel Basquiat, Keith Haring, and Banksy have helped sway the public opinion of street art away from viewing it as vandalism and towards viewing it as a legitimate artistic

medium worthy of additional copyright protection.19 Finally, the language of VARA is intentionally limiting and leaves a lot of interpretation to the courts.20 Generally, courts have been hesitant to apply VARA unless clearly warranted, suggesting that cases such as Blued Trees should not be a cause for panic given the court’s careful application of VARA.21

Part II of this Note explores the development of United States copyright law. Particular emphasis is put on the resistance to the concept of moral rights. Part III discusses the 5Pointz ruling and analyzes critics’ arguments against the holding and against moral rights in general. This Part also explores the potential ramifications of the 5Pointz ruling. Part IV argues that this recent application is appropriate and not a cause for concern about overreaching. The arguments against V ARA are also addressed and concluded to be unpersuasive. The appropriateness of the application of VARA to street art is supported by public opinion and judicial interpretation, while future overreaching is prevented by the statute’s limiting language and a careful court. Blued Trees is used as an illustration of the ease with which a court can deny VARA protection. Finally, Part V suggests that VARA offers appropriate coverage presently, but future expansion of VARA may be necessary.

__________________________________________________________________________________________________________

*. Executive Senior Editor, Southern California Law Review, Volume 94, J.D. Candidate 2021, University of Southern California Gould School of Law; B.A. Communications and Fine Art 2015, Loyola University Maryland. Thank you to Professor Sam Erman for his guidance during the drafting of this Note. Additionally, thank you to my friends and family for their support and feedback. Finally, thank you to all the Southern California Law Review editors for their hard work.

 

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Does Fair Use Matter? An Empirical Study of Music Cases by Edward Lee and Andrew Moshirnia

Article | Intellectual Property Law
Does Fair Use Matter? An Empirical Study of Music Cases
by Edward Lee* and Andrew Moshirnia†

From Vol. 94, No. 3
94 S. Cal. L. Rev. 471 (2021)

Keywords: Intellectual Property Law, Music Law, Entertainment Law

Copyright law recognizes fair use as a general limitation. It is assumed that fair use provides breathing room above and beyond the determination of infringement to facilitate the creation of new works of expression. This conventional account presupposes that fair use matters—that is, fair use provides greater leeway to a defendant than the test of infringement. Despite its commonsense appeal, this assumption has not been empirically tested. Except for fair uses involving exact copies (for which infringement would otherwise exist), it has not been proven that fair use makes much, if any, difference in results. Indeed, in one sector, the music industry, defendants have avoided pursuing fair use as a defense in most infringement cases (except parodies) decided under the 1976 Copyright Act. This fair use avoidance is surprising given that musicians now face a spate of lawsuits due to a predicament we call copyright clutter, which occurs when copyrights protect numerous subelements of many works in a field of creation, thereby making it difficult for people to create a new work in that field without facing exposure to copyright liability simply based on a similar subelement. If fair use provides breathing room, why do musicians avoid it?
This Article provides the first empirical testing of the significance of fair use as a defense. In an experimental study involving approximately 500 subjects, we found that fair use does make a difference: subjects found no liability more frequently under fair use than the test of infringement when examining the same case. And greater knowledge of music or law resulted in higher findings of no liability under fair use. These findings provide a better conceptual understanding of how fair use operates and practical information for litigants that call into question the predominant strategy of musicians avoiding fair use as a defense. Such a strategy may result in greater findings of liability where fair use would have otherwise been found.

*. Professor of Law and Co-Director, Program in Intellectual Property Law, Illinois Tech Chicago-Kent College of Law. In the interest of full disclosure, I joined an amicus brief submitted to the Ninth Circuit in support of the jury verdict against Pharrell Williams in Williams v. Gaye, 895 F.3d 1106 (9th Cir. 2018). See Brief Amicus Curiae of the Institute for Intellectual Property and Social Justice Musician and Composers and Law, Music, and Business Professors in Support of Appellees, Williams, 895 F.3d 1106 (No. 15-56880) 2016 U.S. 9th Cir. Briefs LEXIS 2423. I also joined an amicus brief submitted to the Second Circuit in support of the lower court’s finding of fair use by Drake in Estate of Smith v. Cash Money Records, Inc., 253 F. Supp. 3d 737 (S.D.N.Y. 2017), aff’d sub nom. Estate of Smith v. Graham, 799 F. App’x 36 (2d Cir. 2020). Brief for Amicus Curiae Intellectual Property Professors Supporting Defendants-Appellees, Estate of Smith, 799 F. App’x 36 (No. 19-0028). In both appeals, the courts sided with the result supported by the amicus briefs. See Williams, 895 F.3d at 1120–27; Estate of Smith, 253 F. Supp. 3d at 742–43. We are grateful for the comments we received from colleagues during a presentation of a draft of this Article at the 2019 Intellectual Property Law Scholars Conference. Many thanks to our research assistants Sarah Anderson, Elizabeth Campbell, Elizabeth Jedrasek, Brittany Kaplan, and Annika Morin. This research was funded by a grant from the Chicago-Kent Center for Empirical Studies of IP and was approved for human subjects testing by the Institutional Review Board of Illinois Institute of Technology.

†. Associate Professor, and Director of Education, Business Law & Taxation, Monash University.

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Rearranging Fair Use: A Critical Analysis of Kienitz v. Sconnie Nation by Eric Wolff

Note | Intellectual Property Law
Rearranging Fair Use: A Critical Analysis of Kienitz v. Sconnie Nation
by Eric Wolff*

From Vol. 94, No. 1
94 S. Cal. L. Rev. 83 (2020)

Keywords: Intellectual Property Law, Fair Use, Kienitz v. Sconnie Nation

The Seventh Circuit’s 2014 opinion in Kienitz v. Sconnie Nation has played an outsized role in the discourse on fair use, an affirmative defense to copyright infringement.The opinion is quite short, spanning just over three pages, and it emerged from a circuit that produces relatively few fair use opinions.Yet Kienitz is often cited for its rejection of “transformative use,” a relatively new but influential concept that has reshaped fair use doctrine.3  The court in Kienitz warned that transformative use threatens to replace the four-factor test for fair use found in § 107 of the Copyright Actand could erode authors’ exclusive rights to produce derivative works” based on their original works.In place of transformative use, Kienitz proposed that courts should simply stick with the statutory list” of four factors when analyzing fair use.The opinion applied this approach by focusing its analysis on factors three and four: the amount of the copyrighted work used and the effect of that use on the market for the copyrighted work.7

Is Kienitz’s approach a viable model for analyzing a fair use defense without relying on transformative use? The answer is no. This Note concludes that Kienitz’s reasoning is fundamentally flawed and suffers from many of the same infirmities it identified in transformative use.8

There are three problems with Kienitz’s reasoning. First, its approach to factor four defines the scope of derivative works in a way that would severely limit authors’ rights.Second, it employs a test, known as the  substitute/complement test,” which tends to underestimate market harm.10 Finally, its analysis of factor three implies there was no copyright infringement, which if true, would have made the fair use defense unnecessary.11 If Kienitzs amputation of transformative use was an attempt to remedy its harmful symptoms, its cure was worse than the disease.12

Although its analysis was flawed, Kienitz’s diagnosis of the problems with transformative use was accurate.13 Transformative use has been applied in a way that has come to dominate the statutory fair use factors and blurs the line between protected derivative works and fair use.14 This Note proposes two ways to restructure fair use analysis to limit the negative effects of transformative use: (1) rearrange the order in which the factors are analyzed and (2) make a finding of transformative purpose a threshold requirement of transformative use.

Part I explains how the scope of fair use has contracted and expanded throughout United States history and how transformative use has driven the current period of expansion. Part II examines the analysis in Kienitz and concludes, for the reasons described above, that it does not provide a viable alternative to transformative use. Part III demonstrates an alternative fair use analysis of the facts in Kienitz to show how the opinion could have benefited from incorporating transformative use into its analysis and by applying this Notes two proposals for restructuring fair use. In the process, Part III also reveals, and argues against, common issues in other courts’ analyses of each fair use factor, including the widespread underappreciation of factor two15 and Campbell v. Acuff-Rose Music, Inc.s unprecedented instruction to emphasize findings from factor one in the analysis of factor three.16

* Executive Senior Editor, Southern California Law Review, Volume 94; Juris Doctor Candidate 2021, University of Southern California Gould School of Law. This Note has benefited greatly from the attentive guidance and insightful comments of Professors Jonathan Barnett and Sam Erman. It would not exist without the unwavering support of my spouse Georgina and my parents Lori and Greg. I am also grateful to my colleagues at the Southern California Law Review who edify and inspire me with their excellent work.

Institutional Design in Patent Law: Private Property Rights or Regulatory Entitlements – Article by Adam Mossoff

From Volume 92, Number 4 (May 2019)
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Institutional Design in Patent Law: Private Property Rights or Regulatory Entitlements

Adam Mossoff[*]

INTRODUCTION

Judges often observe that the U.S. patent system arose from the English practice of the Crown conferring commercial monopoly privileges under its prerogative power.[1] This is undeniably true—just as it is undeniably true that the American republic arose from the English constitutional monarchy and parliamentary system of government. After the American Revolution, the U.S. retained aspects of the English political and legal systems, such as the common law,[2] but it also implemented innovative structural and substantive changes in its new political and legal institutions. Its patent system represented the same fundamental break from the English patent system as other U.S. political and legal institutions.[3]

The early U.S. patent system was a legal system in transition, but with the first Patent Act of 1790, there were fundamental differences between the U.S. and English patent systems. This divergence reflected a fundamental choice in institutional design. It is the core difference between defining a patent, on the one hand, as a private property right or, on the other hand, as a regulatory entitlement—between securing rights through private law doctrines and legal institutions constrained by the rule of law versus granting rights as matters of public policy and through discretionary decision-making processes in the political organs of the government.[4]

This key distinction is often obscured by the oft-repeated judicial gloss about the provenance of the U.S. patent system. A single article cannot address all historical and institutional details, but, as historians and economists have recognized, the U.S. patent system generally diverged from the English patent system as a matter of institutional design by defining patent rights largely within the domain of private law.[5] By the late nineteenth century, there was some convergence among jurisdictions, as other countries adopted aspects of the U.S. private law model for their patent systems, such as providing enforceable property rights that are alienable in the marketplace for commercial development. The U.S. patent system has been the legal “gold standard” in applying to patents basic precepts of the rule of law, securing them in stable legal institutions such as a Patent Office that followed definitive procedures in first examining and then publishing the patents it issued to inventors, and using an independent judiciary to resolve infringement and validity disputes over issued patents.[6]

These comparative choices in institutional design are significant because, in the early twenty-first century, patent systems are diverging again. This time, however, the United States is shifting to a conception of patents as regulatory entitlements—defining patents as public rights within the administrative state, denying judicial remedies for private property rights to patent owners, and denying patent protections to new technologies, among other changes. Meanwhile, other jurisdictions are creating or reforming their patent systems as private law systems in order to promote their own innovation economies. This includes (surprisingly) China, which has moved aggressively in recent years to create a patent system and a supporting legal infrastructure as a key foundational pillar in its efforts to create its own growing innovation economy.

This Article will address the legal and economic implications of the institutional design choice in defining patents as private property rights versus public regulatory entitlements. First, it will identify the historical divergence of the U.S. patent system from the English patent system in two key respects: (1) in securing patents as private property rights by providing effective judicial remedies against infringers, both private citizens and public officials, and (2) in securing the alienation of patents in the marketplace on legal and commercial par with other property rights. It will detail these two fundamental pillars of a private property right in historical court decisions and in other primary sources in the historical record. Second, it summarizes the economic and historical evidence that has consistently found a causal relationship between a private law model for patent systems and growing innovation economies and flourishing societies. Third, it identifies the convergence in the nineteenth century around elements of the U.S. patent system, how this convergence was driven in part by the economic success of the U.S. patent system, and that the United States is now diverging from its historical private law model while other jurisdictions are retaining theirs or are adopting the private law model in their own reforms of their respective patent systems.

I.  The U.S. Patent System: A Private
Property Rights Model

From the beginning of the U.S. patent system, there has been a vibrant debate about the nature of patent rights. Some courts and commentators classified patents as monopoly privileges.[7] Others classified patents as private property rights.[8] As with all legal doctrines, one can identify judges or commentators who support one side or the other of the debate. Sometimes, the private property or monopoly privilege perspectives are expressed by the same person in a single legal document, such as in Chief Justice William Taft’s 1923 decision in Crown Die & Tool Co. v. Nye Tool & Machine Works.[9] There, Chief Justice Taft first explained that the “title” in a patent secures the classic “common-law right . . . of exclusive enjoyment,” but then he later shifted in framing a patent as a statutory “monopoly” and concluded that “[i]t is not safe . . . to follow implicitly the rules governing a transfer of rights in a chose in action at common law.”[10]

Yet Chief Justice Taft was wrong in his second claim that U.S. patent law did not incorporate the legal rules from the common law of property or contract. In creating the foundational doctrines that comprised U.S. patent law in the nineteenth century, courts explicitly applied to patent owners the same common law rules governing transfers of other property rights, as well as imported into patent law other private law doctrines in property, contract, and tort more generally. This is not an ex post observation by historians tantamount to the accounts by law and economists of how the common law implicitly achieved efficiency via private law doctrines.[11] Nineteenth-century courts and commentators explicitly recognized that the private law character of the U.S. patent system was one of its distinctive characteristics, especially in comparison to the English patent system whence the U.S. patent system arose.[12] By the nineteenth century, the English patent law system had progressed toward a private law model,[13] but it still bore significant vestiges of its provenance in a royal grant of privilege issued by either political favoritism or for purely economic policy goals.

Notably, the early U.S. patent statutes did not refer to patents as “property,” but they defined patents as securing the exclusive rights to make, use, and dispose of an invention.[14] Congress thus used in the patent statutes the longstanding definition of property reaching back to the Roman law, which legal elites in the United States recognized as a classification of patents as property rights.[15] This is confirmed by federal courts consistently recognizing patents as a “species of property.”[16] In 1813, for example, Chief Justice John Marshall, riding circuit, explained that the “constitution and law, taken together, give to the inventor, from the moment of invention, an inchoate property therein, . . .  [and] that this inchoate and indefeasible property in the thing discovered commences with the discovery itself, and is only perfected by the patent.”[17] Later, in 1824, a unanimous Supreme Court held that a patent secures to an “inventor . . . a property in his inventions; a property which is often of very great value, and of which the law intended to give him the absolute enjoyment and possession.”[18]

This dominant line of nineteenth-century patent cases represents a fundamental institutional design choice by Congress and courts. In its concepts, doctrines, and even in judicial rhetoric, U.S. patent rights were secured to their owners, not through political institutions defined by discretionary policy-making and modes of regulatory analysis, but largely through the private law doctrines of property, contract, and tort.[19] The evidence for this is widespread throughout early U.S. patent law, but in the constraints of a single article, I will illustrate this in two primary areas of private law theory: (1) the enforcement of the property right against infringers via lawsuits in courts, including against the government, and (2) the free alienation of the property right in the marketplace.

In terms of the remedies available to patent owners for violations of their property rights, there was a period of transitional development in the first few decades of the U.S. patent system. Given general concerns arising from federalism and related constitutional constraints on the federal government in the Federalist Period, Congress did not expressly provide in the patent statutes for an injunction as a remedy for patent infringement until 1819.[20] Yet, there is evidence that courts awarded injunctions to patent owners (and copyright owners) who met the requirements for this equitable remedy before the 1819 amendment to the patent statutes.[21]

This made sense. Since early courts recognized that infringement of a patent is a violation of a property right,[22] they conceptualized patent infringement as a species of trespass.[23] This of course provides a remedy for damages, which patent owners could obtain, just as all other property owners. Some courts recognized that the ongoing or willful trespasses inherent in a defendant’s commercial infringement of a patent are properly the subject of an equitable remedy, as evidenced in Antebellum case law.[24] The 1819 amendment was in effect a declaratory act.

This is further confirmed by other private law doctrines and rhetoric that courts invoked as legal reference points for patent infringement. For example, Chief Justice Marshall, riding circuit, characterized as “fraud” a defendant’s efforts at avoiding liability by making minor changes in copying a patented invention.[25] Moreover, judges and commentators alike repeatedly embraced the rhetoric of “piracy” in characterizing the act of patent infringement.[26]

The unique U.S. approach in securing patents as private property rights, especially in comparison to the more general public law model in the English patent system, is exemplified in securing patents under the Takings Clause of the U.S. Constitution.[27] Again, the cases are not all uniform, as no legal doctrine is entirely “pure” in this way, but the dominant jurisprudence weighed in favor of constitutional security for the private property rights in patents.[28] For example, in 1878 in McKeever v. United States, which arose from a lawsuit against the federal government for compensation for an unauthorized use of a patented cartridge box by the federal government, the Court of Claims engaged in a wide-ranging, historical analysis of how U.S. patents are “private property,” as opposed to the English definition of a patent as a “grant” that issues by “royal favor” and thus do “not exclude a user by the Crown.”[29]

The McKeever court first analyzed the text of the Patent and Copyright Clause as evidence of this fundamental difference between the English Crown’s personal privilege and the U.S. private property right. The court explained that the language in the U.S. Constitution—the use of the terms “right” and “exclusive,” the absence of the well-established English legal term “patent,” and the absence of any express reservation in favor of the government—established that the private property rights in a U.S. patent were not on the same legal footing as the personal privileges in a patent granted by the English Crown.[30] The McKeever court further observed that this conclusion was buttressed by the fact that the Framers empowered the Legislature, not the Executive, to secure an inventor’s rights—placing this constitutional provision in Article I, not in Article II. This indicated that they viewed patents as private property rights secured by the people’s representatives, not as a special grant rooted in the discretionary prerogative powers of the Executive (the U.S. analog to the English Crown).[31] The McKeever court concluded that the Framers “had a clear apprehension of the English law, on the one hand, and a just conception, on the other, of what one of the commentators on the Constitution has termed ‘a natural right to the fruits of mental labor.’”[32]

As a segue to the second key private law feature of U.S. patent law—alienability of patents in the marketplace—the McKeever court further explained that the U.S. approach in securing patents as private property rights was confirmed by the federal government’s well-established practice since the Founding Era in using patented inventions by “express contracts” with patent owners.[33] This was in contrast to the power claimed by the English government to the free use of any patent issued by the Crown.[34]

U.S. courts secured to patent owners their rights to dispose of their property by importing into patent law longstanding common law doctrines securing the free alienation of real property. This was not achieved through a public lawmaking mode of top-down regulatory directive; rather, early U.S. patent owners alienated their property interests in the marketplace by drafting conveyances to successors and assigns (using property concepts and terms),[35] using patents as collateral in obtaining financing from investors,[36] selling security interests in their patents to obtain third-party financing for lawsuits against infringers,[37] and otherwise slicing and dicing their property into myriad sets of exclusive rights in follow-on owners, successors, and assigns in making, using, and selling the patented property throughout the United States.[38]

In adjudicating disputes over licenses and assignments of patent rights, Justice Joseph Story explicitly relied on real property case law as binding precedent in his many patent opinions that he issued while riding circuit.[39] In fact, the willingness of early federal courts to import into patent law the common law property concepts of assignment and license for defining the quantum of estate conveyed to a successor in interest in a patent is one more data point indicating that the United States implemented a private law model in creating its patent system.[40] Notably, President George Washington chose to acquire a license in 1791 from Oliver Evans, the recipient of the third U.S. patent issued under the 1790 Patent Act, for use of Evans’ invention in Washington’s mill at Mount Vernon.[41] Of course, Congress already made this fundamental institutional design choice itself in 1790 by providing in the first patent statute that a patent may issue to an inventor or to “his, her or their heirs, administrators or assigns” (and retaining the codification of this right to transfer to “assigns” in subsequent patent statutes).[42]

Similar to the earlier contrast of a U.S. patent as a private property right against an English patent as a personal privilege, courts and commentators further contrasted U.S. and English patents in terms of their permissive alienation to third parties. This is reflected in an anonymous note in the Federal Cases Reporter, which explains that an English patent is a “privilege” conferred by a “grant by the crown,” and thus the patent owner’s “right has been regarded [as] a personal privilege, inalienable unless power to that effect is given by the crown.”[43] Although the legal rule was that an English patent was “a mere naked right, inseparable from the person of the grantee,” legal and commercial practice evolved such that this power was typically conferred in patent grants.[44] In the U.S., however, the patent statutes and courts provided as a matter of law and right that patents could be conveyed by their owners, which meant that the patent is “defined as an incorporeal chattel, which the patent impresses with all the characteristics of personal estate . . . .”[45] As one federal court later put the point: “the rights conferred by the patent law, being property, have the incidents of property, and are capable of being transmitted by descent or devise, or assigned by grant.”[46]

In conclusion, the U.S. patent system was initially crafted by Congress and courts along a private law model, which diverged in key respects from the mostly public law model that prevailed in England in the eighteenth and nineteenth centuries. There are many aspects of the U.S. patent system that reflect this basic institutional design choice, including the creation of a Patent Office that operated along set rules of procedure in issuing patents (and then after 1836, examining patent applications).[47] Here, I identify two key private law features of U.S. patents: (1) providing remedies in court against both private citizens and public officials for violations of patent rights, and (2) securing the free alienation of patent rights in the marketplace. These are exemplars of the unique U.S. approach in securing patent rights as private property rights—as an intellectual property right similar to the nonpossessory “incorporeal rights” like easements and other property rights long secured at common law.[48] Justice Levi Woodbury, riding circuit, captured the essence of this institutional design choice in the U.S. patent system in an 1845 case, writing that “we protect intellectual property, the labors of the mind, . . . as much a man’s own, and as much the fruit of his honest industry, as the wheat he cultivates, or the flocks he rears.”[49]

II.  The Significance of the U.S. Patent System
as a Private Law System

As economists and historians have recognized, the U.S. approach to defining its patent system as a system of property rights within a private law framework has contributed to the United States’ thriving innovation economy. This is unsurprising. When defined by clear legal requirements and secured within stable political and legal institutions governed by the rule of law, private property rights are a key ingredient for growing economies and flourishing societies.[50]

This general insight by economists and political scientists applies as much to property rights in inventions as it does to property rights in land and in other assets, whether tangible or intangible. For example, Hernando de Soto’s research shows the importance of title recordation and clear rules for transferring property to economic growth.[51] He recognized that this fundamental insight applies to patents just as much as it does to real estate, although many miss this point in de Soto’s analysis.[52] The prior Part described some of these key legal characteristics of the early U.S. patent system, including the security of patents as private property rights that are recorded in a legal institution functioning under the rule of law (the Patent Office), and the alienability of patents in the marketplace under the same rules as other long-standing property rights.

Economists, such as Professor Zorina Khan, have identified that this choice in institutional design by Congress and courts was a key factor in promoting thriving innovation markets in the United States in the nineteenth century.[53] Other economists have also identified features of these robust nineteenth-century innovation markets—such as an increase in “venture capital” investment in patent owners, the rise of a secondary market in the sale of patents as assets, and the embrace of specialization via licensing business models—as indicators of value-maximizing economic activity made possible by securing patents as private property rights.[54] This remains true today: a twenty-first-century startup with a patent more than doubles its chances of securing venture capital financing when compared to a startup without a patent.[55]

Historically, U.S. patent owners also innovated the franchise business model via licensing of their patent rights to businesspersons. This included Samuel Morse, the inventor of the electro-magnetic telegraph,[56] and Alexander Graham Bell, the inventor of the telephone,[57] among others. Other innovations in new corporate forms and cross-licensing agreements, such as the invention of the patent pool in 1856, made it possible for patent owners to use their property rights to overcome transaction-cost barriers in the commercialization of their property; in the case of patent pools, this was the private-ordering solution to widespread litigation by multiple owners of patents on multiple components of a single product or service sold in the marketplace.[58] All of these developments and activities confirm de Soto’s insight that a “good legal property system is a medium that allows us to understand each other, make connections, and synthesize knowledge about our assets to enhance our productivity.”[59]

Even when patent owners engaged in strategic, rent-seeking behavior in the nineteenth century, this problem arose in the context of legal disputes over patents and thus it was addressed by courts who responded appropriately within the procedural and substantive legal rules governing the scope of property rights in patents. For instance, starting in the early nineteenth century, the Patent Office began permitting patent owners to surrender patents that had inadvertent formal defects in their patents that had unintended substantive, negative effects on the scope of the property rights secured to them.[60] The Patent Office would “reissue” a corrected patent. Consistent with the private law model in the U.S. patent system, this practice was not left solely to administrative discretion. First, the Supreme Court upheld the validity of reissue patents in 1832 in Grant v. Raymond,[61] and then Congress codified the reissue practice in the 1836 Patent Act.[62]

Some patent owners began to exploit their right to obtain reissue patents to expand ex post the scope of their property rights solely to capture newly invented technologies, which was not the initial function of the reissue right (and it was explicitly prohibited).[63] Courts reined in this strategic behavior by patent owners in extending a property right beyond the metes and bounds in one’s title deed.[64] This was done for the same reasons that all property owners are delimited in the use of their property by other property owners’ equal rights.[65] In the case of property rights in inventions, courts sought to secure as clear title as possible in the context of new innovation to facilitate licensing and to provide proper notice to other innovators and commercial actors of the legal boundaries in which they could operate without incurring liability.[66]

Ultimately, the private law model embraced by the U.S. for its patent system, which differentiated it from its predecessor in the English patent system, has been identified by Professor Khan as serving a key role in the “democratization of invention.”[67] As she explains:

The tendency to democratization was manifested in unique features of the U.S. patent system such as the examination of patent applications by technically qualified Patent Office employees, the award of property rights only to the first and true inventor, low fees, and few restrictions on the ability of patentees to exploit their inventions in the marketplace.[68]

Professor Stephen Haber also surveys the economic and historical evidence and finds the weight of evidence supporting a finding of a “causal relationship between strong patents and innovation.”[69] Here, a “strong patent” means a property right enforceable in courts and freely alienable to third parties such that it facilitates specialization and the division of labor in innovation markets. Professor Haber concludes that “there are no wealthy countries with weak patent rights, and there are no poor countries with strong patent rights.”[70] This establishes the same presumptive burden on behalf of patents that is established by the same overwhelmingly positive correlations between other private property rights and economic growth—those who claim otherwise bear the burden of proof.[71]

III.  Historical Convergence and Modern Divergence
in Patent Law Systems

Key elements of modern patent systems around the world today were copied from the U.S. patent system, including the most widely adopted institutional feature: examining patent applications at a Patent Office according to predetermined legal standards in both process and substance.[72] This convergence is notable, especially among the world’s leading economies. The United States became a leading world economy only in the latter half of the nineteenth century after having a per capita gross domestic product on par with Brazil at the start of the eighteenth century.[73]

Yet jurisdictions throughout the world did not adopt all aspects of the U.S. private law model for their patent systems. While adopting examination processes and rules regarding title recordation, among others, they balked when it came to securing patents as private property rights that were freely alienable in the marketplace and enforceable against all infringers in court. For example, in addition to the “Crown right” that permitted free use of patents by the English government, England adopted a compulsory licensing scheme in the late nineteenth century.[74] As noted, this was in stark contrast to the property and contract doctrines generally relied on in the United States to define the freedom of patent owners to convey their rights in the marketplace.[75] In fact, the United States repeatedly has considered and rejected compulsory licensing requirements in its patent system.[76]

The U.S. patent system thus has been identified as the “gold standard” for world patent systems given its comparative advantages in securing private property rights in technological innovations,[77] but this has begun to change in the twenty-first century. In recent years, the United States has slowly shifted through court decisions, legislation, and the creation of a new administrative tribunal for reviewing and canceling patents. It has moved from a predominantly private law model to one that has significant institutional features of a public law model.

In terms of reliable and enforceable patent rights, courts have muddied the doctrinal waters in awarding either equitable or legal remedies for violations of these private property rights. In 2006 in eBay v. MercExchange, the U.S. Supreme Court reframed the test for awarding injunctions to patent owners on a finding of infringement by a defendant in terms of an allegedly historical four-factor test (which was not in fact a historical test).[78] Justice Anthony Kennedy concurred in the decision, arguing that there now exists a new business model of “obtaining licensing fees” and that patent licensing companies should not be permitted to “charge exorbitant fees” by threatening manufacturers with an injunction if they do not take a license.[79] Within a few years, many district courts conflated Justice Kennedy’s concurrence with the holding in eBay itself, citing not the majority opinion, but Justice Kennedy’s concurrence.[80] As a result, patent owners, including both manufacturers and licensors, are now less likely to obtain an injunction against infringers.[81] In effect, patent owners are forced into compulsory licensing schemes via judicial decisions that deny them injunctions, requiring them to accept court-ordered “reasonable royalties” for ongoing infringement. In terms of determining these “reasonable royalties,” courts have further lowered the baseline for assessing damages to the “smallest saleable patent practicing unit,”[82] and are using this standard for damages even when it does not match the market-based rate for licensing patented innovation.[83]

The result of the weakening of the ability to obtain an injunction—the backstop for all market-based negotiations of conveyances of property rights—and the further limiting of damages awarded to patent owners below market-set rates has led to an increasingly common commercial practice referred to as “efficient infringement.”[84] This occurs when a company decides that it “economically gains from deliberately infringing [on a] patent[]” because it knows the patent owner will not receive an injunction and thus it will pay less in legal fees and in court-ordered damages than it would have paid in a license obtained from the patent owner.[85]

For instance, in its patent infringement lawsuits against Apple—a multi-year, worldwide legal dispute that spanned numerous court cases—Qualcomm claimed in late 2018 that Apple was in arrears for as much as $7 billion (and counting) for refusing to make royalty payments under its previous licensing agreements for use of the 4G digital transmission technologies invented at Qualcomm.[86] In April 2019, the two companies settled all worldwide litigation with Apple paying an undisclosed sum and entering into a new license to use Qualcomm’s next-generation 5G technologies in future iPhones.[87] By itself, the refusal to pay royalties might not fall within the scope of strategic behavior labeled as “efficient infringement,” but internal documents disclosed in one of the legal cases shortly before the settlement revealed that Apple engaged in a deliberate legal campaign to devalue Qualcomm’s patents for the sole purpose of reducing its royalty payments in previously agreed-upon licenses.[88] This is consistent with economic and theoretical analyses of what happens when injunctions are not an available remedy for infringement of property rights, which incentivizes “hold out” by licensees or infringers.[89] The only jurisdiction in which Apple was not enjoined in the patent infringement lawsuits brought by Qualcomm was the United States, although injunctions were issued against Apple in Germany and in China.[90]

Given the increasingly high costs of patent litigation as a result of both efficient infringement practices and diminished chances of success for many patent owners in seeking protection of their rights in court, patent litigation is now referred to as the “sport of kings.”[91] This directly undermines the “democratization” effects that accessible, reliable, and effective property rights have historically achieved via the private law model of the U.S. patent system. This is important given that the “great inventors” in the nineteenth century were individuals who mostly relied on patent licensing and other features of market specialization facilitated by enforceable and tradeable property rights.[92]

In addition to the shift in U.S. courts in treating patents less like private property rights, Congress has similarly adopted changes to the patent system that comprise a public law model, such as discretionary, administrative adjudication of patent rights by regulatory officials. In 2011, Congress enacted the largest revision to the U.S. patent system since 1836, called the America Invents Act (AIA).[93] Among many transformations in the U.S. patent system, including shifting to a first-to-file system from a first-to-invent system, Congress created a new administrative tribunal to review and cancel previously issued patents.[94] This tribunal, called the Patent Trial and Appeal Board (PTAB), began its administrative hearings in 2012. Unfortunately, Congress imposed very few substantive or procedural limits on this tribunal in the AIA, and thus the PTAB quickly became an example of an administrative agency run amok.

There are innumerable due process and related concerns at the PTAB. One prominent issue has been the practice of “panel stacking” administrative judges at the PTAB to obtain preordained results.[95] Moreover, anyone in the world can file a petition at any time during a patent’s twenty-year term to challenge it regardless of the personal financial gain that may motivate the petition, leading to strategic behavior by hedge-fund managers who would short stocks of companies in which they then file PTAB petitions seeking to invalidate the respective companies’ patents.[96] In fact, anyone can file as many petitions as they wish; numerous patents have been subject to “serial filings” of multiple petitions,[97] and serial petitions are sometimes filed concurrently in order to keep the patent under an administrative, legal, and commercial cloud. The PTAB also initially adopted a lower legal standard for construing patent claims in its administrative hearings than what is used in a lawsuit in an Article III court; this has resulted in inordinately high “kill rates” that range almost as high as 100% for some types of patents.[98] This difference in legal rules in interpreting patents has resulted in cases in which the PTAB cancels a patent after an Article III court construes a patent as valid and enforceable. The Court of Appeals for the Federal Circuit has held that this is an acceptable contradiction in legal decisions concerning the validity of the same property right reached between two state institutions governing the patent system.[99]

These are just a few examples of the new regulatory mode of legal governance in a patent system that was once defined by relatively clear legal requirements, the rule of law, and stable legal institutions. The newly appointed Director of the U.S. Patent & Trademark Office has issued new regulations to reverse course on some of these practices.[100] But these new rules are not legally mandated; thus, there is nothing that can prevent a new Director from reversing course and reinstituting as a matter of regulatory fiat all of these problematic practices at the PTAB, whose administrative panels one former federal judge has characterized as “death squads . . . killing property rights.”[101]

Significantly, many patent owners raised constitutional challenges to the PTAB on the basis of due process and takings concerns, but the Supreme Court agreed to hear a challenge to the PTAB in Oil States Energy v. Greene’s Energy Group[102] on whether the PTAB violated the Seventh Amendment rights of patent owners to receive a jury trial. In its opinion in May 2018, the Oil States Court did not reach the Seventh Amendment question, because it held that the legal determination of the validity of an issued patent was entirely a matter of “public right,” and thus a patent is not a private right secured by the separation of powers and other structural protections afforded to citizens by the Constitution.[103] This is the first time that the Supreme Court held that a patent that had vested in an owner after an examination and grant by the Patent Office is a public right, as opposed to construing patents as private rights.[104] Oil States represents a radical shift from the private law model in which the U.S. patent system has secured patents as private property rights and provided them the relevant constitutional protections as other private rights.

The PTAB is widely recognized as contributing to a legal and policy environment in which patents owned by individuals or other under-capitalized entities, such as startups or universities, are now significantly devalued as commercial assets. This patent owner must first navigate the increasingly difficult process to obtain a patent, especially in the biopharmaceutical and high-tech industries that have been hit the hardest by recent court decisions that have severely restricted the patent eligibility of innovations in these sectors of the innovation economy.[105] If a patent issues, the patent owner is then faced with the prospect of efficient infringement, as companies do not pursue a license and instead infringe a patent given their economic calculation that a denial of an injunction and a below-market-rate “reasonable royalty” awarded by a court will result in a smaller compulsory license fee than if they negotiated a license directly with the patent owner. Companies, or the special companies hired anonymously to file petitions in the PTAB,[106] then file multiple petitions in the PTAB, which is an expensive process and time consuming.[107] Through its administrative processes, which are nothing like the legal processes in court, the PTAB can cancel a patent. The odds favor the petitioner. This regulatory cancelation is valid regardless of panel stacking or other concerns. It is also valid even if the patent owner was lucky enough to survive a validity challenge in court, prove infringement, and then receive an injunction or damages high enough to justify its legal fees. The U.S. patent system is now characterized by inordinately high costs, high legal hurdles, and discretionary and even contradictory legal processes and decisions. In sum, patents are now more like public rights awarded and adjudicated according to the discretionary, regulatory decisionmaking processes of the political branches, as opposed to stable private rights in property secured in courts.

The judicial, legislative, and administrative developments in the U.S. patent system in the last ten years represent a demonstrable shift away from the private law model that was the hallmark of the early U.S. patent system. In the early twenty-first century, the U.S. patent system has the institutional traits of the public regulatory model that first animated the English patent system, and from which the United States diverged. This is not merely a divergence in the U.S. patent system over time, as foreign jurisdictions are adopting elements of the private law model for their own patent systems. One jurisdiction in particular is China, which has begun a substantial reform of its patent system over the past decade, but unlike the United States, it is creating a private law system.

Among other reforms it has implemented in contract law and in other fields of private law,[108] China has begun reforming its patent system within a private law model. First, it is implementing new rules at the State Intellectual Property Office (SIPO) that “provide for the streamlined examination of patent applications” on inventions in the high-tech sector, such as those in cloud computing, AI, the Internet, and Big Data.[109] As one legal news source reported, “China’s opening up [of its patent system to new high-tech innovation] contrasts with the United States’ move to cut back on business method patents and software patents.”[110] In terms of its judicial institutions, China enacted reforms in 2014, creating three specialized IP courts in Beijing, Shanghai, and Guangzhou, and creating another fifteen IP tribunals in other regions of the country.[111] China authorized these courts to award both injunctions and damages on a finding of patent infringement.[112] Patent owners in Chinese courts typically seek injunctions against infringing products, which, unlike their U.S. counterparts, judges are “generous in awarding.”[113] Finally, following the United States’ lead in creating the Court of Appeals for the Federal Circuit, a specialized single appellate court that hears all patent cases, China has announced that it is considering creating a single national IP appeals court.[114] This would create much-valued national uniformity in judicial decisions that resolve disputes and which ultimately govern the private decision-making and private-ordering institutions in its innovation economy.

Although China initially used its patent laws and institutions to promote its own domestic economic interests, it is showing signs that it is embracing the basic tenets of equal protection under the rule of law in its patent system. As reported in early 2018, “[p]atent holders in China are likely to prevail in infringement actions . . . with specialized IP courts said to have found for foreign plaintiffs in nearly every case tried to date.”[115] In December 2018, for example, a Chinese court issued a preliminary injunction against Apple selling older iPhone models in China in a patent infringement lawsuit filed by Qualcomm.[116] Two months earlier and in stark contrast to the Chinese court issuing an injunction on a finding of infringement, the U.S. International Trade Commission refused to issue an exclusion order against imports of older models of the iPhone, despite the administrative law judge finding that Apple was infringing Qualcomm’s patents.[117]

A key feature of a private law model is that owners of property rights receive the same remedies as other owners of property rights, including injunctive relief for ongoing or willful infringement. The importance of these archetypical private law reforms in China’s patent system is confirmed by the response from innovators themselves. As the New York Times has reported, patent-intensive “Big Pharma is shrugging off its long-held fears of China’s rampant counterfeiting and cumbersome bureaucracy. . . . Executives say that the government has made inroads in toughening protections of pharmaceutical patents.”[118]

Of course, all is not entirely well with China, as there are legitimate concerns about its government’s authoritarianism more generally, which has ramped up in recent years in other areas of its society.[119] This effects its private law reforms in its patent system, because, as the historical and economic evidence consistently finds, private property rights only work in stable political and legal institutions defined by the rule of law. Yet, the success of China’s reform of its patent system within a private law model, and any resulting economic success in its fledgling innovation economy, may provide an incentive for political and legal actors elsewhere in the Chinese government to implement further reforms in the rule of law and limited government throughout its political and legal institutions. With the United States embracing the public law model of regulatory entitlements and discretionary decisionmaking processes in its own patent system, the United States arguably no longer has the comparative advantage to China in this key driver of its innovation economy.

Conclusion

Although scholars typically focus on the pendulum swings over time when courts and Congresses are either more favorable or more skeptical of patents, there is a more fundamental institutional distinction between defining patents as private property rights or regulatory entitlements. This institutional divide was a key difference between the early U.S. patent system, that was put into effect in the early republic and developed by Congress and the federal courts throughout the nineteenth century, and the early English patent system whence it arose. The success of the U.S. patent system, as evidenced in part by the explosive economic growth in the U.S. innovation economy in the nineteenth century, led to an international convergence on aspects of the U.S. private law model in its patent system. Today, though, the United States is diverging from this private law model and is returning once more to a public law model of regulatory entitlements, as evidenced in part by the creation of the PTAB, the denial of core remedies for violations of private property rights, heightened legal costs, and devaluing of patent rights in the marketplace. Other jurisdictions, such as China, are diverging from the United States today in implementing the private law model for their patent systems. Given the substantial historical and economic evidence correlating private law models of patent systems with innovation and economic growth, this divergence between the United States and other countries today is concerning.

 


[*] *. Professor of Law, Antonin Scalia Law School, George Mason University. Thank you to Marcus Cole, Charles Delmotte, Richard Epstein, Henry Smith, Saul Levmore, Arial Porat, Mario Rizzo, Aaron Simiwicz, and Yun-chien Chang for their helpful comments. Thank you also to Yun-chien, Richard, and Mario at the Classic Liberal Institute at NYU for inviting me to present this paper at the Convergence and Divergence in Private Law Symposium held at the New York University School of Law in November 2018. Dylan Campbell provided valuable research assistance.

 [1]. See Graham v. John Deere Co., 383 U.S. 1, 5 (1966) (“[The Copyright and Patent Clause] was written against the backdrop of the practices—eventually curtailed by the Statute of Monopolies—of the Crown in granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public.”); see also Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC 138 S. Ct. 1365, 1377 (2018) (“The Patent Clause in our Constitution ‘was written against the backdrop’ of the English system.” (quoting Graham v. John Deere Co., 383 U.S. 1, 5 (1966))); Bilski v. Kappos, 561 U.S. 593, 626–27 (2010) (Stevens, J., concurring) (“The Constitution’s Patent Clause was written against the ‘backdrop’ of English patent practices, and early American patent law was ‘largely based on and incorporated’ features of the English patent system.” (citations omitted)).

 [2]. See Ford W. Hall, The Common Law: An Account of Its Reception in the United States, 4 Vand. L. Rev. 791, 798–800 (1951) (identifying the fact that all of the original thirteen states except Connecticut enacted either reception statutes or provided expressly in their new state constitutions for the authoritative force of the common law).

 [3]. See B. Zorina Khan, Trolls and Other Patent Inventions: Economic History and the Patent Controversy in the Twenty-First Century, 21 Geo. Mason L. Rev. 825, 830 (2014) (“The American patent system was deliberately designed to be different [from the British patent system].”); see also Adam Mossoff, Who Cares What Thomas Jefferson Thought About Patents? Reevaluating the Patent “Privilege” in Historical Context, 92 Cornell L. Rev. 953, 967 (2007) (“The provenance of the American patent system, as the American property system generally, is found in the English feudal system. . . . But an American patent in the late eighteenth century was radically different from the royal monopoly privilege dispensed by Queen Elizabeth or King James in the early seventeenth century.”).

 [4]. See B. Zorina Khan, The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790–1920, at 51 (Claudia Goldin ed., 2005). In contrast to British patent law, “U.S. doctrines emphatically repudiated the notion that the rights of patentees were subject to the arbitrary dictates of government.” Id.

 [5]. See generally id. (examining the unique institutional and legal approach in the United States in securing patents as private property rights as compared to England and France, and identifying the positive impact this had on the U.S. innovation economy in the nineteenth century). For further discussion on the shift in defining and securing patents as private property rights in the United States, see Oren Bracha, The Commodification of Patents 1600-1836: How Patents Became Rights and Why We Should Care, 38 Loy. L.A. L. Rev. 177, 181 (2004) (“Patents changed from case-specific discretionary policy or political grants of special privileges designed to achieve individually defined public purposes, to general standardized legal rights conferring a uniform set of entitlements whenever predefined criteria are fulfilled.”).

 [6]. See Kevin Madigan & Adam Mossoff, Turning Gold Into Lead: How Patent Eligibility Doctrine is Undermining U.S. Leadership in Innovation, 24 Geo. Mason L. Rev. 939, 940 (2017) (identifying the “gold standard” label for the U.S. patent system as compared to the rest of the world).

 [7]. See, e.g., United States v. Am. Bell Tel. Co., 167 U.S. 224, 239 (1897).

[T]he purpose of the patent is to protect him in this monopoly, not to give him a use which, save for the patent, he did not have before . . . . The patentee, so far as a personal use is concerned, received nothing which he did not have without the patent, and the monopoly which he did receive was only for a few years.

Id.

 [8]. See, e.g., Seymour v. Osborne, 78 U.S. 516, 533 (1870) (“Inventions secured by letters patent are property in the holder of the patent, and as such are as much entitled to protection as any other property, consisting of a franchise, during the term for which the franchise or the exclusive right is granted.”); Rubber Co. v. Goodyear, 76 U.S. 788, 798 (1869) (“[T]here is no distinction between . . . a patent [for land] and one for an invention or discovery.”).

 [9]. Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24, 33–44 (1923).

 [10]. Id. at 36–41.

 [11]. See Richard A. Posner, Economic Analysis of Law 6 (1973).

[M]any areas of the law, especially the great common law fields of property, torts, and contracts, bear the stamp of economic reasoning. Few legal opinions, to be sure, contain explicit references to economic concepts and few judges have a substantial background in economics. But the true grounds of decision are often concealed rather than illuminated by the characteristic rhetoric of judicial opinions.

Id.

 [12]. See, e.g., McKeever v. United States, 14 Ct. Cl. 396, 420–21 (1878) (observing that “a patent in England was nothing more than a grant dependent in contemplation of law upon royal favor,” in contrast to the U.S. patent system which “recognizes an invention as property”); Belding v. Turner, 3 F. Cas. 84, 85 (C.C.D. Conn. 1871) (No. 1,243) (discussing the history of patents as a “privilege” granted by the “crown” as distinguished from the “personal estate” now secured in U.S. law); Motte v. Bennett, 17 F. Cas. 909, 913–14 (C.C.D.S.C. 1849) (No. 9,884).

 [13]. See Sean Bottomley, Did the British Patent System Retard the Industrial Revolution?, 1 Criterion J. on Innovation 65, 73–81 (2016) (detailing licensing activities by English patent owners and English courts applying property and contract doctrines to patent owners).

 [14]. See Patent Act of 1870, ch. 230, § 22, 16 Stat. 198, 201 (repealed 1952) (“[E]very patent shall . . . grant to the patentee, his heirs or assigns, for the term of seventeen years, of the exclusive right to make, use, and vend the said invention or discovery throughout the United States and the Territories thereof . . . .”); Patent Act of 1836, ch. 357, § 11, 5 Stat. 117, 121 (repealed 1870) (“[E]very patent shall be assignable in law . . . [and every] conveyance of the exclusive right under any patent, to make and use, and to grant to others to make and use, the thing patented [must be recorded in the Patent Office] . . . .”); Patent Act of 1793, ch. 11, § 1, 1 Stat. 318, 321 (repealed 1836) (“[A patent secures] the full and exclusive right and liberty of making, constructing, using, and vending to others to be used, the said invention or discovery . . . .”); Patent Act of 1790, ch. 7, § 1, 1 Stat. 109, 110 (repealed 1793) (“[A patent secures] the sole and exclusive right and liberty of making, constructing, using and vending to others to be used, the said invention or discovery . . . .”).

 [15]. See generally Adam Mossoff, What is Property? Putting the Pieces Back Together, 45 Ariz. L. Rev. 371 (2003) (explaining how the exclusive rights of acquisition, possession, use, and disposal are the core rights of property from the Roman Law up through the Anglo-American common law).

 [16]. Ball v. Withington, 2 F. Cas. 556, 557 (C.C.S.D. Ohio 1874) (No. 815); see also Carew v. Boston Elastic Fabric Co., 5 F. Cas. 56, 57 (C.C.D. Mass. 1871) (No. 2,398) (“[T]he rights conferred by the patent law, being property, have the incidents of property . . . .”); Chambers v. Smith, 5 F. Cas. 426, 427 (C.C.E.D. Pa. 1870) (No. 2,582) (analogizing to land sales as the basis for framing scope of patent rights); Ayling v. Hull, 2 F. Cas. 271, 273 (C.C.D. Mass. 1865) (No. 686) (discussing the “right to enjoy the property of the invention”); Hayden v. Suffolk Mfg. Co., 11 F. Cas. 900, 901 (C.C.D. Mass. 1862) (No. 6,261) (instructing the jury that a “patent right, gentlemen, is a right given to a man by law where he has a valid patent, and, as a legal right, is just as sacred as any right of property”); Gay v. Cornell, 10 F. Cas. 110, 112 (C.C.S.D.N.Y. 1849) (No. 5,280) (“[A]n invention is, within the contemplation of the patent laws, a species of property . . . .”); Hovey v. Henry, 12 F. Cas. 603, 604 (C.C.D. Mass. 1846) (No. 6,742) (“An inventor holds a property in his invention by as good a title as the farmer holds his farm and flock.”).

 [17]. Evans v. Jordan, 8 F. Cas. 872, 873 (C.C.D. Va. 1813) (No. 4,564) (Marshall, Circuit Justice), aff’d, 13 U.S. 199 (1815); see also Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 18 (1829) (stating that a patent is a “title” and thus an act of invention before applying for a patent is “like an inchoate right to land, or an inceptive right to land, well known in some of the states, and every where accompanied with the condition, that to be made available, it must be prosecuted with due diligence, to the consummation or completion of the title”).

 [18]. Ex parte Wood, 22 U.S. (9 Wheat.) 603, 608 (1824).

 [19]. See Orin S. Kerr, Rethinking Patent Law in the Administrative State, 42 Wm. & Mary L. Rev. 127, 129 (2000) (“The [U.S.] patent system operates not through regulation, but rather through the private law mechanisms of contract, property, and tort.”).

 [20]. See Patent Act of 1819, ch.19, 3 Stat. 481, 481–82. Federal courts could hear all cases under the patent laws between residents of the same state, and thus this law was declaratory in settling that courts could also hear all cases between citizens of different states. See Binns v. Woodruff, 3 F. Cas. 421, 421 (C.C.D. Pa. 1821) (No. 1,424). The Federal Cases reporter provided the following synopsis for the Binns decision:

This case was before the court at April term, 1819, and then was dismissed; it having been decided, that, although in patent causes the courts of the United States have jurisdiction when both parties reside in the same state, the same did not exist in cases of copyright. On the 15th of February, 1819, [3 Stat. 481, c. 19,] congress passed a declaratory law, giving original any bill in equity; filed by any party aggrieved in any such cases, giving authority to grant injunctions according to the course and principles of courts of equity, . . .

Id.; see also James Ryan, A Short History of Patent Remedies, 6 Cybaris Intell. Prop. L. Rev. 150, 158–61 (2015) (discussing the federalism concerns animating why Congress did not authorize injunctions in early federal statutes).

 [21]. See Motte v. Bennett, 17 F. Cas. 909, 914–17 (C.C.D.S.C. 1849) (No. 9,884) (reviewing “the course pursued in the courts of the United States in granting injunctions in patent cases” reaching back to the early nineteenth century); see also Whitney v. Carter, 29 F. Cas. 1070, 1071 (C.C.D. Ga. 1810) (No. 17,583) (“[T]he plaintiff’s counsel cited . . . the opinion of the court, delivered by Judge Johnson, in December term, 1807, in the case of Whitney and others v. Fort, upon a bill of injunction.” (footnote omitted)); Morse v. Reed, 17 F. Cas. 873, 873 (C.C.D.N.Y. 1796) (No. 9,860) (issuing a permanent injunction for infringement of a patent). The Morse case is apparently mistakenly classified as a patent case when it was actually a copyright case. See Ryan, supra note 20, at 160.

 [22]. See Lightner v. Kimball, 15 F. Cas. 518, 519 (C.C.D. Mass. 1868) (No. 8,345) (“[E]very person who intermeddles with a patentee’s property . . . is liable to an action at law for damages . . . .”); Gray v. James, 10 F. Cas. 1019, 1021 (C.C.D. Pa. 1817) (No. 5,719) (stating that patent infringement is “an unlawful invasion of property”); see also supra note 16 (citing cases referring to patents as property rights).

 [23]. See, e.g., Goodyear Dental Vulcanite Co. v. Van Antwerp, 10 F. Cas. 749, 750 (C.C.D.N.J. 1876) (No. 5,600) (stating that patent infringement is equivalent to a “trespass” of horse stables); Burleigh Rock-Drill Co. v. Lobdell, 4 F. Cas. 750, 751 (C.C.D. Mass. 1875) (No. 2,166) (noting that the defendants “honestly believ[ed] that they were not trespassing upon any rights of the complainant”); Livingston v. Jones, 15 F. Cas. 669, 674 (C.C.W.D. Pa. 1861) (No. 8,414) (accusing defendants of having “made large gains by trespassing on the rights of the complainants”); Eastman v. Bodfish, 8 F. Cas. 269, 270 (C.C.D. Me. 1841) (No. 4,255) (comparing evidentiary rules in a patent infringement case to evidentiary rules in a trespass action); Reutgen v. Kanowrs, 20 F. Cas. 555, 557 n. (C.C.D. Pa. 1804) (No. 11,710) (“In all cases of trespass, the jury may find one defendant guilty, and the other not guilty.”).

 [24]. See Poppenhusen v. N.Y. Gutta Percha Comb Co., 19 F. Cas. 1056, 1057 (C.C.S.D.N.Y. 1858) (No. 11,281) (“[I]n [the] future, there will be an infringement, unless such infringement is restrained by injunction. It is, under such circumstances, almost a matter of course, that the injunction should be allowed.” (citation omitted)); Blanchard v. Reeves, 3 F. Cas. 638, 640 (C.C.E.D. Pa. 1850) (No. 1,515) (“We can not shut our eyes to the fact that the defendants have pirated the invention . . . . The complainant is therefore entitled to his injunction . . . .”); Ogle v. Ege, 18 F. Cas. 619, 620 (C.C.D. Pa. 1826) (No. 10,462) (“I take the rule to be, in cases of injunctions in patent cases, that where the bill states a clear right to the thing patented, which, together with the alleged infringement, is verified by affidavit; if he has been in possession of it by having used or sold it in part, or in the whole, the court will grant an injunction, and continue it till the hearing or further order, without sending the plaintiff to law to try his right.”); Buck v. Cobb, 4 F. Cas. 546, 547 (C.C.N.D.N.Y. 1847) (No. 2,079) (“[T]o secure inventors the rewards of their genius against the incursions of pirates . . . . And so the injunction was granted.”); Sullivan v. Redfield, 23 F. Cas. 357, 360–61 (C.C.D.N.Y. 1825) (No. 13,597) (denying a motion for an injunction for the alleged infringement of a patent that issued in 1819 given plaintiff’s failure to meet the legal and equitable preconditions).

 [25]. See Davis v. Palmer, 7 F. Cas. 154, 159 (C.C.D. Va. 1827) (No. 3,645) (Marshall, Circuit Justice) (instructing the jury that if “the imitator attempted to copy the [patented] model” and made an “almost imperceptible variation, for the purpose of evading the right of the patentee,” then “this may be considered as a fraud on the law”); see also Dixon v. Moyer, 7 F. Cas. 758, 759 (C.C.D. Pa. 1821) (No. 3,931) (Washington, Circuit Justice) (explaining that an attempt to make a “mere formal difference” between a patented device and an infringing copy is “a fraudulent evasion of the plaintiff’s right”).

 [26]. See, e.g., Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 12 (1829) (recognizing that “if the invention should be pirated, [this] use or knowledge, obtained by piracy,” would not prevent the inventor from obtaining a patent); Batten v. Silliman, 2 F. Cas. 1028, 1029 (C.C.E.D. Pa. 1855) (No. 1,106) (decrying defendant’s “pirating an invention”); Motte, 17 F. Cas. at 917 (referring to the defendant’s actions as “piracy of [the patentholder]’s combination” in his patented lathe); Buck, 4 F. Cas. at 547 (recognizing goal of patent laws in “secur[ing] to inventors the rewards of their genius against the incursions of pirates”); Dobson v. Campbell, 7 F. Cas. 783, 785 (C.C.D. Me. 1833) (No. 3,945) (concluding that patent-assignee has been injured by “the piracy of the defendant”); Grant v. Raymond, 10 F. Cas. 985, 985 (C.C.S.D.N.Y. 1829) (No. 5,701) (noting that the patented machine had “been pirated” often); Earle v. Sawyer, 8 F. Cas. 254, 258 (C.C.D. Mass. 1825) (No. 4,247) (instructing the jury that an injunction is justified by defendant’s “piracy by making and using the machine”).

 [27]. See, e.g., Cammeyer v. Newton, 94 U.S. 225, 234 (1876) (holding that a patent owner can seek compensation for the unauthorized use of his patented invention by federal officials because “[p]rivate property, the Constitution provides, shall not be taken for public use without just compensation”); United States v. Burns, 79 U.S. (12 Wall.) 246, 252 (1870) (“[T]he government cannot, after the patent is issued, make use of the improvement any more than a private individual, without license of the inventor or making compensation to him.”); McKeever v. United States, 14 Ct. Cl. 396, 420–24 (1878) (rejecting the argument that a patent is a “grant” of special privilege, because the text and structure of the Constitution, as well as court decisions, clearly establish that patents are private property rights that are secured under the Takings Clause).

 [28]. See Adam Mossoff, Patents as Constitutional Private Property: The Historical Protection of Patents Under the Takings Clause, 87 B.U. L. Rev. 689, 701–11 (2007).

 [29]. McKeever, 14 Ct. Cl. at 417–20.

 [30]. Id. at 421.

 [31]. Id. at 420.

 [32]. Id. The McKeever court did not cite a source for this quote, but it may have been paraphrasing a recently published treatise. See Theodore D. Woolsey et al., The First Century of the American Republic 443 (1876) (discussing how inventors are given “some control over the reproductions of the fruits of mental labor . . . in addition to the natural right to property”).

 [33]. McKeever, 14 Ct. Cl. at 421.

 [34]. See United States v. Palmer, 128 U.S. 262, 271 (1888) (“The United States has no such prerogative as that which is claimed by the sovereigns of England, by which it can reserve to itself, either expressly or by implication, a superior dominion and use in that which it grants by letters-patent to those who entitle themselves to such grants.”).

 [35]. One example from a prominent nineteenth-century telecommunications technology is Samuel Morse’s multiple conveyances of rights in his patent issued for his invention of the electro-magnetic telegraph. See Bill of Complaint at 6, Morse v. O’Reilly, 56 U.S. 62 (1848) (No. 224) (quoting 1844 agreement between Samuel Morse and Alfred Vail in which Morse agreed to “sell, assign, set over, and convey to . . . Vail, his heirs and assigns, one undivided eighth part of his said invention”); Id. at 5 (quoting 1838 agreement between Morse and Francis O.J. Smith in which Morse promised to “execute sufficient deeds of transfer” in his patent); Id. at 6 (quoting an 1848 agreement between Leonard Gale and Morse in which Leonard D. Gale agreed to “sell, assign, set over, and reconvey [back] to . . . Morse, the said one-sixteenth part of the right, title, and interest in the said invention of an electro-magnetic telegraph”).

 [36]. See Adam Mossoff, O’Reilly v. Morse 33 (George Mason Law & Econ. Research Paper No. 14-22, 2014), https://ssrn.com/abstract=244836.

Even before Morse’s first patent would issue in 1840, he had entered into several agreements in which he conveyed multiple ownership interests in his imminent patent rights. When Vail began assisting Morse in 1837, for instance, it was not out of altruistic motives by Vail. Morse and Vail executed an agreement that year providing that Vail would construct ‘at his own proper costs and expense’ Morse’s telegraph and would pay the costs of applying for foreign patents in exchange for a 25% interest in the U.S. patent and a 50% interest in any foreign patents.

Id.

 [37]. See Adam Mossoff, The Rise and Fall of the First American Patent Thicket: The Sewing Machine War of the 1850s, 53 Ariz. L. Rev. 165, 182–83 (2011) (detailing how Elias Howe sold a one-half interest in his patent on the lockstitch to George W. Bliss to fund his first patent infringement lawsuit against Isaac Singer).

 [38]. See generally Adam Mossoff, Patent Licensing and Secondary Markets in the Nineteenth Century, 22 Geo. Mason L. Rev. 959 (2015) (detailing extensive licensing and assigning practices of patent rights by inventors and follow-on patent owners).

 [39]. See, e.g., Brooks v. Byam, 4 F. Cas. 261, 268–70 (C.C.D. Mass. 1843) (No. 1,948) (Story, Circuit Justice) (analogizing a patent license to “a right of way granted to a man for him and his domestic servants to pass over the grantor’s lands,” citing a litany of real property cases and commentators at common law, such as Lord Coke’s Institutes, Coke’s Littleton, Viner’s Abridgment, and Bacon’s Abridgement); Dobson v. Campbell, 7 F. Cas. 783, 785 (C.C.D. Me. 1833) (No. 3,945) (Story, Circuit Justice) (relying on real property equity cases in which “feoffment is stated without any averment of livery of seisin” in assessing validity of patent license).

 [40]. See Potter v. Holland, 19 F. Cas. 1154, 1156–57 (C.C.D. Conn. 1858) (No. 11,329) (surveying in extensive detail how the common law real property doctrines of “assignment” and “license” had been incorporated into U.S. patent law to define the legal interest that a patent owner conveys to a third party); see also Moore v. Marsh, 74 U.S. 515, 520 (1868) (“An assignee is one who holds, by a valid assignment in writing, the whole interest of a patent, or any undivided part of such whole interest, throughout the United States.” (footnote omitted)); Suydam v. Day, 23 F. Cas. 473, 474 (C.C.S.D.N.Y. 1846) (No. 13,654) (distinguishing between “an assignee of a patent [who] must be regarded as acquiring his title to it, with a right of action in his own name,” and “an interest in only a part of each patent, to wit, a license to use”).

 [41]. See Edward G. Lengel, First Entrepreneur: How George Washington Built His—and the Nation’s—Prosperity 159–60 (2016).

 [42]. See Patent Act of 1790, ch. 7, § 1, 1 Stat. 109, 110 (repealed 1793); see also supra note 14 (quoting same language from the Patent Acts of 1793, 1836, and 1870).

 [43]. Belding v. Turner, 3 F. Cas. 84, 85 n. (C.C.D. Conn. 1871) (No. 1,243).

 [44]. Id.; see also H.I. Dutton, The Patent System and Inventive Activity During the Industrial Revolution 1750–1852, at 122–69 (1984) (detailing commercial practices by English patent owners and investments in English patents); Bottomley, supra note 13, at 73–81 (discussing licensing and assignments of English patent rights).

 [45]. Belding, 3 F. Cas. at 85 n.

 [46]. Carew v. Boston Elastic Fabric Co., 5 F. Cas. 56, 57 (C.C.D. Mass. 1871) (No. 2,398).

 [47]. See               Khan, supra note 4, at 182.

 [48]. See Leonard A. Jones, A Treatise on the Law of Easements § 20 (1898) (“Only incorporeal rights pass as appurtenant to land or under the description of ‘appurtenances.’ Land cannot pass as appurtenant, nor can the actual and exclusive possession of land pass as appurtenant, for such possession does not differ in effect from title in fee.”); see also id. § 13 (“An easement is not a right to the soil of the land or to any corporeal interest in it.”); Tinicum Fishing Co. v. Carter, 61 Pa. 21, 29, 3738 (1869) (referring to “an incorporeal easement on the land of the riparian owner” as one type of “incorporeal hereditaments”); Edward Coke, 1 The First Part of the Institutes of the Laws of England § 184, 121b–122a (London, W. Clarke & Sons 19th ed. 1832) (1628) (explaining that “incorporeall” interests are necessarily “appurtenant” to corporeal interests); Emory Washburn, A Treatise on the American Law of Easements and Servitudes 37 (2d ed. 1867) (identifying an easement appurtenant as “an incorporeal hereditament”).

 [49]. Davoll v. Brown, 7 F. Cas. 197, 199 (C.C.D. Mass. 1845) (No. 3,662) (citation omitted); see also Hovey v. Henry, 12 F. Cas. 603, 604 (C.C.D. Mass. 1846) (No. 6,742) (“An inventor holds a property in his invention by as good a title as the farmer holds his farm and flock.”).

 [50]. See Stephen Haber, Patents and the Wealth of Nations, 23 Geo. Mason L. Rev. 811, 811 (2016) (“There is abundant evidence from economics and history that the world’s wealthy countries grew rich because they had well-developed systems of private property. Clearly defined and impartially enforced property rights were crucial to economic development . . . .”).

 [51]. See Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else 83 (2000).

 [52]. See id. at 74.

Perhaps the most significant cost was caused by the absence of institutions that create incentives for people to seize economic and social opportunities to specialize within the marketplace. We found that people who could not operate within the law also could not hold property efficiently or enforce contracts through the courts . . . . Being unable to raise money for investment, they could not achieve economies of scale or protect their innovations through royalties and patents.

Id.

 [53]. See Khan, supra note 4, at 9–10 (“[P]atents and . . . intellectual property rights facilitated market exchange, a process that assigned value, helped to mobilize capital, and improved the allocation of resources. . . . Extensive markets in patent rights allowed inventors to extract returns from their activities through licensing and assigning or selling their rights.”).

 [54]. See, e.g., Naomi R. Lamoreaux, et al., Patent Alchemy: The Market for Technology in US History, 87 Bus. Hist. Rev. 3, 4–5 (2013).

 [55]. See Joan Farre-Mensa, et al., What Is a Patent Worth? Evidence from the U.S. Patent “Lottery” 26–27 (USPTO Econ. Working Paper No. 2015-5, 2018), https://ssrn.com/abstract=2704028.

 [56]. See Kenneth Silverman, Lightning Man: The Accursed Life of Samuel F.B. Morse 261–67 (2003) (discussing Amos Kendall’s franchise business model based on licenses of rights in Morse’s patent).

 [57]. See Christopher Beauchamp, Invented by Law: Alexander Graham Bell and the Patent That Changed America 49–51 (2015) (detailing Bell’s use of licensing and the franchise business model after failing to sell his patents to Western Union or obtain venture capital to support his own full-service company).

 [58]. See Mossoff, supra note 37, at 194–97.

 [59]. See de Soto, supra note 51, at 168; see also Khan, supra note 4, at 96 (“The development of trade is predicated on recognized rights of property . . . . Patent Office assignment records and law reports both reveal that an extensive and deep market in patent assignments and licenses functioned during the antebellum period.”).

 [60]. See Mossoff, supra note 3, at 1001–02.

 [61]. Grant v. Raymond, 31 U.S. (6 Pet.) 218, 242 (1832).

 [62]. See Patent Act of 1836, ch. 357, § 13, 5 Stat. 117, 122 (repealed 1870).

 [63]. See Mfg. Co. v. Ladd, 102 U.S. 408, 411 (1880) (“The real object and design of a reissue of a patent have been abused and subverted.”); see also Christopher Beauchamp, The First Patent Litigation Explosion, 125 Yale L.J. 848, 885–92 (2016) (detailing this abusive practice).

 [64]. See Beauchamp, supra note 63, at 891 (“A string of decisions in the 1870s began to rein in reissue practice and to cast doubt on broadened grants. By 1880, the Supreme Court’s disfavor was clear.” (footnote omitted)).

 [65]. See Campbell v. Seaman, 63 N.Y. 568, 576–77 (1876) (“[E]very person may exercise exclusive dominion over his own property, and subject it to such uses as will best subserve his private interests. . . . But every person is bound to make a reasonable use of his property so as to occasion no unnecessary damage or annoyance to his neighbor.”); Keeble v. Hickeringill (1707) 103 Eng. Rep. 1127, 1128 (Holte, C.J.) (holding that a malicious use of one’s property solely to deprive a neighbor of the productive use of his property is sufficient to justify liability under a writ for trespass on the case); see also Dig. 47.10.44 (Javoleneus, Posthumous Works of Labeo 9) (Alan Watson trans., 1985) (stating that there ought to be a right of legal action against a property owner who interferes with someone else’s property with intention to injure).

 [66]. See McClain v. Ortmayer, 141 U.S. 419, 424 (1891) (“The object of the patent law . . . is not only to secure to [the inventor] all to which [the inventor] is entitled, but to apprise the public of what is still open to them.”).

 [67]. Khan, supra note 4, at 51.

 [68]. Id. at 182.

 [69]. Haber, supra note 50, at 834.

 [70]. Id. at 815.

 [71]. See id. at 834 (“Evidence and reason therefore suggest that the burden of proof falls on those who claim that patents frustrate innovation.”); Letter from Jonathan Barnett, Professor, USC Gould School of Law, et al., to Assistant Attorney Gen. Makan Delrahim (Feb. 13, 2018), https://cpip.gmu.
edu/wp-content/uploads/sites/31/2018/02/Letter-to-DOJ-Supporting-Evidence-Based-Approach-to-Anti
trust-Enforcement-of-IP.pdf (“It bears emphasizing that no empirical study has demonstrated that a patent-owner’s request for injunctive relief after a finding of a defendant’s infringement of its property rights has ever resulted either in consumer harm or in slowing down the pace of technological innovation.”).

 [72]. See B. Zorina Khan, An Economic History of Patent Institutions, Econ. Hist. Ass’n (2008), http://eh.net/encyclopedia/an-economic-history-of-patent-institutions (“The German patent system was influenced by developments in the United States, and itself influenced legislation in Argentina, Austria, Brazil, Denmark, Finland, Holland, Norway, Poland, Russia and Sweden. . . . The first national patent statute in Japan was passed in 1888, and copied many features of the U.S. system, including the examination procedures.”).

 [73]. See Haber, supra note 50, at 822.

 [74]. See Khan, supra note 4, at 38 (“Compulsory licenses were introduced [in England] in 1883 (and strengthened in 1919 as ‘licenses of right’) . . . .”).

 [75]. A few special patent doctrines were used to define the outer boundaries of this general reliance on private law doctrines, such as scire facias actions for fraud in obtaining a patent. See Beauchamp, supra note 57, at 86–108 (discussing “a thoroughly ad hoc mobilization of government power” by interest groups who lobbied the federal government to bring a (unsuccessful) case against Alexander Bell in their efforts to invalidate Bell’s patent on the telephone).

 [76]. See, e.g., Bruce W. Bugbee, Genesis of American Patent and Copyright Law 143–44 (1967) (discussing the rejection of a Senate proposal for a compulsory licensing requirement in the bill that eventually became the Patent Act of 1790); Kali Murray, Constitutional Patent Law: Principles and Institutions, 93 Neb. L. Rev. 901, 935–37 (2015) (discussing the introduction of legislation in 1912 requiring compulsory licensing for patent owners not manufacturing a patented invention, which received twenty-seven days of hearings, but was not enacted into law).

 [77]. See Madigan & Mossoff, supra note 6, at 939–40.

 [78]. eBay Inc. v. MercExchange L.L.C., 547 U.S. 388, 390–91f (2006); see, e.g., Doug Rendleman, The Trial Judge’s Equitable Discretion Following eBay v. MercExchange, 27 Rev. Litig. 63, 76 n. 71 (2007) (“Remedies specialists had never heard of the four-point test.”).

 [79]. eBay, 547 U.S. at 396–97 (Kennedy, J., concurring).

 [80]. See Ryan T. Holte, The Misinterpretation of eBay v. MercExchange and Why: An Analysis of the Case History, Precedent, and Parties, 18 Chap. L. Rev. 677, 721–22 (2015).

 [81]. See Kirti Gupta & Jay P. Kesan, Studying the Impact of eBay on Injunctive Relief in Patent Cases 38 (Univ. of Ill. Coll. of Law, Legal Studies Research Paper No. 17-03, 2016), https://ssrn.com/abstract=2816701.

We find that both for preliminary and permanent injunctions, [patent licensing companies] are less likely to obtain an injunction, after controlling for patent characteristics and the length of the case (from filing to termination) throughout the 2000-2012 time period. We also find that the eBay ruling reduced the likelihood of all firms [including manufacturers] receiving either preliminary or permanent injunctions.

Id.

 [82]. Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 283–86 (N.D.N.Y. 2009).

 [83]. See Jonathan D. Putnam & Tim A. Williams, The Smallest Salable Patent-Practicing Unit (SSPPU): Theory and Evidence 12 (Sep. 8, 2016) (unpublished manuscript), https://ssrn.com/abstract=
2835617.

 [84]. See Adam Mossoff & Bhamati Viswanathan, Explaining Efficient Infringement, Antonin Scalia L. Sch.: CPIP Blog (May 11, 2017), https://cpip.gmu.edu/2017/05/11/explaining-efficient-infringement.

 [85]. Id.

 [86]. See Reuters, Apple Reported to Be $7 Billion Behind in Patent Royalty Payments by Qualcomm, Tech2 (Oct. 27, 2018, 10:05 AM), https://www.firstpost.com/tech/news-analysis/apple-reported-to-be-7-billion-behind-in-patent-royalty-payments-by-qualcomm-5456151.html. One analyst estimated that Apple paid $5 to $6 billion in its settlement with Qualcomm, which indirectly confirms the amount claimed in arrears. See Kif Leswing, Apple Paid Up to $6 billion to Settle with Qualcomm, UBS Estimates, CNBC (Apr. 18, 2019, 11:49 AM), https://www.cnbc.com/2019/04/18/apple-paid-5-billion-to-6-billion-to-settle-with-qualcomm-ubs.html.

 [87]. See Don Clark & Daisuke Wakabayashi, Apple and Qualcomm Settle All Disputes Worldwide, N.Y. Times (Apr. 16, 2019), https://www.nytimes.com/2019/04/16/technology/apple-qualcomm-settle.html.

 [88]. See Reed Albergotti, Apple Said Qualcomm’s Tech Was No Good. But in Private Communications, It Was ‘the best,’ Wash. Post (Apr. 19, 2019), https://www.washingtonpost.com/
technology/2019/04/19/apple-said-qualcomms-tech-was-no-good-private-communications-it-was-best.

 [89]. See Richard A. Epstein & Kayvan B. Noroozi, Why Incentives for “Patent Holdout” Threaten to Dismantle FRAND, and Why It Matters, 32 Berkeley Tech. L. J. 1381, 1414–15 (2017).

 [90]. See Adam Mossoff, Apple Pays for Its Patent Infringement, But Important Legal Cases Continue, IPWatchdog (Mar. 19, 2019), https://www.ipwatchdog.com/2019/03/19/apple-pays-patent-infringement-important-legal-cases-continue/id=107425.

 [91]. See The Impact of Bad Patents on American Businesses: Hearing Before the Subcomm. on Courts, Intellectual Prop., and the Internet of the H. Comm. on the Judiciary, 115th Cong. (2017) (statement of J. Paul R. Michel, former C.J. of the U.S. Court of Appeals for the Federal Circuit) (“Indeed, most owners of patents can no longer afford to enforce them. . . . Experts opine that to enforce a small portfolio an owner needs $15 million in cash and $3 billion in market cap. So, wages now say that the ‘sport of kings’, horse racing, has been replaced by patent litigation.”).

 [92]. See Khan, supra note 3, at 833–35.

 [93]. See David Kappos, Under Sec’y of Commerce for IP and Dir. of the USPTO, Keynote Address at the Center for American Progress: An Examination of Software Patents (Nov. 20, 2012), https://www.uspto.gov/about-us/news-updates/examination-software-patents (“[T]he AIA is the most significant reform to the U.S. patent system since 1836.”).

 [94]. See 35 U.S.C. § 6 (2018) (patent trial and review board); id. § 101 (patentable subject matter; utility); id. § 102 (novelty); id. § 103 (nonobviousness); id. § 112 (written description and enablement).

 [95]. See Adam Mossoff & David Lund, The Problems with the PTAB, IAM, Nov.Dec. 2017, at 29, 32–33 (discussing Target Corp. v. Destination Maternity Corp., in which the PTAB panel was increased from 3 to 5, and ultimately to 7, judges before the panel finally reached the “right” result of invalidating the patent).

 [96]. See id. at 30.

The most notorious example has been hedge fund manager Kyle Bass, who has repeatedly filed PTAB petitions targeting patents in the biopharmaceutical industry. Neither his hedge fund nor his PTAB-filing organisation makes generic drugs or commercialises any products or services in the pharmaceutical industry. Instead, Bass simply shorts the stock of companies that own the patents he challenges at the PTAB, because the market is aware of the PTAB death squad statistics.

Id.

 [97]. See Anne S. Layne-Farrar, The Cost of Doubling Up: An Economic Assessment of Duplication in PTAB Proceedings and Patent Infringement Litigation, Landslide, MayJune 2018, at 52, 55 (“On a per-patent basis, out of 3,460 patents with an IPR challenge filed, 842 (24 percent) were ‘serially petitioned patents.’ Among the patents with three or more IPR challenges, the serial petitions involved an overlap in claims, an overlap in the prior art asserted, or both.” (footnotes omitted)).

 [98]. See Mossoff & Lund, supra note 95 at 29 (reporting that 97.8% of the business method patents reviewed in the Covered Business Method (CBM) hearings at the PTAB were canceled).

 [99]. See Novartis AG v. Noven Pharms., Inc., 853 F.3d 1289, 1293–94 (Fed. Cir. 2017); see also Matthew Bultman, PTAB Nixes Part of Garage Door Opener Patent Upheld By ITC, Law360 (Oct. 25, 2018), https://www.law360.com/ip/articles/1095772/ptab-nixes-part-of-garage-door-opener-patent-uphe

ld-by-itc (reporting a patent canceled by PTAB after it was construed as valid by the ITC, which applies the same legal standard in construing patents as Article III courts).

 [100]. See Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board, 83 Fed. Reg. 51340, 51340 (Oct. 11, 2018) (to be codified at 37 C.F.R. pt. 42) (changing the legal rule for construing patents at the PTAB to be the same as the rule used in Article III courts).

 [101]. Ryan Davis, PTAB’s “Death Squad” Label Not Totally Off-Base, Chief Says, Law360 (Aug. 14, 2014) (quoting Former Chief Judge of the PTAB, Randall Rader), https://www.law360.com/articles/
567550/ptab-s-death-squad-label-not-totally-off-base-chief-says.

 [102]. Oil States Energy v. Greene’s Energy Grp., 138 S. Ct. 1365 (2018).

 [103]. Id. at 1373–74.

 [104]. See Adam Mossoff, Statutes, Common-Law Rights, and the Mistaken Classification of Patents as Public Rights, 104 Iowa L. Rev. (forthcoming 2019) (manuscript at 2) (available at https://ssrn.com/abstract=3289338). Professor Richard Epstein has meticulously reviewed the cases quoted or cited by the Oil States Court in support of its decision, and he found that the Court quoted or cited the cases out of context, or, in some cases, the quotes elided language that contradicted the propositions for which the Court claimed they supported; See Richard A. Epstein, Inter Partes Review Under the AIA Undermines the Structural Protections Offered by Article III Courts, in The Supreme Court Tackles Patent Reform, 19 Federalist Soc’y Rev. 132, 133–39 (2018).

 [105]. See Madigan & Mossoff, supra note 6. at 946–60 (identifying how four Supreme Court decisions between 2010 and 2014 have destabilized and diminished U.S. innovation, particularly in the biopharmaceutical and advanced technology industries).

 [106]. See Rob Sterne, PTAB Challenges Are a Costly, Uphill Battle for Patent Owners, IPWatchdog (Apr. 22, 2018), https://www.ipwatchdog.com/2018/04/22/ptab-challenges-costly-uphil-battle-patent-owners/id=96158 (“[C]ompanies like Unified Patents were formed to aggregate the PTAB opportunity . . . . These PTAB aggregators offer several benefits to accused infringers, including reduced PTAB cost, no estoppels, and the ability to circumvent the one-year challenge requirement. They act as a surrogate for the accused infringer, who never files a PTAB challenge.”).

 [107]. Id. (“PTAB challenges are very expensive, often topping [over $1 million] through Federal Circuit appeal. They add 2-4 years to most district court suits.”).

 [108]. See G. Marcus Cole, The Long Convergence: “Smart Contracts” and the “Customization” of Commercial Law, 92 S. Cal. L. Rev 851, 85354 (2019) (“In 1999, the National People’s Congress of the People’s Republic of China adopted the New Contract Law . . . . [I]ts contract law [now] reflects the law of commerce developed over centuries in the common law of the United States, England, and before that, the Law Merchant and the jus commune of continental Europe.”); Aaron D. Simowitz, Convergence and the Circulation of Money Judgments, 92 S. Cal. L. Rev 1031, 1036 (2019) (“On June 30, 2017, a Chinese court recognized a U.S. commercial money judgment—a first in Sino-U.S. history.”). 

 [109]. Steve Brachmann, China Streamlines Patent Examination for Internet, Big Data Patent Applications, IPWatchdog (Aug. 1, 2017), http://www.ipwatchdog.com/2017/08/01/china-stream
lines-patent-examination-internet-big-data-patent-applications/id=86356.

 [110]. Elizabeth Chien-Hale, A New Era for Software Patents in China, Law360 (May 25, 2017, 11:55 AM), https://www.law360.com/articles/924934/a-new-era-for-software-patents-in-china; see also Jack Ellis, China Relaxes Rules on Software Patentability – And the United States Loses More Ground, IAM (Mar. 3, 2017), https://www.iam-media.com/law-policy/china-relaxes-rules-software-patent
ability-and-united-states-loses-more-ground (“China’s apparent embrace of software patents stands in stark contrast to the situation in the United States, which many would see as the traditional home of the software industry.”).

 [111]. Ryan Davis, What You Need to Know About Patent Litigation in China, Law360 (Aug. 9, 2018), https://www.law360.com/articles/1072015.

 [112]. See id.

 [113]. Id.

 [114]. See Bing Zhao, China Introduces Legislation to Create a National IP Appeals Court, IAM (Oct. 24, 2018), https://www.iam-media.com/law-policy/china-introduces-legislation-create-national-ip-appeals-court.

 [115]. Grant Clark & Shelly Hagan, What’s Intellectual Property and Does China Steal It? Bloomberg: Quicktake (Mar. 22, 2018, 4:58 AM), https://www.bloomberg.com/news/articles/2018-03-22/what-s-intellectual-property-and-does-china-steal-it-quicktake.

 [116]. See Don Clark & Jack Nicas, Chinese Court Says Apple Infringed on Qualcomm Patents, N.Y. Times (Dec. 10, 2018), https://www.nytimes.com/2018/12/10/technology/apple-qualcomm-patents-ruling.html.

 [117]. See Kristen Jakobsen Osenga, Making Important Patents Worthless, Wash. Times (Oct. 15, 2018), https://www.washingtontimes.com/news/2018/oct/15/international-trade-commission-judge-gives-apple-a.

 [118]. Sui-Lee Wee, Made in China: New and Potentially Lifesaving Drugs, N.Y Times, Jan 3, 2018, at B1.

 [119]. See Simowitz, supra note 108, at 1033 (“China has decisively opened its courts to foreign judgments at the same time the Xi government has dramatically closed other economic doors. For example, the Xi government has imposed Maoist-era currency controls—an act of profound economic self-sabotage, in the view of most observers.”); Jonathan Tepperman, China’s Great Leap Backward, Foreign Pol’y (Oct. 15, 2018, 8:00 AM), https://foreignpolicy.com/2018/10/15/chinas-great-leap-backward-xi-jinping (reporting on China’s return to authoritarianism).

 

Patently Unjust: Tribal Sovereign Immunity at the U.S. Patent Office – Note by Christopher B. Phillips

From Volume 92, Number 3 (March 2019)
DOWNLOAD PDF


 

Patently unjust:
Tribal Sovereign Immunity at the U.S. Patent Office

Christopher B. Phillips[*]

TABLE OF CONTENTS

Introduction

I. Sovereign Immunity

A. Tribal Sovereign Immunity

1. Kiowa Tribe of Oklahoma v. Manufacturing
Technologies, Inc.

2. Michigan v. Bay Mills Indian Community

3. Upper Skagit Indian Tribe v. Lundgren

B. State Sovereign Immunity

1. Florida Prepaid Postsecondary Education Expense
Board v. College Savings Bank

2. The Eleventh Amendment in Administrative Proceedings:
State-Owned Patents and PTAB IPR Rulings

C. Sovereign Immunity’s Purposes

1. Tribal Sovereign Immunity’s Justifications

2. State Sovereign Immunity’s Justifications

II. Reasons for the Allergan-Saint Regis Deal

A. Are These Good Deals for Participants?

B. Are Such Deals a Good Thing?

III. Decisions in the Allergan-Saint Regis IPR

A. Patent Trial and Appeal Board 2018 Decision

1. PTAB Does Not Apply Tribal Sovereign Immunity in IPRs

2. Issues with the PTAB Decision

B. The Federal Circuit Decision to Not Apply Tribal
Sovereign Immunity in an IPR Proceeding

IV. TRIBAL SOVEREIGN IMMUNITY’S UNEQUAL STATUS
WITH STATE SOVEREIGN IMMUNITY

A. The Inconsistency

1. This Inconsistency Matters and Should Be Fixed

2. Addressing the Inconsistency

CONCLUSION

Introduction

The Indian Commerce Clause of the United States Constitution grants Congress plenary power to regulate Native American tribes.[1] In the absence of congressional action, a “dual sovereign” structure exists whereby the tribes are allowed—subject to constraints imposed by Congress—to exist and regulate their own affairs independently of the states and the Federal Government.[2] As a benefit of sovereignty, tribes possess sovereign immunity—an immunity similar to the immunity granted to states under the Eleventh Amendment.[3] Sovereign immunity as a doctrine is based in the common law and allows the sovereign to avoid being sued without its consent.[4] Tribal sovereign immunity, unlike state sovereign immunity,[5] is subject to congressional abrogation, meaning Congress can decide the circumstances whereby tribes are subject to suit without their consent.[6]

In September 2017, Allergan Pharmaceuticals (“Allergan”) made news when, in the middle of a challenge to its Restasis[7] patent’s validity in Inter Partes Review (“IPR”), it assigned its patent rights in the drug to upstate New York’s Saint Regis Mohawk Tribe (“Saint Regis”).[8] After receiving the patent rights, Saint Regis quickly licensed the Restasis patent back to Allergan for an immediate payment of $13.75 million, coupled with an additional $15 million per year in royalties.[9] Because the transaction gave Saint Regis ownership of the patent, the tribe became the patent’s defender in the IPR proceeding. The tribe moved to have the IPR terminated, asserting their immunity from suit under the doctrine of tribal sovereign immunity.

An IPR is an adversarial post-grant proceeding located in the United States Patent and Trademark Office (“USPTO”); it is overseen by a panel of Administrative Patent Judges.[10] Third parties utilize this forum to challenge the validity of patents that they believe were improperly granted.[11]

The deal between Allergan and Saint Regis ignited a public relations firestorm. Critics allege that Allergan acted in bad faith. They claim Allergan “rented” Saint Regis’s sovereign immunity to gain an improper protection from IPRs.[12] Former Senator Claire McCaskill of Missouri sponsored legislation to abrogate tribal sovereign immunity by eliminating it as an IPR defense.[13] In response to criticism, Allergan and other defenders of the deal, tried to shift public focus from the deal to an IPR system that they allege inadequately protects patent owners.[14]

The deal’s critics countered by arguing that IPRs are essential to the intellectual property system because IPRs provide a forum in which disputes over patents are resolved in a quick, cost-effective manner by experts in the field.[15] The alternative to IPRs is litigation in federal district court, which can be costly. In addition, IPRs are overseen by patent law experts, while district court litigation is in front of a judge who may have no familiarity with the complexities of patent law. Moreover, IPRs provide a final check on the USPTO’s grant of a patent by reviewing the granting decision; thus, it can be viewed as a last-chance mechanism by which the USPTO can ensure it has properly granted a patent. Thus, the proceeding’s purpose is to prevent unpatentable material from gaining patent protection which can harm the patent owner’s competitors and hinder further innovation.[16]

On the other hand, the deal has upsides.[17] The tribe received much-needed funds, leading attorneys for the tribe to advocate similar deals as a solution for Saint Regis, other tribes, and state universities in need of revenue.[18] Additionally, some proponents of stronger patent rights condemn IPR proceedings as patent “death squad[s],”[19] so engaging in workarounds of this kind is necessary for patent owners to protect their hard-earned and valuable patent rights.[20]

Nearly one year after the Allergan-Saint Regis deal was announced, on July 20, 2018, the Federal Circuit decided that tribal sovereign immunity does not apply in IPRs, rejecting Saint Regis’s assertion of the doctrine.[21] Therefore, unless the Supreme Court steps in to reverse this decision, the Allergan-Saint Regis deal, and any others like it, is dead.

Part I of this Note covers the history of tribal sovereign immunity, its close relationship to state sovereign immunity, the applicability of state sovereign immunity in intellectual property disputes and administrative proceedings, and the purposes of sovereign immunity. Part II proceeds by evaluating why the Allergan-Saint Regis deal was attractive enough to its participants that they were willing to endure the negative press in order to reap its benefits—patent owners get greater protection of their patents, while tribes receive much-needed funds for little to no cost.[22] The Allergan-Saint Regis deal existed because of concerns that IPRs do not adequately protect patent owners. Congress could take the chance to address these issues, so counterproductive end-runs—even unsuccessful ones—are no longer sought out by patent owners.[23]

 Part III analyzes the various legal decisions rendered in the Allergan-Saint Regis matter. First, it reviews and evaluates the Patent Trial and Appeal Board (“PTAB”)[24] decision from February 2018, finding the it filled with legal error. Next, it evaluates the July 2018 Federal Circuit decision, again finding legal error in refusing to apply tribal sovereign immunity in IPRs. Contra these decisions, tribal sovereign immunity should apply in IPR proceedings, even if this may cause issues from a policy standpoint. These policy issues can be addressed by Congress[25] and, even so, do not outweigh the importance of maintaining tribal sovereign immunity. Therefore, the Supreme Court should take up the issue and reverse the Federal Circuit by finding that tribal sovereign immunity applies in IPRs.

In fact, the Supreme Court would likely reverse the Federal Circuit if it takes the case because its recent decisions have generally protected tribal sovereign immunity.[26] These recent decisions have been rooted in the reasons for the doctrine, such as promoting the dignity of sovereigns, protecting sovereign resources, and protecting a sovereign’s unique culture. Given these purposes, the Court has been extremely hesitant to curtail tribal sovereign immunity without clear Congressional direction to do so. Rather, the Court generally defers to Congress on the issue. Recent cases showcase the Supreme Court giving explicit direction to Congress that it must take ownership over any fixes to problems arising from the assertion of tribal sovereign immunity. Reversal is made even more likely because the Supreme Court has found that state sovereign immunity applies in administrative proceedings and patent litigation. Further, PTAB precedent allows state sovereign immunity to be invoked in IPRs, giving even more reason for the Supreme Court to find that tribal sovereign immunity applies in IPRs, thus preventing unequal treatment of the two sovereigns.

Part IV builds on this contention by evaluating how making tribal immunity inapplicable in IPRs erodes tribal sovereign immunity’s status relative to state sovereign immunity given that state sovereign immunity has typically been allowed to apply in IPRsand administrative proceedings more generally. In fact, Supreme Court jurisprudence over the past several decades has become more protective of state sovereign immunity through the Eleventh Amendment. Therefore, the Federal Circuit decision in this case leaves tribal sovereign immunity out of line with state sovereign immunity in the context of administrative proceedings. Such incongruence should be remedied. This Note argues the best remedy to this issue is for tribal immunity to be brought in line with state immunity in IPRs, thus allowing tribal sovereign immunity to apply in IPR proceedings.

I.  Sovereign Immunity

Sovereign immunity is [a] judicial doctrine which precludes bringing suit against the government without its consent. Founded on the ancient principle that the King can do no wrong, it bars holding the government or its political subdivisions liable . . . unless such immunity is expressly waived . . . .[27]

A.  Tribal Sovereign Immunity

The Indian Commerce Clause of the United States Constitution provides that Congress has the authority to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”[28] By placing Indian tribes alongside states and foreign nations, the United States “recognized tribes among the family of sovereigns.”[29] Chief Justice Marshall classified tribes as “domestic dependent nations.”[30] The Court also has declared that tribes “are in many respects . . . foreign and independent nation[s],” so courts have no “power . . . to arrest the public representatives or agents of Indian nations . . . [or] compel them to pay the debts of their nation.”[31]

Today, the Supreme Court recognizes that “Indian tribes have long been recognized as possessing the common-law immunity from suit traditionally enjoyed by sovereign powers.”[32] In this respect, the Court firmly grounds tribal sovereign immunity in the “inherent powers of a limited sovereignty which has never been extinguished.”[33] In other words, tribal sovereign immunity predates the Constitution and continues to have effect. However, the enactment of the Constitution did place limitations on the immunityconsistent with tribes’ new status as domestic dependent nationsas Congress has the authority to abrogate the immunity through the Indian Commerce Clause.[34] But to do so, Congress must speak clearly, as “courts will not lightly assume that Congress in fact intends to undermine Indian self-government.”[35]

Congress’s power to abrogate tribal sovereign immunity has played a key role in the outcome of several cases. It is worth discussing two of these cases to provide a better understanding of how the Supreme Court approaches tribal sovereign immunity. This Section will conclude with a brief discussion of the Court’s most recent tribal sovereign immunity case, Upper Skagit Indian Tribe v. Lundgren. The Court in Lundgren avoided establishing any new rules for tribal sovereign immunity—the Supreme Court found that the lower courts had not yet had an opportunity to opine on legal issues of immense significance to the case, and since the Supreme Court is not generally a court of first impression, the justices remanded the case to the lower courts.[36] However, the dispute in that case concerned proceedings that could be viewed as similar to IPRs, so its various opinions and dicta are instructive.

1.  Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc.

In Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., the Supreme Court held that tribal sovereign immunity can be invoked by tribes when engaged in off-reservation, commercial activity.[37] The underlying dispute in Kiowa involved stock purchased by a tribal entity from the plaintiff.[38] As part of the transaction, a promissory note was signed in the name of a tribe by which the tribe agreed to pay the plaintiff $285,000 plus interest in exchange for stock.[39] When the tribe defaulted on its payments, an action was commenced in Oklahoma state court. Once in court, the tribe moved to dismiss the case because its sovereign immunity insulated it from suit; however, both the state trial court and the Oklahoma Court of Civil Appeals ruled in favor of the creditor because they reasoned that tribal sovereign immunity should not apply to breaches of contract that involve “off-reservation commercial conduct.”[40] After the Oklahoma Supreme Court declined to hear an appeal, the United States Supreme Court granted certiorari. Justice Kennedy began the majority opinion by reviewing the general principles of tribal sovereign immunity: “[a]s a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.”[41]

A key factual dispute in the case was whether the promissory note was signed on Indian territory or “beyond the Tribe’s lands;”[42] however, Justice Kennedy dismissed this issue because tribal sovereign immunity does not depend “on where the tribal activities occurred.”[43] Without Congressional abrogation of tribal sovereign immunity for off-reservation, economic conduct, the Supreme Court held for the tribe, allowing them to invoke their sovereign immunity from suit.

Justice Kennedy proceeded to lay out what the Court viewed as the shaky foundation of tribal sovereign immunity, given that it “developed almost by accident.”[44] The majority believed that “[t]here are reasons to doubt the wisdom of perpetuating the doctrine of tribal sovereign immunity because the it can economically “harm those who are unaware that they are dealing with a tribe” or have no awareness of tribal sovereign immunity.[45] However, the Court was not moved enough by these arguments to reverse, or even limit, the doctrine. Rather, the Supreme Court put the impetus on Congress to abrogate tribal sovereign immunity in situations where they find it necessary because “Congress is in a position to weigh and accommodate the competing policy concerns and reliance interests.”[46] Therefore, tribes enjoy sovereign immunity protections even when engaging in economic activity outside of reservations. The Supreme Court had the opportunity to reconsider this issue again in 2014. The result remained the same.

2.  Michigan v. Bay Mills Indian Community

When the Supreme Court decided Michigan v. Bay Mills Indian Community in 2014, it reaffirmed the basic holding from Kiowa that tribal sovereign immunity applies to commercial activity outside of Indian lands unless otherwise abrogated by Congress.[47] Michigan had asked the Supreme Court to find the federal statute at issue authorized their suit and abrogated tribal sovereign immunity, or alternatively, reverse Kiowa’s holding that tribal sovereign immunity applies to commercial activity on non-Indian lands.[48]

The Supreme Court first engaged in statutory construction and found that the statute did not clearly express a Congressional intent to abrogate tribal sovereign immunity in the context at issue.[49] The Court then noted that Michigan could have negotiated a waiver of the tribe’s immunity at the outset of their dealings and, in fact, had significant leverage to do so.[50] Therefore, this was not a situation where parties dealing with tribes were left with no recourse. It is important to remember that parties remain free to negotiate waivers of sovereign immunity, thus protecting themselves in the event future litigation is required in the matter.[51]

Next, the Bay Mills Court turned its attention to reviewing the Kiowa decision and the arguments made in favor of overruling its basic holding. The Court made four arguments under stare decisis that counted against overturning its precedent. First, the decision in Kiowa was only one decision of many in a long line of precedent upholding tribal sovereign immunity.[52] Second, the Supreme Court had relied on the Kiowa precedent as a basis for subsequent rulings. Third, the Court noted that tribes, as well as individuals and entities doing business with them, have relied on the Kiowa precedent when structuring their business dealings. Finally, the Court reiterated that the law places the power in Congress to abrogate tribal sovereign immunity—not in the Court. Therefore, in order “[t]o overcome all these reasons for [the] Court to stand pat, Michigan . . . need[ed] an ace up its sleeve.”[53]

Michigan produced no ace, leaving the Court to explain that Michigan was simply rehashing the same functional arguments promoted by Kiowa’s plaintiff—because tribal business activities have become more detached from tribal governmental interests, sovereign immunity should no longer apply to a tribe’s commercial activity.[54] In Kiowa, the Court was sympathetic to these functional arguments, but still rejected them in favor of tribal sovereign immunity; the Bay Mills Court did the same.[55]

Importantly, after the Kiowa decision, Congress expressly considered abrogating tribal sovereign immunity in the context of commercial activity on non-Indian lands, but rejected a law that overturned Kiowa’s holding.[56] Therefore, Congress had spoken directly on the issue, leading the Court to defer to Congress’s decision and uphold tribal sovereign immunity for commercial activities taking place outside of tribal land.[57] Deferring to Congress kept Bay Mills in line with Justice Kennedy’s Kiowa opinion, which rested its holding on the fact that Congress had the authority to abrogate tribal sovereign immunity and was better positioned to do so, since it could weigh the competing policy concerns. Bay Mills demonstrates the uneasiness the Supreme Court feels towards abrogating tribal sovereign immunity without clear congressional abrogation.

3.  Upper Skagit Indian Tribe v. Lundgren

In May 2018, the Supreme Court decided Upper Skagit Indian Tribe v. Lundgren.[58] The dispute concerned tribal land that the Upper Skagit Indian Tribe’s neighbors (the Lundgrens) claimed to have adverse possessed.[59] The Lundgrens “launched a quiet title lawsuit against the Upper Skagit tribe . . . after the tribe attempted to assert ownership over a strip of land . . . the Lundgrens claim[ed] belong[ed] to them.”[60] The Tribe responded to this action by invoking their sovereign immunity. Washington State courts resolved the issue in favor of the Lundgrens, holding that “the case could go forward under in rem jurisdiction,” even though the court did not have jurisdiction over the Tribe due to sovereign immunity.[61]

This state court holding created a new exception to the doctrine of tribal sovereign immunity. On review, the Supreme Court remanded the case to the state court for further review, ultimately ignoring the tribal sovereign immunity issues—though it did touch on those issues in dicta and dissenting and concurring opinions.[62] The Court remanded the case on a procedural grounds because the lower court decisions improperly interpreted a Supreme Court precedent;[63] thus, the parties in the case were asking the Supreme Court to answer a legal question that had not yet been addressed by the lower courts. Namely, the parties wanted the Court to find an “immovable property” exception to the doctrine of tribal sovereign immunity.[64] In remanding the case, the Court noted that it was the importance of the question that lead them to refrain from answering the “immovable property” exception question—“[d]etermining the limits on the sovereign immunity held by Indian tribes is a grave question; the answer will affect all tribes, not just the one before us.”[65] Therefore, whether an immovable property exception exists is an open question. Due to the similarity of the issues, the eventual resolution of this case will be instructive for the application of tribal sovereign immunity in IPRs and must be watched closely.

Justice Thomas filed a strongly worded dissent arguing that the “immovable property” exception was strongly established, thus no need to remand existed.[66] He found the idea that an entity (in this case, a tribe) could assert immunity in a suit over land situated inside another sovereign’s jurisdiction ridiculous. Further, “[a]llowing the judge-made doctrine of tribal immunity to intrude on such a fundamental aspect of state sovereignty contradicts the Constitution’s design.”[67] In making such an argument, Justice Thomas articulates a view of tribal sovereign immunity that would naturally be extended to prevent the doctrine’s assertion in IPR proceedings—since patents are historically the jurisdiction of the federal government, allowing tribal sovereign immunity there may “intrude” on the federal government’s sovereignty.[68]

B.  State Sovereign Immunity

Another set of sovereigns recognized by the Constitution is the states.[69] However, the basis for state sovereign immunity is explicitly recognized in a constitutional amendment.[70] The Eleventh Amendment says “[t]he 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 of any Foreign State.”[71]

A few years after the Eleventh Amendment’s enactment, the Supreme Court, in Hans v. Louisiana, held that the amendment imposed a broad understanding of state sovereign immunity.[72] This broad understanding of state sovereign immunity has largely been reaffirmed by the Supreme Court.[73] Thus, unlike tribal sovereign immunity, which can be abrogated by Congress, states enjoy sovereign immunity as a Constitutional right.[74]

In patent cases, the Supreme Court has held that states cannot be subject to suit for patent infringement due to their sovereign immunity.[75] The Supreme Court has not addressed whether a state is immune from a direct challenge to the validity of its patents as would occur if a state-owned patent was challenged in an IPR proceeding.[76] However, the USPTO has opined on the issue. Several 2017 PTAB decisions hold that state-owned patents are not subject to IPR challenges due to state sovereign immunity. But these holdings are subject to the condition that sovereign immunity would be deemed waived if the state had asserted the patent in litigation against the IPR petitioner. Both the Supreme Court case and these PTAB decisions are discussed in more detail below.

1.  Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank

In Florida Prepaid, the Supreme Court considered whether Congress could abrogate state sovereign immunity by allowing private suits against state entities that were infringing patents under the Patent Act.[77] At issue was the Patent Act’s clear abrogation of state sovereign immunity: “[a]ny State . . . shall not be immune, under the [E]leventh [A]mendment of the Constitution of the United States or under any other doctrine of sovereign immunity, from suit in Federal court . . . for infringement of a patent.”[78]

To address this issue, the Supreme Court first discussed its holding in Seminole Tribe of Florida v. Florida from only a few years prior. Seminole Tribe reaffirmed that Congress is not able to use its Article I powers to abrogate state sovereign immunity.[79] Rather, the only way state sovereign immunity could be abrogated is if Congress properly acted through its Fourteenth Amendment enforcement powers (“Section 5 enforcement powers”).[80] Because a patent is property for the purposes of the Fourteenth Amendment’s Due Process Clause, Congress could have theoretically used its Section 5 enforcement powers to abrogate state sovereign immunity.[81] However, since Section 5 enforcement powers are remedial, Congress can only use them when the Fourteenth Amendment’s substantive provisions are being violated and Congress needs to step in to prevent further violation of the substantive provisions.[82] Therefore, the question became whether this was a proper use of Congress’s enforcement power. After engaging in a thorough analysis under the City of Boerne v. Flores[83] Section 5 enforcement test, the Supreme Court found the Patent Act’s abrogation of state sovereign immunity was not a proper exercise of Congress’s Section 5 enforcement power.[84]

While Florida Prepaid addressed a state entity’s alleged infringement of a private party’s patent, it is instructive for its discussion of state sovereign immunity’s interplay with patent rights—allowing states to assert their sovereign immunity if made a defendant in a patent suit. A natural extension from this holding would be that state-owned patents cannot have their validity directly challenged.[85] Such a challenge to a state-owned patent’s validity would have to be in an IPR proceeding because if a state asserts their patent in an infringement suit, the suit will suffice as a waiver of the state’s sovereign immunity such that the alleged infringer would be able to challenge the patent’s validity as a defense to patent infringement.[86] Although no federal appellate court has decided if direct challenges to state-owned patents are barred by sovereign immunity, PTAB decisions in 2017 have found that state sovereign immunity protects state-owned entities from having their patents attacked in IPR proceedings.[87] A general overview of these decisions is provided in this next Section.

2.  The Eleventh Amendment in Administrative Proceedings: StateOwned Patents and PTAB IPR Rulings

Federal Maritime Commission v. South Carolina State Ports Authority (“FMC) extends a state’s Eleventh Amendment immunity beyond just Article III proceedings, covering administrative proceedings as well.[88] Additionally, in Vas-Cath, Inc. v. Curators of University of Missouri, the Federal Circuit[89] held that Eleventh Amendment immunity applies to interference proceedings[90] at the USPTO.[91] Building on this Supreme Court and Federal Circuit precedent, PTAB issued several decisions in 2017 regarding the applicability of state sovereign immunity in IPRs.[92]

In Covidien LP v. University of Florida Research Foundation, Inc.,[93] PTAB relied on FMC and Vas-Cath to hold that state sovereign immunity is a defense in IPR proceedings.[94] But to directly apply these two precedents, PTAB needed to address a few things. First, they dealt with the argument that since patents are “public rights” they can be subject to any statutory conditions—such as being subject to review in an IPR proceeding to ensure that the patent was properly granted.[95] PTAB rejected this argument outright as “unpersuasive” because there had been no “case law, or persuasive authority” holding that “a state’s Eleventh Amendment immunity may be limited or abrogated by a public rights exception.”[96] Second, PTAB also rejected the argument that sovereign immunity is irrelevant in IPRs because the “proceedings are directed to the patent itself,” and therefore, are not a private claim against the state.[97] In so deciding, PTAB asserted that the primary function of protecting a sovereign from suit is not monetary, though that is one purpose, but is according them “the respect owed . . . as joint sovereigns.”[98] This tracks recent Supreme Court decisions, the details of which are covered in Section I.C. Additionally, PTAB conceived of the IPR proceeding as a suit between parties rather than as a challenge directed solely to the patent.[99] Therefore, PTAB concluded that it is proper to apply the FMC framework in IPRs.[100]

Applying the FMC framework to IPRs, PTAB began by reaffirming the fact that “immunity applies regardless of whether a private plaintiff’s suit is for monetary damages or some other type of relief.”[101] Therefore, the “absence of monetary and injunctive relief” was irrelevant to the determination of whether state sovereign immunity could be invoked.[102] Next, PTAB considered the nature of IPRs. While noting that there were some differences in procedure and substance between IPRs and civil litigation, PTAB focused on the fact that IPRs are “adversarial” and intended to “resemble civil litigation in federal courts.”[103] Therefore, PTAB held that Eleventh Amendment immunity could be invoked in IPRs.[104]

However, PTAB went further in order to address the patent challenger’s policy argument that allowing a state to assert sovereign immunity in IPR would lead to regrettable outcomes.[105] PTAB conceded that the practical effect of the ruling would mean that states and state-owned entities no longer need to worry about having their patents challenged in the proceeding; however, the PTAB panel pointed out that exempting states from suit is exactly the point of the Eleventh Amendment.[106] The amendment, in fact, explicitly places state dignity as a sovereign above other practical considerations that may merit subjecting the state to suit.[107] Moreover, PTAB pointed out that “there is no evidence that . . . harm to the patent system . . . will come to pass.”[108]

In December 2017, PTAB convened an expanded panel of Administrative Patent Judges to hear another IPR case involving state sovereign immunity.[109] In this case, Ericsson Inc. v. Regents of the University of Minnesota,[110] PTAB’s “Chief Judge Ruschke expanded the panel from the normal three administrative patent judges to seven judges, including himself and the Deputy and Vice Chief Administrative Patent Judges” and wrote the opinion himself.[111] As such, the resulting decision can be understood as PTAB’s authoritative position on the applicability of state sovereign immunity in IPRs. The expanded panel reaffirmed the prior PTAB holdings by concluding that state sovereign immunity can be invoked in IPR proceedings.[112] In coming to this conclusion, they followed Covidien’s reasoning.[113]

However, this expanded PTAB panel placed some limits on a state’s ability to invoke its sovereign immunity. The issue before the expanded panel was whether the state-entity waived its sovereign immunity by filing a patent infringement action in federal district court against the party that had instituted the IPR proceeding.[114] The state-entity argued that waiver of sovereign immunity ought to be limited to the forum in which any waiver occurred.[115] PTAB disagreed, holding that the state waived its sovereign immunity for the purposes of subsequent IPR proceedings when it brought the patent infringement suit.[116]

This holding could prove to be a slight limitation on the usefulness of deals similar to the one between Allergan and Saint Regishowever, as will be discussed in Part III, in light of Saint Regis Mohawk Tribe v. Mylan Pharm. Inc.,[117] the deal would be between a patent owner and a state entity rather than a tribe. This is because a party who has been sued for patent infringement in district court could simply initiate IPR review of the asserted patent. The state entity would then be barred from asserting its sovereign immunity as it would be deemed waived by the commencement of the infringement suit against the party who is challenging the patent in the IPR. However, observers of the patent system believe that Ericsson’s holding on waiver could prove to be “controversial on appeal.”[118] This is because “[w]aivers of sovereign immunity . . . are typically forum specific, and [PTAB] did not cite any direct precedent for its ruling” that extended the waiver doctrine to encompass litigation in a separate forum.[119] How this issue is resolved should be watched carefully as it could have far-reaching consequences for patent owners wishing to assert sovereign immunity in IPRs.[120]

While these PTAB decisions have not authoritatively settled the question of state sovereign immunity as a defense in IPR, they provide examples of legal reasoning that may indicate how state sovereign immunity will be dealt with in IPRs if the Federal Circuit opines on the issue.[121] This is because the Federal Circuit is likely to affirm PTAB’s legal analysis.

Through January 15, 2018, the Federal Circuit has affirmed PTAB on every issue raised in cases related to the IPR process just under seventy-four percent of the time.[122] Moreover, the PTAB decisions in Covidien and Ericsson follow what the Federal Circuit held in Vas-Cath. In addition, the Supreme Court’s recent state sovereign immunity cases have viewed sovereign immunity’s primary purpose as protecting the respect due to sovereigns. Because PTAB’s decision rests on similar reasoning, it is likely PTAB will be upheld in the event the decision somehow made it to the Supreme Court.

C.  Sovereign Immunity’s Purposes

Sovereign immunity as a historical doctrine developed out of the idea that “the King c[ould] do no wrong.”[123] This was justified on the grounds that the “King” created the law within a nation or state, and therefore could not act illegally.[124] However, this justification fell out of vogue in America in the late eighteenth century and was replaced with “a rationale emphasizing the doctrine’s benefit to society.”[125] This newer strain of thought stressed that the doctrine was necessary to protect the “sovereigns funds.”[126] Sovereigns use their money to provide services to their people, and if forced to compensate every person with a claim, sovereigns would have less money to spend on providing social services, among other necessary governmental services. While the protection of sovereign funds has been mostly abandoned as a reason to protect states and the federal government via sovereign immunity,[127] it still provides a normative basis for tribal sovereign immunity.[128]

1.  Tribal Sovereign Immunity’s Justifications

Tribal sovereign immunity can be justified with a variety of functional considerations. First, it allows tribes to protect their economic interests, so they can be self-sufficient—in other words, tribal resources will be better protected. Justice Sotomayor espoused this view in her Bay Mills concurring opinion. She wrote in concurrence to provide normative reasons supporting the outcome that reasserted the doctrine of tribal sovereign immunity because she viewed the doctrine as under attack, with even the majority opinion questioning the doctrine’s normative foundations.[129]

Justice Sotomayor bolstered the argument in favor of tribal sovereign immunity with an in-depth discussion of the unique issues facing tribes and the ways sovereign immunity helps. First, she pointed out that while some tribes have become “substantial and successful commercial actors,” most tribes do not participate in “lucrative commercial activity.”[130] Furthermore, “[a] key goal of the Federal Government is to render Tribes more self-sufficient, and better positioned to fund their own sovereign functions, rather than relying on federal funding.”[131] The idea is to promote tribal self-sufficiency by allowing them space to operate in the commercial arena so they can make money to perform basic functions expected of sovereigns. These functions include providing schools, roads, police, among other services.

Promoting tribal self-sufficiency is an important goal because tribes are uniquely situated compared to the other sovereigns in the United States when it comes to raising revenue to fund their government. This is because tribes face significant hurdles in imposing taxes. “[T]ribes have no power to impose taxes on non-Indian owners of land inside the reservation even if the tribe provides significant services to the owner.”[132] Additionally, tribes are deprived “of the usual means of raising government funds” as they are significantly limited in their ability to impose property taxes.[133] Tribal governments are not allowed to impose “real property tax on trust lands, which are owned by the federal government.”[134] In some reservations, trust land is equal to all of the tribe’s land.[135] Finally, raising revenue through means such as income taxes is unrealistic because “proportionally more Indians qualify for negative income taxes,” which means they actually pay less in taxes than they receive in benefits.[136] Rather, tribes’ main source of income comes from “federal transfers, which are widely acknowledged to be inadequate . . . and . . . tribe-owned enterprises.[137] These enterprises suffer from less competitive pricing, lower productivity, and worse profitability when compared to privately owned enterprises.[138]

Given these limitations on a tribe’s ability to raise money through taxation, its funds could be significantly depleted if it is expected to pay out on every claim against it. This is especially true for tribes because they are smaller sovereigns acting within much larger sovereigns—the U.S. federal government as well as state governments. As smaller sovereigns, tribes have less money to work with and therefore can be economically crippled if they end up in a situation where they are forced to pay many judgements. To illustrate, imagine a tribe consisting of several thousand people. The tribe could be engaged in economic activity with thousands of people, and if those individuals with whom they are engaged in business have claims against them, the tribe could be wiped out. For this reason, sovereign immunity is essential to maintaining the financial well-being—and independence—of tribes which directly impacts their ability to govern themselves.

In addition to promoting self-sufficiency through stronger economic development, tribal sovereign immunity promotes “Tribal Self-Government.”[139] This idea comes from the place tribes hold in the United States. Tribes are placed alongside foreign nations and states in the United States Constitution’s Commerce Clause and are treated, in Chief Justice Marshall’s words, as “domestic dependent nations.” As this status indicates, tribes govern their own territories. Therefore, they ought to be granted the same dignity afforded to other sovereigns—namely, immunity from suit in the absence of a waiver or congressional abrogation.[140] It is a matter of respect for them to be treated like other sovereigns in the United States.[141]

Finally, tribal sovereign immunity preserves tribal cultural identity.[142] While maintaining a distinct culture in this interconnected world may be difficult, sovereign immunity assists tribes accomplish this by preventing outside forces from imposing foreign rules and values.[143] Because sovereign immunity prevents tribes from being subject to suit in non-Indian tribunals, the tribe does not need to alter its behavior to conform with outside legal and social norms, thus allowing the tribe to chart its own path regarding the law. To the extent law is influenced by culture rather than the reverse,[144] tribal sovereign immunity provides a way for tribes to control their own culture by being free from the influence of another sovereign’s laws.[145]

2.  State Sovereign Immunity’s Justifications

Like tribal sovereign immunity, state sovereign immunity rests on justifications such as protecting state resources and promoting sovereign dignity. The Eleventh Amendment was passed due to concern with protecting state resources after the Revolutionary War because most states had accumulated large debts.[146] Recently, the Supreme Court has focused on the “preeminent purpose” of promoting sovereign dignity.[147] However, because state sovereign immunity exists as a constitutional right, it is unlike tribal sovereign immunity, in which the purposes of the doctrine loom larger because Congress can abrogate it at any time.

II.  Reasons for the Allergan-Saint Regis Deal

The basic idea behind Allergan’s action is simple. The deal made Saint Regis the owner of the Restasis patent, which should leave the Tribe to defend the patent’s validity in any IPR proceeding. In defending the Restasis patent in the IPR, Saint Regis’s Motion to Terminate the proceeding argued: “[t]he tribe is a sovereign government that cannot be sued unless Congress unequivocally abrogates its immunity or the tribe expressly waives it. Neither of these exceptions apply here.”[148] Saint Regis is correct that the tribe’s sovereign immunity has not been abrogated by Congress for IPRs and that Saint Regis has not waived its immunity. In fact, in IPR decisions from 2017, PTAB validated this approach in the context of state sovereign immunity by claiming lack of jurisdiction over a proceeding involving a state-owned patent. As a result, it appeared that by slightly extending PTAB’s logic from its 2017 state sovereign immunity decisions, the Restasis patent would be safe from being challenged in the IPR. However, as will be discussed in Part III, both PTAB and the Federal Circuit disagreed and held that tribal sovereign immunity does not apply in IPR proceedings.

Even so, the motives for the Allergan-Saint Regis deal are still important to understand. As discussed in Section I.B.2, states and state-owned entities are still able to assert sovereign immunity in IPR proceedings, which could lead to patent owners seeking deals with those entities as possible protection for their patents. Therefore, it is possible—though perhaps unlikely—that these sorts of deals could proliferate.

A.  Are These Good Deals for Participants?

Yes. The deals are extremely attractive for tribes, states, and patent owners. They would allow patent owners to evade challenges to their patents in IPR proceedings, which is extremely valuable due to high invalidation rates of patents in IPRs. Independent analysis of invalidation in IPRs finds that anywhere between 62% to 92% of the patents challenged are invalidated, depending upon the technology at issue.[149] Moreover, a recent review found that fifty-eight patents had been invalidated by PTAB on the exact same grounds with which a district court had previously upheld their validity, thus demonstrating PTAB’s “slanted playing field.”[150] In addition, challenged patents represent a substantial asset for the patent owner. In Allergan’s case, the Restasis patent is valued at $1.5 billion.[151] The price of having such a valuable patent invalidated is steep. Allergan prepared for such a possibility by announcing it would layoff over 1,000 employees, costing the company an expected $125 million just in severance expenses.[152] Companies, therefore, have strong incentives to adopt measures to protect their intellectual property.[153] Paying several million dollars to “rent” a tribe’s or state’s sovereign immunity is a small price to pay to protect the patent’s validity.[154]

For tribes, deals like these provide a good way to earn much-needed money.[155] The Saint Regis Mohawk Tribe has 15,600 members and is geographically centered in upstate New York.[156] Saint Regis planned to put this money to use by enhancing government services such as “health, welfare, education, housing and other services.”[157] As discussed in Section I.C, tribes have a hard time raising revenue because they have a limited tax-base. Therefore, tribes must get creative to raise money. While casinos are a lucrative option for some tribes, a large majority of tribes have not been able to tap into casinos for any meaningful amount of revenue.[158] Providing this service to pharmaceutical and technology companies who have patents being challenged in IPRs would provide substantial revenue raising opportunities for tribes that desperately need it.[159]

B.  Are Such Deals a Good Thing?

No. In the case of Allergan and Saint Regis, the two parties use Saint Regis’s sovereign immunity to escape a procedure by which Allergan’s Restasis patent may be invalidated through a mechanism designed by Congress. This violates common notions of fairness by engaging in a “sham” transaction through which Allergan keeps a potentially improperly granted patent because they had the money to “rent” Saint Regis’s sovereign immunity. The deal acts as a loophole through which a big pharmaceutical companythat has access to expensive lawyershas exploited a process in a way that is completely unavailable to patent owners who possess fewer resources.

Arguments made on behalf of Saint Regis and Allergan, while satisfying on the surface, ultimately stumble under scrutiny. An argument supporting this deal notes that IPRs have been deemed a patent “death squad” as most patents are invalidated by the process.[160] Critics of IPRs have noted that by engaging in deals like the one between Allergan and Saint Regis, economically valuable patents may be better protected, thus stimulating more investment in research and development on products that improve people’s lives.

Yet this argument is satisfactory only to the extent that it highlights needed reforms to IPRs. While the IPR process may be flawed, those flaws should not be cured by creating an end run around the Patent Office. Doing it this way diminishes the credibility of the entire system, misallocates money by paying millions of dollars to lawyers and tribes to make the deal, and only benefits companies with resources to pay for the expensive licensing agreement and the lawyers who structure it. Therefore, any fixes to the IPR process should be done by Congress—not by private actors.[161]

Others find the deal appealing because it provides a much-needed revenue source to economically struggling tribes.[162] However, while it does enhance tribal economic independence, it accomplishes that goal by disrupting the congressionallydesigned patent system. Where tribes need to find more funding sources, steps should be taken independently of the patent system. Addressing one problem while undermining an unrelated government program is not a sustainable way to fix anything.

Furthermore, while this could boost funding for a small class of tribes, the actual benefit to most tribes will likely be marginal. Money received in these ventures could be difficult to rely on as the amount may vary dramatically over time. In fact, the appeal of such a deal could hurt early participants the most. As more sovereigns[163] recognize the upside, benefits could become more widely spread, thus leading to fewer benefits for all recipients as the funding sources are spread across a larger number of entities.[164] In addition, if the practice does not become widespread, that means tribes who need the revenue are not reaping the benefits, thus further limiting the benefit of these deals as a solution to tribal revenue issues.

As a panacea for tribal funding, then, this is a poorly targeted program. Either only a select few tribes will benefit, leaving many unable to obtain its benefits, or many will take advantage of these deals, meaning the benefit to each tribe will be small and the amount received will shrink over time as more sovereign actors take advantage of the practice. The problems faced by tribes in the financial sphere is something that should be addressed. However, promoting more deals like the one between Allergan and Saint Regis is not an efficacious solution because these deals will provide only a marginal benefit, at best.[165]

III.  Decisions in the Allergan-Saint Regis IPR

Since the deal was made in September 2017, litigation has proceeded over the applicability of tribal sovereign immunity of IPRs, resulting in opinions from both PTAB and the Federal Circuit Court of Appeals. Both opinions found tribal sovereign immunity does not apply in IPRs. As will be discussed below, a proper reading of PTAB, Federal Circuit, and Supreme Court precedent demonstrates that these decisions were incorrect.

A. Patent Trial and Appeal Board 2018 Decision

1.  PTAB Does Not Apply Tribal Sovereign Immunity in IPRs

On February 23, 2018, PTAB denied Saint Regis’s Motion to Terminate IPR proceedings due to tribal sovereign immunity.[166] After going through the history of the deal between Allergan and Saint Regis, PTAB rejected that the Supreme Court’s decision in FMC[167]which allowed state sovereign immunity to be invoked in administrative proceedings—had any bearing on the application of tribal sovereign immunity in administrative proceedings.[168] Moreover, it distinguished its own decisions allowing state sovereign immunity to be invoked in IPRs because “the immunity possessed by Indian Tribes is not co-extensive with that of the states”[169] and “there are reasons to doubt the wisdom of perpetuating the . . . doctrine.”[170]

PTAB further based its decision on Congress’s plenary control over tribal sovereign immunity and noted that the Patent Act is a generally applicable statute that places conditions on the grant of a patent, which includes the possibility of being subject to IPR proceedings.[171] PTAB relied on a variety of circuit court decisions, noting that only in limited circumstances do generally applicable laws not apply to tribes, then found that IPR proceedings do not meet these limited circumstances.[172] PTAB also relied on prior cases in which government administrative enforcement actions against tribes were deemed not to have implicated tribal sovereign immunity because “tribes cannot impose sovereign immunity to bar the federal government from exercising its trust obligations.”[173] Moreover, IPRs are not the type of suit to which an Indian tribe would traditionally enjoy immunity under the common law.”[174]

PTAB concluded this section of the opinion by noting that it does “not exercise personal jurisdiction over the patent owner,” rather, it is over “the challenged patent in an inter partes review proceeding.”[175] In a footnote, the opinion rejects characterizing the proceedings as in rem because they could find no “controlling precedent” for that proposition.[176]

Finally, PTAB concluded that even if tribal sovereign immunity applied in IPRs, the proceeding may continue because Allergan still effectively owns the patent.[177] Allergan is found to be a “patent owner” because the license from Saint Regis to Allergan “transferred ‘all substantial rights’ in the challenged patents”—including the “right to sue for infringement,” the “right to make, use, and sell products or services under the patents,” the “right to sublicense,” the “reversionary rights in patents,” the “right to litigation or licensing proceeds,” among others.[178] In addition, the “tribe is not an indispensable party” to the proceeding, thus, PTAB allowed the IPR to continue without the Tribe.[179] This decision was appealed by Saint Regis and Mohawk to the Federal Circuit.[180]

2.  Issues with the PTAB Decision

PTAB’s decision suffered from numerous flaws that should have made it a prime candidate for reversal on appeal. First, its rejection of state sovereign immunity precedent dealing with the doctrine’s applicability in administrative proceedings because tribal immunity is “not co-extensive with that of the States”[181] dramatically misunderstands the Supreme Court’s tribal sovereign immunity case law. This quote from Kiowa, when read in context, actually stands for the proposition that tribal sovereign immunity is broader than state sovereign immunity in some respects.[182] Yet PTAB relied on it for just the opposite proposition; the panel’s fundamental misunderstanding of Kiowa is evident throughout the rest of its opinion.

Other than this out-of-context quote from Kiowa, PTAB provided no reasons for holding that tribal sovereign immunity is situated differently from state sovereign immunity in IPRs or other administrative proceedings. PTAB did not attempt to distinguish other administrative adjudications that found tribal sovereign immunity applicable; rather, it dismissed them all as non-binding and simply asserted that tribal sovereign immunity is so different from state sovereign immunity that it must not apply.

The remaining arguments from PTAB hold up just as poorly under scrutiny. PTAB asserted that only in limited circumstances do generally applicable laws not apply to tribes. However, this misunderstands the issue, which is whether the tribe can assert its sovereign immunity from suit—not whether the tribe must follow a particular law. As PTAB decided in Covidien, which followed FMC and held that state sovereign immunity applies in IPR proceedings, IPRs are adversarial in nature and modeled on civil litigation.[183] Covidien explicitly found that IPRs are properly conceived of as a civil suit between two parties, rather than as an administrative enforcement proceeding.[184] PTAB’s holding in the Saint Regis case is directly at odds with its own holding in Covidien and Ericssonthe latter being PTAB’s authoritative view on state sovereign immunity in IPRs given the make-up of the expanded panel that decided it. Framing the IPR component of the Patent Act as an enforcement proceeding (rather than an adjudicative proceeding) is incorrect according to PTAB’s own decisions. Rather, as Covidien held, IPRs are modeled as a civil suit, which is the type of proceeding in which tribes historically have sovereign immunity protection.[185]

PTAB also argued its jurisdiction in IPRs is over “the challenged patent,” rather than over the tribe itself.[186] However, Covidien, again, is instructive as it reached the exact opposite conclusion when state sovereign immunity was at issue. PTAB’s Covidien decision applied state sovereign immunity because sovereign immunity’s “central purpose is to accord the States the respect owed them as joint sovereigns.”[187] Moreover, PTAB in Covidien pointed to the adversarial nature of the proceeding, the parties’ involvement in it, and the procedure imposed on PTAB’s authority to review the challenged patents as reasons the proceeding should be understood as having jurisdiction over the patent owner, rather than the patent itself.[188] PTAB in the Saint Regis case does not attempt to explain why it reaches precisely the opposite result in the tribal sovereign immunity context.[189]

PTAB reaffirmed Covidien’s basic holding in Ericsson.[190] There, PTAB convened an expanded panel in which PTAB’s Chief Judge Ruschke wrote the opinion.[191] After Ericsson, it can be reasonably concluded that the authoritative PTAB view applies state sovereign immunity in IPR proceedings for the reasons provided in Covidien. By adopting Covidien’s reasoning on the applicability of state sovereign immunity to IPRs, the Ericsson holding rests upon conclusions of law that the Saint Regis panel directly contradicts without providing any explanation.

In the Saint Regis proceeding, PTAB simply asserted that tribal immunity is different and moved on. However, tribal sovereign immunity is not different from state sovereign immunity in this context. Both doctrines promote the dignity of the sovereign, while helping protect the sovereign’s economic well-being—the latter reason being even more compelling for tribal sovereign immunity given the economic difficulties tribes experience compared to states. The better result would have been to extend Ericsson and Covidien to find that tribal sovereign immunity applies in IPRs. Unfortunately, the decision appeared to be motivated by a desire to stop deals like one between Allergan and Saint Regis from becoming an option for patent owners.[192] The main difference between the state proceedings and the tribal proceeding is that the tribal proceeding garnered significant negative press. Unfortunately, simply shutting down the Allergan-Saint Regis deal ignores the negative impacts on tribal sovereign immunity going forward.

    1.  The Federal Circuit Decision to Not Apply Tribal Sovereign Immunity in an IPR Proceeding

The Federal Circuit approached the question of whether tribal sovereign immunity applies in IPRs in much the same way as PTAB did, also finding that tribal sovereign immunity does not apply in IPRs.[193] After briefly discussing the case’s procedural history, the Federal Circuit began by laying out the rules of tribal sovereign immunity. It noted that “[g]enerally, immunity does not apply where the federal government . . . engages in an investigative action or pursues an adjudicatory agency action,” while acknowledging the FMC rule that immunity can “apply in federal agency proceedings.[194] The court described the FMC rule as allowing immunity in “adjudicative proceedings brought . . . by a private party,” but not allowing immunity in “agency-initiated enforcement proceedings.”[195] Therefore, the key question in front of the Federal Circuit was which of these two types proceedings is most analogous to IPRs.[196]

 However, answering this question was not straightforward for the Federal Circuit, as it noted IPRs are complicated, “hybrid proceeding[s]” that combine both traditional adjudicatory aspects with characteristics similar to “specialized agency proceeding[s].”[197] The Federal Circuit reviewed “several factors” that led it to determine that “IPR[s] [are] more like an agency enforcement action than a civil suit.”[198]

 First, IPRs are only instituted if the USPTO Director decides to grant review, much like a traditional enforcement action. While it is a private party that requests the review, the Director has “broad discretion in deciding whether to institute review.”[199] Therefore, IPRs are unlike the agency in FMC, which could not refuse to adjudicate private complaints. This means that a federal official is the one deciding to haul a sovereign into “court,” rather than a private party. Second, even though most IPRs are conducted in an adversarial nature between two private parties, the USPTO retains the ability to “continue review even if [a party] chooses not to participate.”[200]

 Next, the Federal Circuit pointed to the “substantial” differences between IPR procedures and the Federal Rules of Civil procedure.[201] It noted the far greater extent of discovery in district court litigation, the opportunity for live testimony at trial, and various differences in pleadings, with the Federal Rules being more liberal in allowing changes. Finally, the Federal Circuit noted that despite the USPTO having options for reexamination that are more inquisitorial than IPR proceedings—in which even the tribe acknowledged sovereign immunity would not apply under FMCthe existence of these options does not make IPRs adjudicatory proceedings. Rather “[w]hile IPR[s] present a closer case for the application of tribal immunity than reexamination, [the Federal Circuit] nonetheless conclude[d] that tribal immunity does not extend to these . . . reconsideration decisions.”[202] In deciding this, the court noted that IPRs are intended to “reexamine . . . agency decision[s].”[203]

 This decision suffers from many of the same issues that the PTAB decision suffered from, which will not be rehashed here. Further issues with the decision will be discussed in Part IV—with a particular focus on how the Federal Circuit incorrectly conceived of IPRs as agency enforcement actions rather than administrative adjudications. In addition to the faulty legal analysis, the bigger issue is the effect of this decision: tribal sovereign immunity cannot be invoked during IPRs, while state sovereign immunity can be. This creates a sort of second-class immunity for the very sovereigns that need the immunity most.

IV.  TRIBAL SOVEREIGN IMMUNITY’S UNEQUAL STATUS WITH STATE SOVEREIGN IMMUNITY

 With its decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals, Inc., the Federal Circuit established that tribal sovereign immunity does not apply in IPRs.[204] However, as discussed in Section I.B.2, PTAB decisions have previously found that states can invoke their sovereign immunity from suit when having their patents challenged in an IPR proceeding. The reason for this comes from inconsistent legal positions on how to conceive IPRs—that is, treating them as either adjudicatory agency actions or as agency enforcement actions. This inconsistency will be discussed below in Section IV.A.2, which contemplates how to address this inconsistency, while Section IV.A.1 argues that in addition to this inconsistency being based on legal error, this inequality in immunity is normatively undesirable for the way that it negatively impacts tribes, ultimately depriving them of a benefit bestowed on other sovereigns for no just reason.

A. The Inconsistency

 In Saint Regis, the Federal Circuit explicitly did not decide whether state sovereign immunity applies in IPRs; instead, it only explained that tribal sovereign immunity.[205] By leaving this question unanswered, prior PTAB decisions allowing states to invoke their sovereign immunity IPR proceedings were left on shaky footing.[206] This inconsistency in whether states and tribes are allowed to invoke their sovereign immunities in IPRs stems from the conception of the IPR proceeding itself as either adjudicative or enforcement-based. Currently, states can assert their sovereign immunity in IPR proceedings because IPRs are allegedly similar to adjudicative actions, while tribes may not assert their sovereign immunity in IPR proceedings because IPRs are supposedly more similar to enforcement actions.[207]

1.  This Inconsistency Matters and Should Be Fixed

  At a basic level, this inconsistency matters because it stems from an inconsistent legal position taken on the conception of IPRs—adjudicative versus enforcement—rather than a real, substantive differences between tribal and state sovereign immunity.[208]

 This inconsistent treatment of the nature of IPRs should be addressed, and the proper resolution should be that IPRs are similar to district court litigation such that, under FMC, sovereign immunity should apply.[209] First, In the USPTO’s own words, IPRs are trial proceeding[s] adjudicated before PTAB.[210] They are very similar to civil litigation in that they are an adversarial process with discovery, deadlines, and binding decisions. As discussed by PTAB in both Covidien and Ericsson, IPRs share a number of similarities with district court patent litigation.[211] IPRs are initiated by a third party, typically a competitor of the patent owner.[212] Moreover, the proceeding contains many of the safeguards for its participants that district court litigation does, including the prevention of harassment, clear pleading rules, and impartial, politically-insulated decisionmakers.[213]

 Further, the Code of Federal Regulations even provides IPR practitioners with a “trial practice” guide for when they appear “before the patent trial and appeal board,[214] further indicating the specific design of IPR practice to be modeled on civil litigation. A review of the legislative history surrounding the creation of IPRs is consistent with this. The framers of the process envisioned IPRs as adjudicative proceedings, not an enforcement proceeding.[215] Congressional intent appears to have been that “IPRs [are] to serve as a substitute for district court litigation with respect to the key issue of validity.”[216] Based on the similarities of IPR and district court litigation, the FMC framework should apply, meaning that sovereign immunity can be invoked in an IPR from a legal standpoint.[217]

 Beyond just the improper conception of IPRs adopted by PTAB and the Federal Circuit in this case, state and tribal sovereign immunity do not differ enough for this result. In fact, while there are legal differences between tribal and state sovereign immunity, any legal difference between the doctrines should actually break in favor of tribal immunity for both legal and normative reasons.

 First, tribes were not present at the original Constitutional Convention. While they were considered during the drafting of the Constitution and by the early U.S. governments in treaty discussions,[218] tribes did not have any actual input into either the drafting or the ratification of the Constitution. This is quite unlike states, which played an essential role in both drafting and ratification.[219] Given states roles in the drafting of the Constitution, a state sovereign immunity doctrine has developed which says that states can be found to have given up their immunity in some contexts in the “plan of the convention.”[220] While this is a limited doctrine in the state sovereign immunity context—state sovereign immunity case law is largely grounded in the Eleventh Amendment—it does not apply to tribes. Tribes were not present at the convention and, thus, cannot be said to have waived any immunity in the “plan of the convention.” Therefore, in many respects, tribal sovereign immunity is broader than state.[221]

 Second, the Supreme Court, in both Kiowa and Bay Mills, has made it clear that absent actual waiver by a tribe, tribal sovereign immunity does not apply only when Congress has clearly decided to abrogate it. Here, no abrogation occurred, despite former Senator Claire McCaskill introducing legislation to do so. When introducing her legislation, she expressed outrage that it was “one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal.”[222] However, since the bill was introduced in October 2017, it has not made any progress in Congress. This possibly reflects its status a low priority item for a Congress that has issues passing legislation higher on its priority list. In addition, Congress has been hesitant in the past to abrogate tribal sovereign immunity. As mentioned in Bay Mills, Congress considered abrogating tribal sovereign immunity in the context of commercial, off-reservation activity, but declined to act despite the potentially bad consequences of allowing tribes to engage in such commercial activity without the possibility of being held accountable in court. Given congressional silence in the face of knowing about the problem, courts should be wary of taking actions that fly in the face of Congress’s decision, especially given the Supreme Court’s emphasis on deferring to Congress on issues of tribal sovereign immunity.

Yet beyond these legal issues, there are normative reasons to be concerned about as well. First, courts should be wary of abrogating tribal sovereignty because they should wish to show tribes their due respect as sovereigns. Courts should not want to damage the financial health of the tribes; statistics show poor economic health in tribal territory. For example, “[f]ive of the poorest [ten] counties in the United States are in Indian country.”[223] Therefore, courts should tread lightly when considering any action that that could economically cripple a tribe, including taking away their tribal sovereign immunity in IPRs, which puts them at a disadvantage compared to states. States are still able to take advantage of their sovereign immunity in IPRs and, thus, as discussed in Section II.A, would have strong incentives to engage in these deals with patent owners.

Further, a key reason to promote the doctrine of sovereign immunity is to show the sovereign the respect that it is owed as a sovereign. Treating tribes and states differently here sends the message that tribes are lesser sovereigns than states. Given a long history of tribal oppression in the United States, effort should be made to foster respect owed to these sovereign entities. Legal rules that do the opposite should be renounced or, at least, reconsidered.

2.  Addressing the Inconsistency

 The Supreme Court should review and reverse the Federal Circuit ruling, allowing tribal sovereign immunity to apply in IPRs. In late 2018, Saint Regis appealed the Federal Circuit ruling to the Supreme Court.[224] There is a possibility that “[t]his case is headed for the Supreme Court,[225] where it will likely be reversed. This is the most desirable option available because it accomplishes several things. First, it puts tribes and states back on an even playing field when it comes to IPR sovereign immunity. This is beneficial because being able to assert sovereign immunity in an IPR proceeding is an economic benefit, as evidenced by how the Saint Regis tribe and others began to eagerly promote this service.[226] In addition, it reinstates tribes as equal sovereigns to states, thus allowing them to regain respect that is owed to them as sovereigns.

 In the absence of Supreme Court intervention, PTAB and the Federal Circuit could reverse their view on state sovereign immunity.[227] This alternative response would require PTAB to reverse course and disallow state sovereign immunity from applying in IPRs. While this is not normatively desirable, this would be the response most consistent with the Federal Circuit’s approach in Saint Regis, given how it framed IPRs as an enforcement proceeding.[228] However, the Federal Circuit’s Saint Regis opinion suffers from serious flaws in how it conceives of IPRs—it is also flawed because it largely ignores tribal sovereign immunity case law—and, therefore, its legal error should be reversed rather than extended, making this an undesirable option even though it has the benefit of putting tribes and states on an even playing field in IPRs.

CONCLUSION

In order to ensure that tribes are respected as co-sovereigns, tribal sovereign immunity should be found to apply in IPRs. There has been no congressional abrogation and state sovereign immunity has typically applied in such proceedings. As such, the Allergan-Saint Regis deal should be upheld. The Supreme Court should reverse the Federal Circuit decision preventing Saint Regis from asserting its immunity for several reasonsthe Federal Circuit misunderstood the essential adversarial nature of IPR proceedings, the Supreme Court’s jurisprudence on state and tribal sovereign immunity, and the reasons underlying the sovereign immunity doctrine. This incorrect result is fundamentally unjust, treating sovereign tribes as lesser than states for no good reason. This improper ruling calls for immediate Supreme Court intervention and reversal.

In addition, the Allergan-Saint Regis deal highlighted many issues of pressing importance. Going forward, these issues are in need of more public debateon topics such as the financial situation of tribes and issues patent owners have with IPR proceedings. Each problem requires further study, thought, and innovation to be properly solved. However, as a first step, the Supreme Court should step in and fix the errors of PTAB and the Federal Circuit, restoring the proper respect owed to tribe sovereigns.

 


[*] *. Editor-in-Chief, Southern California Law Review, Volume 92; J.D. Candidate 2019, University of Southern California Gould School of Law; M.S. Mechanical Engineering 2013, University of Minnesota; B.A. Physics 2012, Saint John’s University. I am eternally grateful to my incredible wife, Margaret, for her endless love, support, and patience over the last three years. Thank you to my parents, Jim and Teri, for all their encouragement and support. In addition, thank you to Professor Sam Erman for his guidance, time, and input as I worked through many versions of this Note. Finally, thank you to Katie Schmidt, Karen Blevins, Kevin Ganley, and the rest of the talented Southern California Law Review editors for their great work.

 [1]. U.S. Const. art. I, § 8, cl. 3; see also Matthew L.M. Fletcher, A Short History of Indian Law in the Supreme Court, Hum. Rts., Spring 2015, at 3, 3, https://papers.ssrn.com/sol3/papers.cfm?abstract
_id=2616802.

 [2]. See Gregory Ablavsky, Tribal Sovereign Immunity and Patent Law, SLS Blogs: Legal Aggregate (Sept. 13, 2017), https://law.stanford.edu/2017/09/13/tribal-sovereign-immunity-and-patent
-law (“Congress can readily use its plenary power to abrogate tribal sovereign immunity in patent law.”).

 [3]. Fletcher, supra note 1; see also U.S. Const. amend. XI. There is an academic debate over the precise contours of state sovereign immunity under the Eleventh Amendment and whether or not it actually enshrines state sovereign immunity. See, e.g., William A. Fletcher, A Historical Interpretation of the Eleventh Amendment: A Narrow Construction of an Affirmative Grant of Jurisdiction Rather Than a Prohibition Against Jurisdiction, 35 Stan. L. Rev. 1033, 1035 (1982). This Note does not opine on this issue.

 [4]. Sovereign Immunity, Black’s Law Dictionary (6th ed. 1990).

 [5]. See infra Section I.B for further discussion of state sovereign immunity’s meaning and the Supreme Court’s jurisprudence on the subject.

 [6]. Id. The differences between tribal sovereign immunity and state sovereign immunity are discussed infra Part III. However, at the outset, it is important to remember that state sovereign immunity is based on the Eleventh Amendment of the Constitution, while tribal sovereign immunity is not enshrined in a specific constitutional amendment; rather, it is federal common law. See Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 764–65 (1998) (Stevens, J., dissenting).

 [7]. Restasis is most commonly used to treat dry eye but can also be used to treat more serious medical conditions. See Allergan, About RESTASIS® and RESTASIS MultiDose®, Restasis, https://www.restasis.com/about-restasis-and-restasis-multidose (last visited Mar. 29, 2019); Restasis Patient Information Including Side Effects, RxList, https://www.rxlist.com/restasis-drug/patient-images-side-effects.htm (last visited Apr. 18, 2019).

 [8]. Katie Thomas, How to Protect a Drug Patent? Give It to a Native American Tribe, N.Y. Times (Sept. 8, 2017), https://www.nytimes.com/2017/09/08/health/allergan-patent-tribe.html.

 [9]. Press Release, Allergan, Allergan and Saint Regis Mohawk Tribe Announce Agreements Regarding RESTASIS® Patents (Sept. 8, 2017), https://www.allergan.com/news/news/thomson-reuters
/allergan-and-saint-regis-mohawk-tribe-announce-agr. The Restasis patent expires in 2024, and its value has been estimated at $1.5 billion. Id.; Jan Wolfe, Allergan Ruling Casts Doubt on Tribal Patent Strategy, Reuters (Oct. 17, 2017, 3:10 PM), https://www.reuters.com/article/us-allergan-patents-analysis
/allergan-ruling-casts-doubt-on-tribal-patent-strategy-idUSKBN1CM369.

 [10]. Inter Partes Review, U.S. Pat. & Trademark Off., https://www.uspto.gov/patents-application-process/appealing-patent-decisions/trials/inter-partes-review (last visited Mar. 29, 2019) [hereinafter Inter Partes Review, U.S. Pat. & Trademark Off.]; Inter Partes Review Replaces Inter Partes Reexamination, Taft, Stettinius & Hollister LLP (Oct. 5, 2012), https://www.taftlaw.com
/news-events/law-bulletins/inter-partes-review-replaces-inter-partes-reexamination.

 [11]. Inter Partes Review, U.S. Pat. & Trademark Off., supra note 10.

 [12]. Wolfe, supra note 9 (discussing a quote from Judge William Bryson of the Federal Circuit that casts the legality of “rent[ing]” a tribe’s sovereign immunity into doubt).

 [13]. S. 1948, 115th Cong. (2017).

 [14]. See infra Section II.A.

 [15]. Lawrence Hoffman, Inter Partes Review: Good or Bad for Patent Owners, Ehrlich & Fenster (Dec. 18, 2016), http://www.ipatent.co.il/inter-partes-review-good-or-bad-for-patent-owners.

 [16]. The Supreme Court affirmed the constitutionality of the IPR process in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365, 1370 (2018). The case challenged IPR constitutionality because IPRs extinguish private property rights (patents) through a non-Article III venue. Id. at 137273. The precise details of this case are beyond the scope of this Note; however, the key takeaway is that IPRs are constitutional.

 [17]. For a more detailed discussion of the deal’s upsides, see infra Part II.

 [18]. See Susan Decker, Tribal Lawyer Shops Patent-Shielding Idea to State Universities, Bloomberg L. (Oct. 19, 2017, 1:11 PM), https://news.bloomberglaw.com/corporate-law/triballawyer-shops-patent-shielding-idea-to-state-universities.

 [19]. Id.

 [20]. It is important to keep in mind that while deals like this prevent patents from being invalidated by IPR, such patents may still be challenged when asserted in district court litigation. In nearly all patent litigation, the alleged infringer argues that the patent being asserted against them is invalid. In such cases, the patent owner will not be able to assert tribal sovereign immunity as they will have been deemed to have waived their immunity by entering the forum through litigation.

 [21]. Saint Regis Mohawk Tribe v. Mylan Pharm., Inc., 896 F.3d 1322, 1325 (Fed. Cir. 2018); see also Gene Quinn, Federal Circuit Rules Tribal Sovereign Immunity Cannot Be Asserted in IPRs, IPWatchdog (July 20, 2018), https://www.ipwatchdog.com/2018/07/20/federal-circuit-tribal-sovereign
-immunity-cannot-asserted-iprs/id=99504.

 [22]. States could engage in these deals in addition to tribes. Therefore, even if the Federal Circuit decision finding that tribal sovereign immunity does not apply in IPRs is upheld, Congress may still face pressure to address this issue because it could become widespread if a few cash-needy states engage in these deals.

 [23]. However, actual proposals for improving the IPR system go beyond the scope of this Note, which focuses on the application of tribal sovereign immunity to IPR proceedings.

 [24]. The Patent Trial and Appeals Board (“PTAB”) hears IPR challenges and is located inside the USPTO. 35 U.S.C. § 6(a)(b) (2012). The USPTO is part of the federal government’s executive branch.

 [25]. Many of these issues stem from issues with the IPR proceeding itself. While an evaluation of the IPR proceeding is beyond the scope of this Note, if IPRs are part of the problem, a good congressional response would be to reform the IPR proceeding, thus reducing incentives for patent owners to engage in these deals. This approach would leave tribal sovereign immunity in place as a defense in IPRs (which as this Note argues infra Parts III and IV is normatively desirable), while focusing on reforming the IPR system such that it may no longer be considered a “death trap” for patent owners.

 [26]. See infra Section I.A.

 [27]. Sovereign Immunity, supra note 4.

 [28]. U.S. Const. art. I, § 8, cl. 3.

 [29]. William Wood, It Wasn’t an Accident: The Tribal Sovereign Immunity Story, 62 Am. U. L. Rev. 1587, 1625 (2013).

 [30]. Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) 1, 17 (1831).

 [31]. Wood, supra note 29, at 1641 (quoting Parks v. Ross, 52 U.S. (11 How.) 362, 374 (1850) (second alteration in original)).

 [32]. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978) (holding a tribe was immune from an action taken to enforce the Indian Civil Rights Act in federal court through declaratory and injunctive relief). Additionally, in Santa Clara Pueblo, the Supreme Court elaborated on reasons for this immunity such as the financial burdens that being subject to suit could impose on the “financially disadvantaged” tribes. Id. at 64.

 [33]. United States v. Wheeler, 435 U.S. 313, 322 (1978) (emphasis omitted).

 [34]. Id. at 323 (discussing Congress’s plenary power to regulate the conduct of tribes).

 [35]. Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 790 (2014).

 [36]. Upper Skagit Indian Tribe v. Lundgren, 138 S. Ct. 1649, 1654–55 (2018).

 [37]. Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 760 (1998).

 [38]. Id. at 753–54.

 [39]. Id.

 [40]. Id. at 754.

 [41]. Id.

 [42]. Id. at 753–54.

 [43]. Id. at 754.

 [44]. Id. at 756. Justice Kennedy explains this phenomenon in his opinion by arguing that Turner v. United States, 248 U.S. 354, 355 (1919), the case cited for the proposition that tribes enjoy immunity from suit, did not originally stand for this particular proposition. Rather, Justice Kennedy believes that tribal sovereign doctrine only came to exist through the Court’s subsequent decision in United States v. U.S. Fidelity & Guaranty Co., 309 U.S. 506 (1940). But see Wood, supra note 29, at 1587 (criticizing Kennedy’s historical analysis of the doctrine’s development).

 [45]. Kiowa, 523 U.S. at 758.

 [46]. Id. at 758–59.

 [47]. See Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 788–90 (2014).

 [48]. Id. at 791.

 [49]. Id. at 791–804 (evaluating Indian Gaming Regulatory Act provisions).

 [50]. Id. at 796–97. The Court explained its reasoning as follows:

If a State really wants to sue a tribe for gaming outside Indian lands, the State need only bargain for a waiver of immunity. . . . States have more than enough leverage to obtain such terms because a tribe cannot conduct class III gaming on its lands without a compact . . . and cannot sue to enforce a State’s duty to negotiate a compact in good faith . . . . So as Michigan forthrightly acknowledges, ‘a party dealing with a tribe in contract negotiations has the power to protect itself by refusing to deal absent the tribe’s waiver of sovereign immunity from suit.’ . . . And many States have taken that path.

Id. (citations omitted).

 [51]. This reasoning would not apply in the Allergan-Saint Regis case. There, waiver of sovereign immunity would not be negotiable by third parties as the third parties by definition were not present when the licensing deal was made. It is interesting though that when Allergan made this deal with Saint Regis, it secured a limited waiver of the Tribe’s immunity as it related to any potential litigation arising from the deal. See Mylan Pharm., Inc. v. Saint Regis Mohawk Tribe, No. IPR2016-01127, 2018 WL 1100950, at *10 (P.T.A.B. Feb. 23, 2018) (denying Saint Regis’s motion to terminate the proceeding).

 [52]. Bay Mills, 572 U.S. at 798 (explaining that the Kiowa Court positioned itself as simply following well-established precedent that tribal immunity does not have “any exceptions for commercial or off-reservation conduct”).

 [53]. Id. at 799.

 [54]. Id at 798–801.

 [55]. Id.

 [56]. Id. at 802–03.

 [57]. Id.

 [58]. Upper Skagit Indian Tribe v. Lundgren, 138 S. Ct. 1649 (2018).

 [59]. Andrew Westney, Justices May Cinch Immunity Loophole in Upper Skagit Case, Law360 (Feb. 1, 2018), https://www.law360.com/articles/1008098/justices-may-cinch-immunity-loophole-in-upper-skagit-case.

 [60]. Id.

 [61]. Id.

 [62]. Upper Skagit, 138 S. Ct. at 1654–55.

 [63]. See id. at 1651–53.

 [64]. See id. at 1654.

 [65]. Id.

 [66]. Id. at 1661–63 (Thomas, J., dissenting).

 [67]. Id. at 1663.

 [68]. However, as will be discussed infra Part III, neither PTAB or the Federal Circuit relied on reasoning similar to Justice Thomas’s to decide that tribal immunity does not apply in IPR.

 [69]. U.S. Const. art. I, § 8, cl. 3 (“[R]egulate commerce with foreign nations, and among the several states, and with the Indian tribes.”).

 [70]. See U.S. Const. amend. XI.

 [71]. Id.

 [72]. Hans v. Louisiana, 134 U.S. 1, 18–20 (1890) (holding that despite clear textual language to the contrary, citizens of a state are not allowed to sue the state of which they are a citizen).

 [73]. See, e.g., Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 56–­57 (1996).

 [74]. As mentioned supra note 3, the specific nuances of state sovereign immunity are beyond the scope of this Note.

 [75]. See Seminole Tribe, 517 U.S. at 72.

 [76]. A holding on this issue would be instructive for the Allergan-Saint Regis case because Allergan’s patent was having its validity challenged in IPR when the deal took place.

 [77]. Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627, 630 (1999).

 [78]. Id. at 632 (citation omitted) (providing the statute at issue’s language, which clearly abrogated state sovereign immunity).

 [79]. Id. at 636–37 (discussing Seminole Tribe, 517 U.S. at 59).

 [80]. See Seminole Tribe, 517 U.S. at 59 (discussing Fitzpatrick v. Bitzer, 427 U.S. 445, 452–56 (1976)).

 [81]. Fla. Prepaid, 527 U.S. at 636–37 (discussing Seminole Tribe, 517 U.S. at 59–60).

 [82]. Id.

 [83]. City of Boerne v. Flores, 521 U.S. 507, 520 (1997).

 [84]. Fla. Prepaid, at 646–47. The Court evaluated the various requirements introduced in City of Boerne. See City of Boerne, 521 U.S. at 520. A deeper discussion of these requirements is beyond the scope of this Note.

 [85]. There are two ways a state’s patent could be challenged. First, the patent could be challenged in a post-grant proceeding at the Patent Office such as an IPR proceeding. Second, in a case where the state is the plaintiff, the defendant (that is, the alleged infringer) could challenge the patent’s validity during district court litigation. See David Carnes, How to Challenge a Patent, Legalzoom, https://info.legalzoom.com/challenge-patent-21969.html (last visited Mar. 31, 2019). IPRs are the only venue in which sovereign immunity could be helpful because by filing suit against an alleged infringer, the sovereign would be deemed to have waived its immunity for the purposes of that litigation.

 [86]. See Biomedical Patent Mgmt. Corp. v. California, 505 F.3d 1328, 1343 (Fed. Cir. 2007).

 [87]. Catherine Garza & Paula Heyman, Sovereign Immunity Protects State-Funded Patent Owners from Post-Grant Proceedings, Lexology: PTAB Trials Blog (Apr. 11, 2017), https://www.lexology.com/library/detail.aspx?g=d1a3c68b-efdc-4c16-bae8-d5fdd2b6feba (noting that neither the Supreme Court nor the Federal Circuit has addressed this question).

 [88]. Fed. Mar. Comm’n v. S.C. State Ports Auth. (FMC), 535 U.S. 743, 760 (2002) (holding that a state entity was immune from an adjudication at the Federal Maritime Commission because of the similarities that such proceedings have with civil litigation).

 [89]. Appeals of PTAB decisions are reviewed by the Federal Circuit. Court Jurisdiction, U.S. Court of Appeals for the Fed. Circuit, http://www.cafc.uscourts.gov/the-court/court-jurisdiction (last visited Mar. 31, 2019). The Federal Circuit has exclusive appellate jurisdiction over all patent cases that occur in federal district court. Federal Circuit decisions, along with Supreme Court decisions, are binding in the realm of patent law on PTAB and federal district courts. See id.

 [90]. In interference proceedings, the Patent Office seeks to settle a dispute over which party invented the patented product or method first. See Introduction to USPTO Patent Interference Practice, McNeely, Hare & War LLP, http://www.patentek.com/patent-interference-overview (last visited Mar. 31, 2019). This proceeding was necessary because the United States patent system granted a patent to the first inventor. However, in 2011, Congress passed the America Invents Act, which eliminated interferences as a part of patent law in the United States. Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 290 (2011). This is because the law altered the patent system to a first-to-file system, where the first entity to file for a patent is granted the patent, regardless of who invented it first. See Introduction to USPTO Patent Interference Practice, supra.

 [91]. Vas-Cath, Inc. v. Curators of the Univ. of Mo., 473 F.3d 1376, 1382 (Fed. Cir. 2007) (holding that the reasoning in FMC applied to interference proceedings because they “bear ‘strong similarities’ to civil litigation, . . . can indeed be characterized as a lawsuit”).

 [92]. Garza & Heyman, supra note 87.

 [93]. See Covidien LP v. Univ. of Fla. Research Found. Inc., No. IPR2016-1274, 2017 WL 4015009, at *1 (P.T.A.B. Jan. 25, 2017).

 [94]. Garza & Heyman, supra note 87.

 [95]. Covidien, 2017 WL 4015009, at *5.

 [96]. Id.

 [97]. Id. at *6 (presenting the argument from the party challenging the patent).

 [98]. Id. at *6 (quoting Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 765 (2002)).

 [99]. Id. Note that this conception of IPR means that the ultimate disposition of Upper Skagit, discussed supra Section I.A.3., would not be applicable. That case concerns whether the “immovable property” exception applies to tribal sovereign immunity. Upper Skagit Indian Tribe v. Lundgren, 138 S. Ct. 1649, 1654 (2018). The point of that exception, as noted by Justice Thomas in dissent, is that sovereign immunity should not extend to actions over property within another sovereign’s jurisdiction. Upper Skagit, 138 S. Ct. at 1661–63 (Thomas, J., dissenting). Here, given the Patent Clause of the Constitution, exclusive jurisdiction is given to the federal government over patents. See U.S. Const. art. I, § 8, cl. 8. This means that patents are a property exclusively of federal jurisdiction, much like a physical property is exclusively within a state’s jurisdiction. Therefore, extending Justice Thomas’s view to the IPR case, would mean that sovereign immunity should not apply in IPRs due to the fact that patents are exclusively within federal jurisdiction. However, since PTAB views IPRs as adversarial in Covidien, this type of analysis is inapplicable.

 [100]. Covidien, 2017 WL 4015009, at *8. The FMC approach is used to determine whether sovereign immunity applies in administrative proceedings. IPRs are an administrative proceeding.

 [101]. Id. at *9 (emphasis omitted) (quoting FMC, 535 U.S. at 765).

 [102]. Id.

 [103]. Id. The PTAB decision extensively details all the ways that IPRs resemble civil litigation in federal courts. See id. at *9–11.

 [104]. Id. at *12.

 [105]. Id. at *11 (“Petitioner additionally argues that immunizing patents owned by alleged state entities from IPR proceedings would have harmful and far-reaching consequences.” (internal citation omitted)).

 [106]. Id. at *11.

 [107]. Id.

 [108]. Id. at *12. There is still no evidence available which shows that allowing state sovereign immunity to be asserted in IPRs causes any harm to the patent system. It seems possible, however, that this harm could surface if states begin setting up their own deals with patent owners who wish to take advantage of state sovereign immunity, much like the Allergan-Saint Regis deal. In fact, in light of the Federal Circuit’s refusal to allow tribal sovereign immunity in IPRs, it is possible patent owners may begin seeking deals with states or state-owned entities, thus, “renting” their sovereign immunity.

 [109]. Anthony Blum, PTAB Offers Clarification on Inter Partes Review and State Sovereign Immunity, Thompson Coburn LLP (Dec. 22, 2017), https://www.thompsoncoburn.com/insights/              publications/item/2017-12-22/ptab-offers-clarification-on-inter-partes-review-and-sovereign-immunity (noting that seven administrative patent judges heard this case in contrast to the usual three judges).

 [110]. Ericsson Inc. v. Regents of the Univ. of Minn., No. IPR2017-01186, 2017 WL 6517563, at

*1 (P.T.A.B. Dec. 19, 2017) (expanded panel).

 [111]. Blum, supra note 109.

 [112]. Ericsson, 2017 WL 6517563, at *2.

 [113]. Id. PTAB also utilized the FMC holding that state sovereign immunity can be invoked in administrative proceedings.

 [114]. Id.

 [115]. Id. at *2–3.

 [116]. Id. at *4.

 [117]. Saint Regis Mohawk Tribe v. Mylan Pharm., Inc., 896 F.3d 1322 (Fed. Cir. 2018).

 [118]. See, e.g., Blum, supra note 109.

 [119]. Id.

 [120]. At the time of writing, no appeals were pending on this issue.

 [121]. In Saint Regis Mohawk Tribe v. Mylan Pharmaceutical, Inc., the Federal Circuit noted that it had not opined on state sovereign immunity’s application in IPRs, saying in its decision that made tribal sovereign immunity inapplicable that “we are only deciding whether tribal immunity applies in IPR. While we recognize there are many parallels, we leave for another day the question of whether there is any reason to treat state sovereign immunity differently.” Saint Regis Mohawk Tribe v. Mylan Pharm., Inc., 896 F.3d 1322, 1329 (Fed. Cir. 2018).

 [122]. David C. Seastrunk et al., Federal Circuit PTAB Appeal Statistics – January 15, 2018, Finnegan LLP (Feb. 6, 2018) https://www.finnegan.com/en/insights/blogs/america-invents-act/federal-circuit-ptab-appeal-statistics-January-15-2018.html.

 [123]. Thomas P. McLish, Tribal Sovereign Immunity: Searching for Sensible Limits, 88 Colum. L. Rev. 173, 174 (1988) (alteration in original) (citation omitted).

 [124]. Id.

 [125]. Id.

 [126]. Id.

 [127]. Id. at 174–75 (noting a large majority of the states have either completely or partially waived their sovereign immunity from suit).

 [128]. See Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 804–07 (2014) (Sotomayor, J., concurring).

 [129]. Id.; see also supra Sections I.A.1. and I.A.2. (discussing Bay Mills and its doctrinal underpinnings in detail). Justice Sotomayor agreed with the majority opinion’s application of sovereign immunity on stare decisis grounds but concurred to provide normative justifications for the doctrine to address critics of who no longer saw it serving any purpose.

 [130]. Id. at 809 (internal quotation marks omitted) (noting that nearly half of all tribes in the United States do not operate casinos and that among the tribes that do operate casinos only a small percentage of them reap most of the profits).

 [131]. Id. at 810.

 [132]. Joseph P. Kalt & Joseph William Singer, Myths and Realities of Tribal Sovereignty: The Law and Economics of Indian Self-Rule 17 (Harvard Univ. John F. Kennedy Sch. of Gov’t Faculty Research Working Papers Series, Paper No. RWP04-016, 2004) (discussing the holding of Atkinson Trading Co. v. Shirley, 532 U.S. 645 (2001)).

 [133]. Kelly S. Croman & Jonathan B. Taylor, Why Beggar Thy Indian Neighbor? The Case for Tribal Primacy in Taxation in Indian Country 5 (Joint Occasional Papers on Native Affairs, JOPNA 2016-1, 2016), http://nni.arizona.edu/application/files/8914/6254/9090/2016_Croman_why_beggar_thy
_Indian_neighbor.pdf.

 [134]. Id.

 [135]. Id. Croman and Taylor also note that reservations are subject to state property taxes within the boundaries of the reservation unless they have been given an exemption under state law. Id.

 [136]. Id.

 [137]. Id.

 [138]. Id.

 [139]. Note, In Defense of Tribal Sovereign Immunity, 95 Harv. L. Rev. 1058, 1069 (1982). In addition, this idea can be related back to the idea that the “King” does “no wrong.” See supra Section I.C.

 [140]. Remember that tribes are “domestic dependent nations” and, as such, the scope of tribal sovereignty is limited by the sovereign on which they depend: the federal government. The limitations placed on tribal sovereign immunity give meaning to the tribe’s “dependent” status by recognizing that they are, in a sense, inferior to the federal government.

 [141]. Obviously, the dependent status of tribes still exists in the United States, but to the extent possible, tribes should be treated as a sovereign.

 [142]. See In Defense of Tribal Sovereign Immunity, supra note 139, at 1069–70.

 [143]. See id.

 [144]. While there is debate about this point, law can be conceptualized as—at least partly—reflecting the culture from which it springs. See, e.g., Iris I. Varner & Katrin Varner, The Relationship Between Culture and Legal Systems and the Impact on Intercultural Business Communication, 3 Global Advances Bus. & Comm. Conf. & J., no. 1, 2014, at 1, 2–3.

 [145]. There will be some crossover as tribes are “domestic dependent nations” that are subject to the constraints of the United States Constitution and laws passed by Congress. However, sovereign immunity still provides some level of protection in this area. Evaluating how much protection is beyond the scope of this Note.

 [146]. See Wood, supra note 29, at 1619.

 [147]. Id. at 1619–20 (noting additionally that protecting a state’s treasury was still a meaningful purpose of the Eleventh Amendment).

 [148]. Carlos Quijada, Patents and Tribal Sovereign Immunity, Univ. of Utah S.J. Quinney Coll. of Law: LABS Blog (Oct. 23, 2017), https://www.law.utah.edu/patents-and-tribal-sovereign-immunity.

 [149]. Dan Schneider & James Edwards, Open Letter from Conservatives: What’s at Stake in Oil States v. Greene’s Energy Group, IPWatchdog (Nov. 28, 2017), http://www.ipwatchdog.com
/2017/11/28/conservatives-open-letter-oil-states-v-greenes-energy-group/id=90579.

 [150]. Steve Brachmann & Gene Quinn, 58 Patents Upheld in District Court Invalidated by PTAB on Same Grounds, IPWatchdog (Jan. 8, 2018), http://www.ipwatchdog.com/2018/01/08/58-patents-upheld-district-court-invalidated-ptab/id=91902.

 [151]. Wolfe, supra note 9.

 [152]. Michael Erman, Allergan to Cut Over 1,000 Jobs as It Works to Cut Costs, Reuters (Jan. 3, 2018, 8:59 AM), https://www.reuters.com/article/us-allergan-layoffs/allergan-to-cut-over-1000-jobs-as-it-works-to-cut-costs-idUSKBN1ES1HN.

 [153]. Patents such as Restasis also represent the reward after substantial investment by the company.

 [154]. Again, while the Federal Circuit has said that tribal immunity does not apply, these numbers are emblematic of the massive economic incentive that patent owners have to engage in these types of workarounds.

 [155]. These deals help protect and grow tribal resources, which is one of the purposes of tribal sovereign immunity.

 [156]. Quijada, supra note 148.

 [157]. Saint Regis Mohawk Tribe, Frequently Asked Questions About New Research and Technology (Patent) Business 3 (2017), https://www.srmt-nsn.gov/_uploads/site_files/Office-of-Technology-Research-and-Patents-FAQ.pdf.

 [158]. See Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 809–10 (2014) (Sotomayor, J., concurring).

 [159]. Similar reasons exist for states to engage in such deals, even if, as noted in Section I.C.2, states possess stronger mechanisms for raising money. That being said, it is easy to envision poorer states engaging in such deals as another source of revenue. The biggest obstacle to states doing such a thing, it seems, would be potential political pressure. In addition, given how the Federal Circuit ruled in Saint Regis, see infra Section III.B., it is possible state sovereign immunity may no longer be found to apply in IPRs.

 [160]. See supra Section II.A.; see also Decker, supra note 18 (explaining that IPRs act as patent “death squad[s]”).

 [161]. However, as will be discussed infra Part III, these shortcomings do not justify the outcomes reached by the Federal Circuit and PTAB in the Allergan-Saint Regis case. Rather, reforms should focus on improving the patent system, while respecting tribal sovereign immunity.

 [162]. See, e.g., Saint Regis Mohawk Tribe, supra note 157, at 3; cf. Bay Mills, 572 U.S. at 809–10 (Sotomayor, J., concurring) (arguing that “not all Tribes are engaged in highly lucrative commercial activity” and that even if they were, this fact alone “would not justify the commercial-activity exception urged by the principal dissent”).

 [163]. States could do this as well. See supra Section I.B.2.

 [164]. While such benefit spreading could be a good thing, it most likely will harm sovereigns, such as Saint Regis, who pioneered these deals only to have companies go to other sovereigns who offer better deals. This could cause harm to some tribes as revenue sources dry up and previously relied upon services must go away due to lack of funding.

 [165]. This Note takes no position on how to best handle the financial situation of tribes. It just recognizes that relying on a system like the one used by Allergan and Saint Regis could be very counterproductive.

 [166]. See Mylan Pharm., Inc. v. Saint Regis Mohawk Tribe, No. IPR2016-01127, 2018 WL 1100950, at *2 (P.T.A.B. Feb. 23, 2018) (denying Saint Regis’s motion to terminate the proceeding).

 [167]. See supra Section I.B.2. for a discussion of FMC and its holdings on state sovereign immunity in administrative proceedings.

 [168]. Mylan Pharm., 2018 WL 1100950, at *34 (discussing Federal Maritime Commission v. South Carolina State Ports Authority (FMC), 535 U.S. 743 (2002), in which the Supreme Court held that state sovereign immunity could be invoked in administrative proceedings). PTAB also rejected in this portion of the opinion decisions by other administrative agencies which had found that tribal sovereign immunity could be invoked in administrative proceedings. Id. at *3 (discussing Kanj v. Viejas Band of Kumeyaay Indians, No. 06-074, 2007 WL 1266963 (U.S. Dep’t of Labor Adm. Rev. Bd. Apr. 27, 2007)), which noted that no prior cases prevented tribes from asserting sovereign immunity in administrative adjudications). It should be noted that PTAB provided no reasons for treating states and tribes differently in this context.

 [169]. Id. at *4 (citation omitted).

 [170]. Id. (citation omitted).

 [171]. Id. at *4–5.

 [172]. See, e.g., id. at *5 (discussing San Manuel Indian Bingo & Casino v. NLRB, 475 F.3d 1306, 1312–13 (D.C. Cir. 2007), which said “when a tribal government goes beyond matters of internal self-governance and enters into off-reservation business transaction[s] with non-Indians, its claim of sovereignty is at its weakest.”). This underlying idea is directly at odds with the Supreme Court’s approach in Bay Mills, which found tribal sovereign immunity is only abrogated where Congress clearly intends, even if there may be negative consequences from the immunity’s applicability. PTAB did not discuss Bay Mills in its analysis. For further discussion of Bay Mills, see Section I.A.

 [173]. Mylan Pharm., 2018 WL 1100950, at *5 (quoting Quileute Indian Tribe v. Babbitt, 18 F.3d 1456, 1459 (9th Cir. 1994)). The tribes attempted to distinguish these cases on the basis that IPRs include a third party initiating and remaining involved in the entire proceeding; however, PTAB rejected this argument. Id. at *6.

 [174]. Id. (internal quotation marks omitted). It is unclear then why PTAB thinks state sovereign immunity can be invoked in IPRs.

 [175]. Id. (discussing how patent owners are not required to participate in IPR proceedings).

 [176]. Id. at *6 n.6.

 [177]. Id. at *7–8.

 [178]. Id. at *8, *10–12.

 [179]. Id. at *13–15 (noting that the Federal Rules of Procedure do not apply to administrative proceedings).

 [180]. Kevin E. Noonan, St. Regis Mohawk Tribe and Allergan Appeal Denial of Motion to Dismiss on Sovereign Immunity Grounds, Patent Docs: Patent Law Weblog (Mar. 1, 2018, 10:04 PM), http://www.patentdocs.org/2018/03/st-regis-mohawk-tribe-and-allergan-appeal-denial-of-motion-to-dismiss-on-sovereign-immunity-grounds.html. The decision can be appealed under the collateral order doctrine which allows for immediate appeal of denials of sovereign immunity. See, e.g., Burlington N. & Santa Fe Ry. Co. v. Vaughn, 509 F.3d 1085, 1094 (9th Cir. 2007).

 [181]. See Mylan Pharm., 2018 WL 1100950, at *4 (discussing Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 756 (1998)).

 [182]. See Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 75556 (1998). The Court “noted, however, that the immunity possessed by Indian tribes is not coextensive with that of the States,” distinguishing “state sovereign immunity from tribal sovereign immunity,” because “tribes were not at the Constitutional Convention.” Id. Accordingly, the tribes were “not parties to the ‘mutuality of . . . concession’ that ‘makes the States’ surrender of immunity from suit by sister States plausible.’”

Id. (quoting Blatchford v. Native Village of Noatak, 501 U.S. 775, 782 (1991) (alteration in original)).

 [183]. Covidien LP v. Univ. of Fla. Research Found. Inc., No. IPR2016-1274, 2017 WL 4015009, at *13 (P.T.A.B. Jan. 25, 2017).

 [184]. Id.

 [185]. See Kiowa, 523 U.S. at 754–55.

 [186]. Mylan Pharm., 2018 WL 1100950, at *6.

 [187]. Covidien, 2017 WL 4015009, at *6.

 [188]. Id. at *9–11.

 [189]. Upper Skagit Indian Tribe v. Lundgren, discussed supra Section I.A.3, almost answered whether tribal sovereign immunity applies to in rem jurisdiction, where lower courts have claimed the jurisdiction is over the property instead of the tribe, thus allowing the lower courts to find tribal immunity not applicable in the proceeding. In rem jurisdiction is like IPRs because the proceeding can be construed to be about the patent itself—not the patent owner. However, the Supreme Court avoided answering whether tribal immunity applies to in rem cases, leaving the question for another day. See generally Upper Skagit Indian Tribe v. Lundgren, 138 S. Ct. 1649 (2018).

 [190]. Ericsson Inc. v. Regents of the Univ. of Minn., No. IPR2017-01186, 2017 WL 6517563, at

*2 (P.T.A.B. Dec. 19, 2017) (expanded panel).

 [191]. Blum, supra note 109.

 [192]. Which, as discussed supra Section II.B., is a valid concern. However, abrogating tribal sovereign immunity where it should not be is not the proper response. Rather, the onus should be on Congress to address the issue as they are better situated to do so.

 [193]. Saint Regis Mohawk Tribe v. Mylan Pharm., Inc., 896 F.3d 1322, 1325 (Fed. Cir. 2018).

 [194]. Id. at 1325–26.

 [195]. Id. at 1326.

 [196]. Remember, as discussed supra Section I.B.2., the PTAB had previously decided that for the purposes of state sovereign immunity, IPR should be treated as an adjudicative action rather than a traditional enforcement action.

 [197]. Saint Regis, 896 F.3d at 1326 (citation omitted).

 [198]. Id. at 1327.

 [199]. Id.

 [200]. Id. at 1328. While this is true as a rule, most often IPRs proceed as would litigation, with the patent owner arguing for patent validity and a variety of private challengers arguing the patent is invalid.

 [201]. Id.

 [202]. Id. at 1329.

 [203]. Id. (citation omitted).

 [204]. See supra Section III.B. for a discussion of the ruling.

 [205]. Saint Regis, 896 F.3d at 1329 (“In this case [the Federal Circuit] only decid[ed] whether tribal immunity applies in IPR. While [it] recognize[d] there are many parallels, [it] le[ft] for another day the question of whether there is any reason to treat state sovereign immunity differently.”).

 [206]. See Ericsson Inc. v. Regents of the Univ. of Minn., No. IPR2017-01186, 2017 WL 6517563, at *2 (P.T.A.B. Dec. 19, 2017) (expanded panel); Covidien LP v. Univ. of Fla. Research Found. Inc., No. IPR2016-1274, 2017 WL 4015009, at *12 (P.T.A.B. Jan. 25, 2017).

 [207]. For a discussion of PTAB rulings on state sovereign immunity’s applicability in IPRs, including Covidien and Ericsson, see supra Section I.B.2. In those cases, PTAB focused on the similarity between IPRs and district court litigation on its way to finding that state sovereign immunity applies. See supra Part III for further discussion of PTAB’s and the Federal Circuit’s decisions finding that tribal sovereign immunity does not apply in an IPR proceeding because of its dissimilarity to district court litigation.

 [208]. While PTAB’s original holding that tribal sovereign immunity does not apply in IPRs focused on the difference between tribal and state sovereign immunity, the Federal Circuit’s decision did not.

 [209]. For PTAB’s proper analysis of why IPR is similar to district court litigation, see supra Section I.B.2.

 [210]. Inter Partes Review, U.S. Pat. & Trademark Off., supra note 10.

 [211]. See supra Section I.B.2.

 [212]. Inter Partes Review, U.S. Pat. & Trademark Off., supra note 10 (presenting, on the government’s own website, the procedure for how this “trial proceeding” is conducted); see also Peter Harter & Gene Quinn, How IPR Gang Tackling Distorts PTAB Statistics, IPWatchdog (Apr. 5, 2017), https://www.ipwatchdog.com/2017/04/05/ipr-gang-tackling-distorts-ptab-statistics/id=81816 (explaining the process by which third parties can initiate IPR proceedings).

 [213]. See 35 U.S.C. §§ 311–314 (2012) (revealing the adversarial nature of the proceeding); 37 C.F.R. § 42.51–.52 (2018) (laying out IPR discovery procedures); Alex Chan, Are Administrative Patent Judges Properly Appointed Under the Appointments Clause?, Am. B. Ass’n (Feb. 15, 2019), https://www.americanbar.org/groups/litigation/committees/minority-trial-lawyer/articles/2019/are-administrative-patent-judges-properly-appointed-under-the-appointments-clause (“PTAB judges exercise significant independent discretion, are not removable from the competitive service except for cause.”); see also Covidien LP v. Univ. of Fla. Research Found. Inc., No. IPR2016-1274, 2017 WL 4015009, at *8–11 (P.T.A.B. Jan. 25, 2017) (“[C]onsidering the nature of inter partes review and civil litigation, [PTAB] conclude[d] that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment.”).

 [214]. See 37 C.F.R. § 42 (2018) (laying out the procedure for a PTAB trial).

 [215]. See 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011) (statement of Sen. Kyl) (“One important structural change made by the present bill is that inter partes reexamination is converted into an adjudicative proceeding in which the petitioner, rather than the [USTPO], bears the burden of showing unpatentability.”).

 [216]. Joel Sayres & Julie Wahlstrand, To Stay or Not to Stay Pending IPR? That Should Be a Simpler Question, 17 Chi.-Kent J. Intell. Prop., no. 3, 2018, at 52, 59.

 [217]. It is true that there are some dissimilarities between IPRs and civil litigation as well, but these dissimilarities are limited to procedures, rather than the main substance between them, and largely reflect the somewhat more limited nature of the IPR proceeding. It is then important to note that per PTAB, “there is no requirement that the two types of proceedings be identical for sovereign immunity to apply to an administrative proceeding.” Covidien, 2017 WL 4015009, at *11.

 [218]. See, e.g., Relations with Native Americans, Library of Cong., https://www.loc.gov
/collections/continental-congress-and-constitutional-convention-from-1774-to-1789/articles-and-essays
/to-form-a-more-perfect-union (last visited Apr. 3, 2019).

 [219]. See, e.g., The Constitutional Convention of 1787, Univ. of Mo.-Kansas City Sch. L., http://law2.umkc.edu/faculty/projects/ftrials/conlaw/convention1787.html (last visited Apr. 3, 2019).

 [220]. See, e.g., Blatchford v. Native Vill. of Noatak, 501 U.S. 775, 779 (1991) (“[A] State will therefore not be subject to suit in federal court unless it has consented to suit, either expressly or in the ‘plan of the convention.’” (citation omitted)).

 [221]. Of course, this is only true in those areas where tribal sovereign immunity has not been abrogated.

 [222]. Meg Tirrell, More Scrutiny for Allergan over Native American Tribe Deal, CNBC (Oct. 2, 2017, 6:31 PM), https://www.cnbc.com/2017/10/02/more-scrutiny-for-allergan-over-native-american-tribe-deal.html.

 [223]. Juana Summers, Looming Trump Budget Cuts Deepen Distress on Pine Ridge, CNN (May 28, 2017, 10:49 AM), https://www.cnn.com/2017/05/27/politics/indian-reservation-trump-budget/index
.html.

 [224]. Petition for Writ of Certiorari, Saint Regis Mohawk Tribe v. Mylan Pharm., Inc. (No. 18-899) (U.S. Jan. 11, 2019); St. Regis Mohawk Tribe Appeals Loss in Patent Case to Supreme Court, Indianz.com (Jan. 16, 2019), https://www.indianz.com/News/2019/01/16/st-regis-mohawk-tribe-appeals-loss-in-pa.asp.

 [225]. Gene Quinn, Federal Circuit Rules Tribal Sovereign Immunity Cannot Be Asserted in IPRs, IPWatchdog (July 20, 2018), https://www.ipwatchdog.com/2018/07/20/federal-circuit-tribal-sovereign
-immunity-cannot-asserted-iprs/id=99504.

 [226]. See, e.g., supra note 155 and accompanying text.

 [227]. This assumes that neither plan on reversing course on tribal sovereign immunity. The Federal Circuit denied a petition to rehear the case en banc. Matthew W. Johnson, PTAB Denies Stay Pending Sovereign Immunity Cert Petition, Lexology: PTAB Litig. Blog (Dec. 26, 2018), https://www.lexology.com/library/detail.aspx?g=a28cb7cc-76b1-47ea-8364-0cf8d618ba1d.

 [228]. See supra Section III.B. (discussing the Federal Circuit’s decision in the Saint Regis case).

 

Crushing Creativity: The Blurred Lines Case and Its Aftermath – Postscript (Comment) by Edwin F. McPherson

From Volume 92, Postscript (February 2018)
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CRUSHING CREATIVITY: THE BLURRED LINES CASE AND ITS AFTERMATH[*]

EDWIN F. MCPHERSON[†]

On March 10, 2015, the music world was stunned when a jury in Federal District Court in Los Angeles rendered a verdict in favor of the heirs of Marvin Gaye against Pharrell Williams and Robin Thicke, who, along with rapper Clifford Harris, Jr., professionally known as “T.I.,” wrote the 2013 mega-hit song entitled “Blurred Lines.” The eight-member jury unanimously found that Williams and Thicke had infringed the copyright to Marvin Gaye’s “Got To Give It Up.”[1] On appeal, the Ninth Circuit Court of Appeals affirmed the verdict and recently rejected Williams and Thicke’s Petition for Rehearing en banc.

The case is significant for a number of reasons. In typical music copyright casesat least successful onesthe two works share the same (or at least a similar) sequence of pitches, with the same (or at least similar) rhythms, set to the same chords. The Blurred Lines Case [DB1]was unique, in that the two works at issue did not have similar melodies; the two songs did not even share a single melodic phrase. In fact, the two works did not have a sequence of even two chords played in the same order, for the same duration. They had entirely different song structures (meaning how and where the verse, chorus, etc. are placed in the song) and did not share any lyrics whatsoever.

The verdict in this caseassuming (perhaps naively) that it was based upon the music at all,[2] and not, for example, the jury’s dislike for Robin Thicke and his admitted drug usewas no doubt based upon a perception that the overall “feel” or “groove” of the two works is similar, as songs of a particular genre often are. In essence, Williams and Thicke have been found liable for the infringement of an idea, or a series of ideas, and not for the tangible expression of those ideas, which is antithetical to Section 102(b) of the Copyright Act.[3] Such a result is very dangerous to the music community and is certain to stifle future creativity.

All music shares inspiration from prior musical works, especially within a particular musical genre. The import of the Blurred Lines Case is, therefore, that songwriters can now be punished for creating new music that is merely inspired by prior works. By eliminating any meaningful standard for drawing the line between permissible inspiration and unlawful copying, the verdict is certain not only to impede the creative process and stifle future creativity, it ultimately does a disservice to past songwriters as well and adversely affects the entire music industry. The law, and specifically the intent behind the Copyright Act, would be much better served if the courts could provide clearer rules so that songwriters could know when the line is crossed, or at least where the line is.

I.  District Court’s Denial of Summary Judgment

Just prior to trial, the district court denied Williams and Thicke’s motion for summary judgment based upon the declarations of two musicologists submitted by the Gayes, which were filled with abstract theories, identifying certain remote, seemingly unrelated, factors of alleged similarity.[4] The court dismissedsimply as “issues of fact”the multitude of dissimilarities in the two works that were identified by Williams and Thicke’s musicologistincluding distinct, material differences in the actual melodies of the two songs.

Because “Got to Give it Up” was a pre-1978 composition and was recorded prior to 1972, the Court properly limited the Gayes’ proof to include only the deposit copy of the sheet music that was presented to the U.S. Copyright Office upon registration by Marvin Gaye’s publisher and did not allow the jury to hear the entire sound recording. However, immediately following this ruling, the court systematically and completely emasculated the ruling in the following significant ways:

  1. After the court had ruled on summary judgment that “Theme X” (a four-note melody) was not on the deposit copy, the court allowed the Gayes’ musicologist to testify that her “Theme X” was different from the court’s “Theme X,” and that her “Theme X” was implied[5] in the deposit copy (as was much of the music that was contained in the sound recording).
  2. The court allowed the Gayes’ musicologist to further testify that although the keyboard part in “Got to Give it Up” similarly was not in the deposit copy, “professional musicians would understand[6]” to play the keyboard part as she transcribed it—and that keyboard part was the “heartbeat” of “Got to Give it Up.”
  3. The court allowed the Gayes’ musicologist to use a transcription of the bass part from the sound recording that was different than the bass part on the deposit copy.
  4. The court allowed the Gayes’ musicologist to use sound bites from both works to show a “total concept and feel,” while in actuality compounding the issue with an instruction to the jury to disregard the actual clips and only to consider the musicologist’s “opinions.”
  5. The court allowed the Gayes’ musicologist to present a “mashup” of the two works, which was prepared after the close of expert discovery, and which included the bass and keyboard elements (that were not in the deposit copy)—while excluding mashups that were prepared by Williams and Thicke’s musicologist between “Got to Give it Up” and numerous old soul songs and many pop songs that could be played over the same four chords.
  6. The court allowed a lay witness who was in charge of the Marvin Gaye catalogue at Marvin Gaye’s record label (which also happened to be Robin Thicke’s record label), who does not even know how to read music, to testify that he listened to “Blurred Lines,” and thought that it was similar to the “Got to Give it Up” sound recording.

At the same time, the district court excluded evidence that Marvin Gaye’s own publisher strongly believed that there was no infringement. One of the functions of a music publisher is to police the copyrights of the songs in its catalogue, to assess whether or not its songwriters’ music has been infringed, and to commence litigation against the infringers.

In this case, according to Marvin Gaye’s publisher, EMI/Jobete, as stated in the Joint Rule 16(b) Report, EMI/Jobete

first internally analyzed whether ‘Blurred Lines’ was an infringement of ‘Got To Give It Up’ and determined that there was no infringement. Thereafter, Jobete secured the opinion of an expert musicologist who similarly concluded that there was no basis for a claim of infringement. Jobete duly reported its determinations to Frankie and Nona Gaye’s representatives . . . . Further Jobete advised that it could not, in good faith, bring infringement claims (either for ‘Got To Give It Up’ or for ‘After The Dance’ [another song that the Gayes claimed was infringed by Williams and Thicke] because its analysis, including expert analysis confirmed that neither work had ben infringed by Blurred Lines . . . . Jobete advised that, consistent with Rule 11 of the Federal Rules of Civil Procedure, it therefore could not and would not either defend Frankie and Nona Gaye [in Williams and Thicke’s declaratory relief action] or pursue the infringement claim they demanded.[7]

Ultimately, the Gayes actually sued EMI/Jobete for not pursuing the infringement claim against Williams and Thicke.[8]

II.  Infringement of An Idea, Which Is Not Copyrightable

It appears that the jury in this case was persuaded by a number of factors, including the foregoing similarities that were extraneous to the sheet music, interviews given by Robin Thicke, the number of musicologists that each side had (Gayes: two; Williams and Thicke: one), and the biased lay witness opinion. Not one of these factors had anything to do with any perceived similarity in pitch, rhythm, or chords, and not one of these factors constituted a proper basis for a finding of copyright infringement.

A result such as this, in which the melodies are not even close to being similar, is very dangerous, in that it does not distinguish between an idea and the expression of that idea, nor does it distinguish between the influence of a predecessor’s music and the unlawful copying of that music. The inherent danger of such a result is that, without drawing a proper line between what is an idea and what is an expression or between what is an influence and what is an infringement, future songwriters do not know whether their “influence” is going to land them with the next hit record or land them in courtor both, as demonstrated in this case.

Much has been said about Williams’s and Thicke’s apparent ability to afford to fund a case like this. Whether or not Williams and Thicke are able to afford to defend this case and pay a judgment, most of the musicians in the world are not in a position to do so. Clearly then, when a budding songwriter is contemplating the composition of a song, it is axiomatic that he or she is going to think twice before he or she writes a song that “feels” like a Marvin Gaye song or any other artist’s song, always with one foot in the recording studio and one foot in the courtroom. This is an untenable situation that most certainly will not foster uninhibited creativity.

III.  The Ninth Circuit Decision

Devastated by the effect that the verdict would have on future songwriters and the music industry in general, Williams and Thicke appealed the case to the Ninth Circuit Court of Appeals. The Ninth Circuitin a 2-1, very lengthy decision,[9] written by Judge Milan D. Smith Jr.affirmed the bulk of the district court’s decision and ignored the cries of the 212 Amicus songwriters (and dissenting judge Jacqueline H. Nguyen). The majority asserted that its entire decision was about narrow procedural matters and concluded its decision by stating that: “[f]ar from heralding the end of musical creativity as we know it, our decision, even construed broadly, reads more accurately as a cautionary tale for future trial counsel wishing to maximize their odds of success.”[10]

At the heart of the appeal was the issue of whether the copyright protection enjoyed by the Gayes was limited to the sheet music of “Got to Give it Up” that was deposited with the U.S. Copyright Office, or whether the jury could hear the sound recording as well. Williams and Thicke had successfully argued to the district court that because the Gaye song was created under the Copyright Act of 1909, the jury should not get to hear the sound recording. The Gayes’ attorney argued at the district court and at the Ninth Circuit that their proof should not be so limited. On appeal, Williams and Thicke’s attorney argued that Judge Kronstadt erred by initially restricting the Gayes’ proof to the deposit copy but then allowing in bits and pieces of the sound recording through the testimony of the handsomely paid musicologist, Judith Finell.

The majority noted that Williams and Thicke’s position that the scope of the Gayes’ copyright was limited to the deposit copy did not appear to be specifically supported by any case law until the district court’s ruling. However, the court decided to avoid the issue altogether: “Nevertheless, because we do not remand the case for a new trial, we need not, and decline to, resolve this issue in this opinion.”[11]

The Court did affirm that the district court had discretion to allow testimony from both of the Gayes’ music experts, which Williams and Thicke’s lawyers claimed to have improperly incorporated opinions about the similarity of the sound recordings, notwithstanding its earlier limitation of proof to sheet music.

In response to Williams and Thicke’s assertion that Judge Kronstadt erroneously denied their motion for summary judgment, the appellate court determined that the denial of summary judgment, after a complete trial on the merits, is not reviewable unless the issue is one of pure law. The court determined that this was not such a case: “The district court’s application of the extrinsic test of similarity was a factbound inquiry far afield from decisions resolving ‘disputes about the substance and clarity of pre-existing law.’ The district court’s ruling bears little resemblance to legal issues we have reviewed pursuant to our exception.”[12]

With respect to Williams and Thicke’s claim that the district court should not have allowed certain portions of the testimony of the Gayes’ musicologists, the court pointed out that Finell “was impeached with her deposition testimony, in which she admitted that the rhythm of the keyboard parts in the sound recording of Got To Give It Up is not notated in the deposit copy.”[13] The court further noted that Williams and Thicke’s expert disputed her testimony and that the whole thing “boiled down to a question of whose testimony to believe,” which was the purview of the jury.[14] Ultimately, the court ruled that the verdict was not against the clear weight of the evidence.

The Blurred Lines decision was indeed a procedural one and is on very narrow grounds. The court held that the jury’s verdict was not against the clear weight of evidence and refused to disturb or “second guess” the jury’s fact-finding at trial. The court concluded that the district court did not abuse its discretion in denying Williams and Thicke’s motion for a new trial.[15]

Even Williams and Thicke’s contention that the damages were excessive was met with a purely procedural response. The jury had awarded the Gayes 50% of the publishing revenue from “Blurred Lines” as actual damages, which amounted to approximately $3.2 million. The court ruled that the Gayes’ expert testimony in that regard was not speculative and, therefore, affirmed the amount. Similarly, the court determined that the jury’s verdict awarding profits to the Gayes of $1.8 Million against Robin Thicke and $375,000 against Williams was “not clearly erroneous,” nor was the continuing 50% royalty rate.[16]

The court did take exception to the district court’s treatment of T.I. and the Interscope parties, but that was on procedural grounds as well. The jury had rendered a general verdict in favor of T.I. and the Interscope parties, finding (albeit inconsistently) that neither had violated the Gayes’ copyright. The district court disregarded the jury’s verdict in that regard and brought them back into the case.

The Ninth Circuit ruled that the Gayes waived their challenge to the consistency of the jury’s verdict in this regard by not asserting their position at trial before the jury was discharged. The court went on, however, to rule that, even if the Gayes had properly preserved their challenge, “neither Federal Rule of Civil Procedure 50(b) nor our decisions in Westinghouse and El-Hakem v. BJY Inc. conferred authority on the district court to upset the jury’s verdicts in this case.”[17] The court further noted that “no evidence showed Harris was vicariously liable.”[18]

The majority, by focusing on the procedural aspects of the case, minimized the precedential value of the appeal itself, ignoring the potentially catastrophic ramifications of the case as a whole. This cavalier dismissal by the majority precipitated a blistering dissent by Judge Jacqueline Nguyen and an actual rebuttal to the dissent by the majority.

Judge Nguyen writes: “The majority allows the Gayes to accomplish what no one has before: copyright a musical style.”[19] She states further that: “‘Blurred Lines’ and ‘Got to Give It Up’ are not objectively similar. They differ in melody, harmony, and rhythm. Yet by refusing to compare the two works, the majority establishes a dangerous precedent that strikes a devastating blow to future musicians and composers everywhere.”[20]

With respect to the expert musicologists, the dissent goes on:

While juries are entitled to rely on properly supported expert opinion in determining substantial similarity, experts must be able to articulate facts upon which their conclusions—and thus the jury’s findings—logically rely. Here, the Gayes’ expert, musicologist Judith Finell, cherry-picked brief snippets to opine that a constellation of individually unprotectable elements in both pieces of music made them substantially similar. That might be reasonable if the two constellations bore any resemblance. But Big and Little Dipper they are not. The only similarity between these constellations is that they’re both compositions of stars.[21]

Judge Nguyen then picks up on a theme that was forefront in the 212 Songwriters, etc. Amicus Brief, and that was that it is axiomatic that copyright laws do not protect ideas, but only the expression of ideas. In the Blurred Lines Case, the only similarities that exist between the two compositions is the “idea” of, for example, clapping hands, yells, different instruments, etc.

Judge Nguyen goes on to challenge the majority to explain which elements of “Got to Give It Up” were protectable. She also does not believe in the “sliding scale” of access vs. similarity, in other words, the more access can be proved, the less substantial the similarity that is required. The majority adopted the inverse ratio rule, which was designed for cases with limited accessessentially, the less likely the access, the more similarity that is necessary to prove “copying.”[22] Judge Nguyen does not believe that, with undisputed access, the extent of similarity necessary to fulfill a plaintiff’s burden of proof essentially dwindles down to nothing.[23]

In response, the majority strikes back, stating:

[T]he dissent prophesies that our decision will shake the foundations of copyright law, imperil the music industry, and stifle creativity. It even suggests that the Gayes’ victory will come back to haunt them, as the Gayes’ musical compositions may now be found to infringe any number of famous songs preceding them. Respectfully, these conjectures are unfounded hyperbole. Our decision does not grant license to copyright a musical style or groove. Nor does it upset the balance Congress struck between the freedom of artistic expression, on the one hand, and copyright protection of the fruits of that expression, on the other hand. Rather, our decision hinges on settled procedural principles and the limited nature of our appellate review, dictated by the particular posture of this case and controlling copyright law. Far from heralding the end of musical creativity as we know it, our decision, even construed broadly, reads more accurately as a cautionary tale for future trial counsel wishing to maximize their odds of success.[24]

A.  The Denial of Rehearing En Banc

After their appeal to the Ninth Circuit failed, Williams and Thicke filed a petition for an en banc rehearing of the case. Judge Nguyen was the sole judicial proponent of en banc review, which was therefore denied.

IV.  All Music Is InSpired By Other Music

From time immemorial, every songwriter, composer, and musician has been inspired by music that came before him or her. Even one of the musicologists for the Gayes admitted that, with respect to music: All composers share devices and building.” This is especially so within a particular musical genre. Virtually no music can be said to be 100% new and original.

David Bowie was influenced by John Coltrane, Velvet Underground, and Shirley Bassey, among others.[25] Lady Gaga was influenced by David Bowie, Elton John, and Queen, among others.[26] Elton John was influenced by The Beatles, Bob Dylan, The Kinks, and Elvis Presley, among others.[27] The Beatles were influenced by Chuck Berry, Cliff Richard, The Beach Boys, and Elvis Presley.[28] Elvis Presley’s musical influences were “the pop and country music of the time, the gospel music he heard in church and at the all-night gospel sings he frequently attended, and the black R&B he absorbed on historic Beale Street as a Memphis teenager.”[29]

Marvin Gaye, himself, was reportedly influenced by Frank Sinatra, Smokey Robinson, Nat “King” Cole, Sam Cooke, Ray Charles, Bo Didley, and James Brown.[30] In fact, “Got To Give It Up” was apparently inspired by Johnnie Taylor’s song “Disco Lady.”[31]

One can only imagine what our music would have sounded like if David Bowie would have been afraid to draw from Shirley Bassie, or if the Beatles would have been afraid to draw from Chuck Berry, or if Elton John would have been afraid to draw from the Beatles, or if Elvis Presley would have been afraid to draw from his many influences. Presumably, it would also be difficult for the Gayes to imagine if their father had been afraid to draw from Ray Charles or Bo Didley. Quite simply, if an artist is not allowed to display his or her musical influences, for fear of legal reprisal, there is very little new music that is going to be created, particularly with the limitations that already naturally exist in songwriting.

V.  Music Copyright Cases Need A Bright Line Test

In the world of film, television, and books, the universe of choices is unlimited. One can write about the past, the present, or the future; one can write about things that actually happened, things that one wished had happened, or things that could never happenthere is absolutely no limit beyond the author’s imagination.

Yet, notwithstanding those unlimited options, there is somewhat of a bright line test for infringement (and for obtaining summary judgment) in the film/television/book world that does not exist in the music world. With a film, an expert conducts the extrinsic test by comparing the plots, sequence of events, characters, theme, mood, and pace of the two works. The expert also filters out all of the scènes à faire, such as a car chase in an action movie or a magician pulling a rabbit out of a hat.

A motion for summary judgment in such cases will weed out the protectable elements from the unprotectable elements. It will then demonstrate how the works are different with respect to protectable elements, and how any perceived similarities are based upon commonplace, unprotectable elements. The “language” spoken by the experts is typically one that the judge understands and can articulate freely.

In music, unlike film, etc., however, there is a “limited number of notes and chords available to composers,” and composers are therefore much more restricted in their options.[32] There are literally twelve notes per octave, and not all of those notes can be used in the same song. As Judge Learned Hand once wrote: “It must be remembered that, while there are an enormous number of possible permutations of the musical notes of the scale, only a few are pleasing; and much fewer still suit the infantile demands of the popular ear. Recurrence is not therefore an inevitable badge of plagiarism.”[33]

Yet, notwithstanding the severe actual and practical limitation of choices in music cases, the line drawing that exists in film copyright cases does not appear to exist in music cases. Musicologists speak a language that is often foreign to judges (and juries), and therefore confuse judges into denying summary judgment motions whenever two musicologists disagree.[34] There appears to be no easy way, no bright line, to determine in music casesand it was certainly not done in this casethe difference between creating the same “feel” or “style,”[35] and infringing a copyright.[36]

This is particularly so when a plaintiff can hire three, four, or five musicologists, conflict out three of them that find no similarities between any protectable elements, and know that, even if he only has one musicologist that can argue a case for infringement, he will avoid summary judgment. This is exactly what happened in the Blurred Lines Case. There were two or three musicologists that were initially consulted, rendered strong opinions of non-infringement, and ultimately were conflicted out of the case.[37]

VI.  Copyright Law Should Stimulate, Not Stifle, Creativity

The “ultimate aim” of the Copyright Act is “to stimulate artistic creativity for the general public good,” and most musicians applaud and appreciate that endeavor.[38] However, they also understand that, like the music that was created before them, their own music will serve as building blocks for future songwriters, who will create their own music. As discussed in Fogerty v. Fantasy, Inc., “copyright assures authors the right to their original expression, but encourages others to build freely upon the ideas and information conveyed by a work.”[39]

As written by Peter Alhadeff and Shereen Cheong in the Berklee College of Music Music Business Journal, “The Lesson of Blurred Lines,” quoting an interview with Berklee College of Music professor, Dr. E. Michael Harrington:If you’re not influenced by Marvin Gaye, there must be something wrong with you.”[40] The authors go on to write: “[h]e could just as well be talking about James Brown, Chuck Berry, the Beatles, or Michael Jacksonall of them a product of their own influences. Copyright law should make musical creativity flourish, not stifle.”[41]

Parker Higgins, director of copyright activism at the Electronic Frontier Foundation writes that

[w]hen we say a song sounds like a certain era, it’s because artists in that era were doing a lot of the same thingsor, yes, copying each other. If copyright were to extend out past things like the melody to really cover the other parts that make up the feel of a song, there’s no way an era, or a city, or a movement could have a certain sound. Without that, we lose the next disco, the next Motown, the next batch of protest songs.[42]

Finally, as written by composer Ron Mendelsohn, owner of production music company Megatrax:

All musical works, indeed all creative works, are born from a spark of inspiration. It is essential for musicians and composers to be able to find this spark anywhere and everywhere without having to constantly look over their shoulders and worry about being sued. To extinguish this spark, to replace it with fear, is to stifle creativity and deprive society of the next generation of great artists and new music. And yes, artists should be able to talk freely about their sources of inspiration without having to worry about their exuberant proclamations being played back as damning evidence in a court of law.[43]

VII.  The Celebration Of Influences Should Be Encouraged

Mendelsohn’s last point is an especially important one. In addition to the potential adverse impact that this case is certain to have on future songwriters, this case will have a lasting effect on past songwriters and musicians as well. Many interviews were played during the trial in which Pharrell Williams and Robin Thicke both expressed that they loved Marvin Gaye, and wanted, as an homage to him, to create a song that had the feel of “Got To Give It Up.” One might ask if there could possibly be a better legacy for a songwriter than to inspire other songwriters to write music and expressly pay homage to him or her for inspiring that musicpublicly, on national television and elsewhere, keeping his name and his music alive for generations to come.

Yet there can be no doubt in this case that the jury was swayed, at least in part (arguably in large part), by hearing such interviews. Ultimately, the jury held Williams and Thicke liable for copyright infringement and rendered an award of several million dollars against them. It is difficult to imagine a songwriter that comes along after this case publicly affording any credit to any influence that he or she receives from any songwriter.

Conclusion

It is apparent that the denial of summary judgment and the ultimate verdict in this case were based upon an undeniable musical inspiration, the overall look and feel of the two works, and a series of random, coincidental, and unimportant alleged similarities between unprotectable elements in the sound recording of “Got To Give It Up” (random elements that were not in the “Got To Give It Up” deposit copy) and “Blurred Lines.”

Many important popular songs in the modern era would not exist today if they were subjected to the same scrutiny as “Blurred Lines” was in this case. This case, which was based upon such factorswith no similarities in melody, with virtually no similarities with the music notation on the actual deposit copy, and simply based on a “groove”will clearly stifle future creativity, will undoubtedly diminish the legacies of past songwriters, and, without a doubt, is antithetical to the principals of the Copyright Act.

 

 

 


[*] *. This article was adapted from an amicus curiae brief that was filed by the author on behalf of 212 songwriters, composers, musicians, and producers, in connection with the appeal of the Blurred Lines Case to the Ninth Circuit Court of Appeals. See generally Williams v. Gaye, 885 F.3d 1150 (9th Cir. 2018) [hereinafter the Blurred Lines Case].

[†] †. Edwin F. McPherson is a partner at McPherson Rane LLP in Century City, California, specializing in entertainment litigation, intellectual property litigation, and crisis management. He attended much of the trial in the Blurred Lines Case, has given numerous lectures on the case, and submitted an amicus curiae brief to the Ninth Circuit on behalf of 212 songwriters, composers, musicians, and composers.

 [1]. Though Williams and Thicke were both found liable for copyright infringement, T.I. was exonerated by the jury. Although the district court purported to overrule the jury and brought back in T.I. and the Interscope-related entities as defendants, the Ninth Circuit reversed that portion of the District Court’s judgment. The Blurred Lines Case, 885 F.3d at 1182–83.

 [2]. In the two days in which the jury deliberated, they did not once listen to any of the music.

 [3]. 17 U.S.C. § 102(b) (2018).

 [4].