LAST week we wrote about the Mohawk people being used by vicious corporations that only need the Mohawk people because of corporate greed. We were actually very surprised that the Mohawk people had fallen for it (or rather their lawyers had plotted this). We last wrote about that six days ago.
We've written a bunch over the past few years about the so-called Inter Partes Review (IPR) process at the US Patent Office. In short, this is a process that was implemented in the patent reform bill back in 2010 allowing people and companies to ask a special "review board" -- the Patent Trial and Appeal Board (PTAB) -- at the Patent Office to review a patent to determine if it was valid. This was necessary because so many absolutely terrible patents were being granted, and then being used to shake down tons of companies and hold entire industries hostage. So, rather than fix the patent review process, Congress created an interesting work-around: at least make it easier for the Patent Office to go back and check to see if it got it right the first time.
Last year, part of this process was challenged at the Supreme Court and upheld as valid. However, the whole IPR is still very much under attack. There's another big Supreme Court case on the docket right now which argues that IPR is unconstitutional (the short argument is that you can already challenge patents in court, and by taking them to an administrative board, it creates an unconstitutional taking of property without a jury). There are also some attempts at killing the IPR in Congress.
A drug company has found a novel way to avoid challenges to some of its most prized patents: handing them off to a Native American tribe for safe-keeping.
On Friday, Allergan disclosed that it gave six patents covering its top-selling dry eye drug Restasis to the St. Regis Mohawk Tribe in Northern New York. The deal will provide the tribe with $13.75 million immediately and an annual royalty of $15 million as long as the patents are valid. The new deal was soon reported in both The New York Times and The Wall Street Journal.
Allergan made the unprecedented move because it will prevent any meaningful challenge to the company's patents at the Patent Trial and Appeal Board, or PTAB. Challenging patents at the PTAB in a process called "inter partes review" (IPR) was authorized by the America Invents Act of 2011, and the IPR process has significantly changed the patent landscape since then. While invalidating a patent in district court typically costs millions of dollars, invalidating a patent via IPR can happen for the relative bargain of a few hundred thousand dollars.
What do Seymour Cray’s high-performance computing research company SRC Labs and drug manufacturer Allergan have in common? Both SRC Labs and Allergan sold patents to the Saint Regis Mohawk Tribe, then licensed them back from the tribe, in order to use tribal sovereign immunity to prevent challenges to their patents as invalid.
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Sovereign immunity is not a topic that appears on many Patent Law syllabi. But in the past year, it’s become a more pressing issue when it comes to patents. First, state universities used it to avoid challenges to their own patents. And now, sovereign immunity is being sold to completely unrelated companies.
The University of Florida Research Foundation (UFRF) is a non-profit foundation established by the University in order to “to promote, encourage and provide assistance to the research activities of the University faculty, staff and students.” As part of this, they patent inventions by UF faculty and staff, and license those inventions.
Covidien (a medical device manufacturer) had a patent license agreement with UFRF. UFRF sued Covidien, and in response Covidien defended themselves by filing inter partes reviews (IPRs) against the UFRF patents. Back in January, UFRF claimed that, as a state entity, they were immune from IPR under Eleventh Amendment sovereign immunity. The Patent Trial and Appeal Board agreed and dismissed the IPR on Eleventh Amendment grounds.
Later in the year, a similar situation occurred, this time featuring the University of Maryland and NeoChord, another medical company. Maryland had given an exclusive license to several of their patents to Harpoon Medical, which sued NeoChord. NeoChord filed an IPR on the patents, and again, the PTAB dismissed the IPR on Eleventh Amendment grounds.
There are a few other instances of Eleventh Amendment immunity claims that may come up, including one by the University of Minnesota against Ericsson.
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The tribe’s FAQ on this program is interesting. I don’t know if they got the wrong impression from their lawyers, just misunderstood, or what, but they claim that by doing this, they can help “protect[] from patent trolls.”
Bluntly put, preventing patents from being IPRed does not protect anyone from patent trolls—it protects patent trolls from IPRs.
The tribe also claims that IPR is “very unfair” and allows patent trolls to void valid patents. (Patent trolls do not generally try to invalidate patents, because they usually don’t have any products to be sued on.) The tribe also claims that they’ll file to have their patents reviewed in federal court, which, again, does not happen.
If IPR is unfair, why does the Federal Circuit affirm three quarters of appealed PTAB decisions? The PTAB is getting decisions right, there’s just a lot of invalid patents out there to be challenged.
US Law generally holds that Indian Tribes are “Sovereign Powers” that “possess immunity from suit,” although only “to the extent that Congress has not abrogated that immunity and the tribe has not clearly waived its immunity.” Breakthrough Management Group, Inc. v. Chukchansi Gold Casino and Resort 629 F.3d 1173 (10th Cir. 2010), cert denied. As the Supreme Court wrote, “without congressional authorization,” the “Indian Nations are exempt from suit.” United States v. United States Fidelity & Guaranty Co., 309 U.S., at 512 (1940).
The recent news that pharma giant Allergan and tech company SRC have licensed patents to a Native American tribe in an attempt to protect the patents from inter partes review (IPR) has once again catapulted the controversial post-issuance review process into the wider business press. With the Supreme Court due to hear Oil States, a case concerning the constitutionality of IPRs, in its next term, the Patent Trial and Appeal Board (PTAB) is in the spotlight like never before.
Since the move by the pharma giant was announced early last week there has been an avalanche of press and blog coverage (you can read what this blog had to say here and another piece on Indian tribes and sovereign immunity, which is particularly worth reading, here). The Saint Regis Mohawk Tribe was clearly unimpressed by some of the ensuing coverage and so yesterday put out a statement in what it described as a clarification. Clearly keen to play to the patent gallery the statement ended with: “A strong patent system is in everyone’s best interest, which is why patent protection is one of our original constitutional rights.”
The drugmaker Allergan announced Friday that it had transferred its patents on a best-selling eye drug to the Saint Regis Mohawk Tribe in upstate New York — an unusual gambit to protect the drug from a patent dispute.
Under the deal, which involves the dry-eye drug Restasis, Allergan will pay the tribe $13.75 million. In exchange, the tribe will claim sovereign immunity as grounds to dismiss a patent challenge through a unit of the United States Patent and Trademark Office. The tribe will lease the patents back to Allergan, and will receive $15 million in annual royalties as long as the patents remain valid.