Challenges mount for tribal patent immunity play

USPTO Building

 | AEIde

The Patent Trial and Appeals Board (PTAB) ended 2017 with a bang, issuing a decision that may imperil the recent innovative, controversial strategy by some patent holders to shield their assets from collateral attack by assigning them to Native American tribes.

Recall that pharmaceutical giant Allergan pioneered this strategy last September when it assigned its highly profitable patent portfolio covering the blockbuster Restasis dry-eye treatment drug to the Saint Regis Mohawk Tribe.

The tribe granted Allergan an exclusive license to practice and enforce the patents, and Allergan paid the tribe $13.75 million, plus a royalty of up to $15 million per year until the patents expire in 2024.

The move aimed to inoculate Allergan’s erstwhile patents from a challenge to their validity in front of the PTAB, an administrative tribunal in the Patent and Trademark Office created by the 2011 America Invents Act as a faster, cheaper, and easier avenue for invalidating patents.

But the PTAB itself ruled earlier in 2017 that sovereign entities, such as state universities, are immune from Patent Office proceedings under the 11th Amendment. Companies like Allergan promptly seized the opportunity to transfer their patents (while retaining beneficial interests in them) to Indian tribes, which are considered sovereign entities under US law. Others followed suit, and some tribes have filed patent complaints against Apple and Microsoft.

This strategy in turn prompted outrage by Allergan’s generic competitors and other companies convinced these “sham transactions” violate the spirit, if not the letter, of sovereign immunity law in general and the PTAB’s ruling in particular. The House Committee on Oversight and Government Reform requested detailed information from Allergan, while one senator introduced legislation to strip the tribes’ immunity in such cases. Meanwhile, Allergan lost a court case involving the transferred Restasis patents, prompting the judge to articulate “serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed.”

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