By: Ilya Mirov,

On September 8, 2017, Allergan announced that it had transferred ownership of the patents on its lucrative drug Restasis, used for chronic dry eye relief, to the Saint Regis Mohawk Tribe [1]. The Tribe then granted an exclusive license for the drug back to Allergan, in exchange for an upfront sum of $ 13.75 million and $ 15 million per year in ongoing royalties as long as the patent remains in effect [2]. In exchange, the Saint Regis Mohawk Tribe is expected to claim sovereign immunity as a shield from attempts by generic pharmaceuticals at initiating inter partes review (IPR) actions on their respective patents [3]. Not only would these patents be immune from IPRs, but also from declaratory judgment actions in federal court [4].

Inter Partes Review is an administrative post-grant review of a patent that can invalidate some or all claims of the patent in question. In fact, since the institution of the process in 2013 via the America Invents Act, 86% of IPRs that are not terminated before final written decision have resulted in at least one claim being invalidated [5]. There is much debate on whether the expense and unfavorable decisions of the IPR process give alleged infringers too much power over patent owners, who must now weigh these costs against taking any action against the alleged infringer [6]. The proceedings themselves may even be unconstitutional, an issue that the Supreme Court will decide later this year [7].

Just as the future of IPRs is uncertain, so are the bounds of sovereign immunity in relation to IPRs. This year, the first precedent for sovereign immunity in IPR cases held that state-owned institutions, like universities, cannot have their patents challenged in IPR proceedings unless they waive immunity. Claims against them would instead be decided in federal court, where patent owners fare better against alleged infringers [8]. This most recent case regarding the Mohawk Tribe will decide whether Native American Tribes can exercise sovereign immunity in the same way. State sovereign immunity is granted by the Eleventh Amendment of the Constitution, but Native American Tribal sovereign immunity is granted by Congress, and can thus be limited by Congress [9].

The Mohawk tribe has not publicly commented on these deals yet, except to say that they have a similar arrangement with a technology company. Their actions show that they are ready and willing to enter the patent business, and they will certainly benefit from this new income source. The unique version of sovereign status that Congress affords Tribes does not support some of the typical income sources for a government body (i.e. use of land as collateral), and some do not want Congress to further limit their economic power [10]. Those who believe the IPR process unduly weakens patent rights may also support tribal patent assignments.

On the other hand, many question the legitimacy of the patent transfers. Judge William Bryson, who is overseeing Allergen’s federal infringement lawsuit has asked if the partnership with Mohawk is a “sham,” and whether Mohawk will be a co-plaintiff in the case [11]. Senator Claire McCaskill (D.-Mo.) introduced a bill to prevent tribes from entering in patent deals like these, calling it a “brazen and absurd loophole” [12]; four democratic senators have asked for an investigation [13].

The decisions of these cases could affect legal, economic, and business strategies. Keep an eye out for updates.

 

[1] Rachel Sachs, Be Very, Very Concerned About Allergan Just Did, Bill of Health, Sept. 9, 2017, http://blogs.harvard.edu/billofhealth/2017/09/09/be-very-very-concerned-about-what-allergan-just-did/.

[2] Tom Kulik, Why Assigning Patents to Native American Tribes to Avoid Inter Partes Review Is Bad Medicine Above the Law, Oct. 9, 2017, https://abovethelaw.com/2017/10/why-assigning-patents-to-native-american-tribes-to-avoid-inter-partes-review-is-bad-medicine/?rf=1.

[3] Kevin E. Noonan, Mohawk Nation Exercises Sovereign Immunity in Inter Partes Review, Patent Docs, Sept. 25, 2017, http://www.patentdocs.org/2017/09/mohawk-nation-exercises-sovereign-immunity-in-inter-partes-review.html.

[4] See Sachs, supra note 1.

[5] Patent Trial and Appeal Board Statistics (Mar. 31, 2016), https://www.uspto.gov/sites/default/files/documents/2016-3-31%20PTAB.pdf.

[6] See Paul Morinville, Native Americans Set to Save the Patent System, IP Watchdog, Oct. 9, 2017, https://www.ipwatchdog.com/2017/10/09/native-americans-set-save-patent-system/id=88871/.

[7]  Top of Form Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 137 S. Ct. 2239 (2017)Bottom of For

[8] See Dennis Crouch, Sovereign Immunity Excuses University of Florida from IPR Challenge, PatentlyO, Feb 1, 2017, https://patentlyo.com/patent/2017/02/sovereign-university-challenge.html.

[9] Joe Mullin, New Bill Would End Native American “Sovereign Immunity” for Patents, ARS Technica, Oct. 9, 2017, https://arstechnica.com/tech-policy/2017/10/new-bill-would-end-native-american-sovereign-immunity-for-patents/

[10] See Morinville, supra note 6.

[11] Meg Tirrell, Judge Asks if Allergan’s Patent Deal with Mohawk Tribe is a ‘Sham’, CNBC, https://www.cnbc.com/2017/10/06/judge-asks-if-allergans-patent-deal-with-mohawk-tribe-is-a-sham.html.

[12] See Mullin, supra note 9.

[13] Brendan McDermid, Four Senators are Calling for an Investigation into a Deal between Allergan and a Native American Tribe, CNBC, https://www.cnbc.com/2017/09/27/four-senators-are-calling-for-an-investigation-into-a-deal-between-allergan-and-a-native-american-tribe.html.

Image Source: http://petrieflom.law.harvard.edu/resources/article/why-a-drug-company-is-selling-patents-to-a-native-american-tribe.