Allergan announced on September 8, 2017, that it had transferred its patents covering the drug Restasis to the Saint Regis Mohawk Tribe and will pay the tribe $13.75 million. The tribe is also eligible to receive $15 million in annual royalties as long as the patents remain valid. In exchange, Allergan was given an exclusive license to the patents.
With this unlikely alliance between a multi-national pharmaceutical company and a small Indian tribe located on the New York side of the U.S.-Canadian border, Allergan hopes to benefit from the tribe’s sovereign immunity. Tribal sovereign immunity is a long-established Federal Indian Law principle that flows from tribes’ sovereign status as “domestic dependent nations.” While the scope of the immunity is limited by certain contours established by Congress, the tribes’ sovereignty generally provides immunity protection from suits unless a legislative exception exists or the tribe has expressly waived its sovereign immunity.
Allergan seeks to use sovereign immunity to defend the Restasis patents against challenges before the U.S. Patent and Trademark Office’s Patent Trials and Appeals Board (PTAB) known as inter partes review (IPR) proceedings. In its press release, Allergan cited two recent cases, Covidien LP v. University of Florida Research Foundation Inc. and Neochord, Inc. v. University of Maryland, in which the PTAB dismissed IPR proceedings against public universities based on claims of state sovereign immunity.
The PTAB rendered its opinion in Covidien in late January. In a matter of first impression, the PTAB ruled that state sovereign immunity under the 11th Amendment extends to inter partes reviews and that the University of Florida, as an arm of the state, was therefore immune to challenges to its patent. The PTAB’s opinion in Neochord followed in May, similarly holding that the University of Maryland’s heart valve patent could not be challenged via inter partes review because the university had state sovereign immunity.
Allergan is banking that the tribe’s sovereign immunity will similarly protect the Restasis patents.
It is unclear at this time whether other tech companies will follow suit now or wait to see whether Allergan’s gamble pays off before the PTAB. The PTAB, which was formed in 2012 as part of the America Invents Act, has been nicknamed the “death squad” for its frequent invalidation of patents. The IPR proceedings are conducted as mini-trials before Administrative Patent Judges, and the petitions are often brought by defendants in patent infringement suits seeking an early shot at invalidating the plaintiff’s patent. The IPR process, which is heavily favored by the tech sector, is also far less expensive than taking a patent case through trial.
Companies taking the wait-and-see approach may also want to wait for the U.S. Supreme Court’s ruling on the constitutionality of IPR proceedings. In June, the Court granted certiorari in Oil States vs. Greene’s Energy Group, et al., and will review the question of whether the IPR proceedings violate the patent owner’s constitutional right to a jury and an Article III forum. As a testament to the interest this matter has generated, 31 amicus briefs have been filed by a range of interested parties, including industry groups, patent owners, universities, think tanks, and even the PTAB itself.[1] Merits briefing is set to be completed by the end of November, making it highly likely that the Court will render its decision in the 2017-2018 term. Assuming that IPR proceedings survive the Court’s decision, Congress may choose to close this creative loophole and avoid a flood of transfers by patent owners seeking to keep their patents away from the so-called “death squad.”
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Notes:
[1] For contrast, the Court averaged between 10-14 amicus briefs per case in each of the 2011-2016 terms.
