from the the-patent-system-is-so-damn-broken dept
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.
While those play out, however, never underestimate the ability of sketchy lawyers to find loopholes and dive through them in ways that are clearly sticking a giant middle finger up at the law. Such is the case with the pharmaceutical company Allergan, who just “sold” some of its patents for the dry-eye drug Restasis to the St. Regis Mohawk Tribe based in upstate New York. There are currently challenges against the Restasis patents both in court and via the IPR at the PTAB — and the PTAB has indicated that Allergan is likely to lose its patents. But Allergan has basically short circuited the process just days before the PTAB was set to hear arguments over the patent, and will now tell the PTAB it can’t review these patents because of (no joke) the sovereign immunity of the Mohawk tribe.
The reasoning goes back, first, to a ruling at the beginning of this year where the PTAB dismissed some reviews of patents held by the University of Florida after the University — a part of the state of Florida — made a claim of sovereign immunity, saying it’s exempted under the 11th Amendment of the Constitution. While there are some arguments against this, the PTAB agreed. The lawyers representing the University of Florida in this case apparently saw this as an opportunity. They’re the same lawyers representing Allergan in this “sale.”
Of course, it’s a sale in name only. The only reason for the sale is to be able to avoid the IPR process. In all other ways, Allergan appears to retain control. From the NY Times article on the deal:
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.
So, yeah. This is an insanely blatant attempt at avoiding a process put in place under the law, and where this pharmaceutical company is basically paying off a Native American tribe for the right to avoid a process that might invalidate some patents. As a side note, the tribe’s quote on this to the NY Times is pretty ridiculous:
?The tribe has many unmet needs,? Dale White, the tribe?s general counsel, said in an interview. ?We want to be self-reliant.?
Being “self-reliant” means doing something of actual value yourself. It doesn’t mean abusing an already questionable loophole in patent law to help giant pharma companies keep their dubious patents and limit the ability of more affordable medicine to get on the market. And, of course, lots of people are predicting that there will be more deals like this in the near future.
Either way this is a big deal. Law professor Rachel Sachs has already pointed out that this could go way beyond just the IPR process and could impact claims in federal court as well. And you can be sure that if that’s true it will be exploited. There is no “legitimate” reason for this patent sale and license-back other than to avoid having the patent reviewed. It’s a sickeningly blatant attempt to avoid the law and to keep a patent from possible invalidation. Even those who support the patent system should be concerned when obvious games like this are played to abuse the system. It doesn’t make the system look any stronger. It just shows how desperate some companies are to avoid having their patents looked at closely.
Of course, there is some more history on this issue going back quite a while. Almost exactly 10 years ago, we wrote about the ridiculousness of letting state universities claim sovereign immunity to avoid being sued for patent infringement (even while asserting patents against other entities). And, back in 2011, we saw a similar issue pop up with a Native American nation (in that case, the Quapaw Tribe in Oklahoma) able to have a patent infringement case dropped entirely by using sovereign immunity. At the time, we wondered if this might enable a creation of patent-free autonomous zones — but that didn’t really happen. Instead, we get something much, much worse: patent holding giants totally abusing the system to make sure that bad patents can be used to inflate prices and limit competition, even in the field of important life-saving drugs.