So now that Allergan has pioneered the technique of avoiding patent challenges by selling said patent rights to an Indian tribe, where do we go from here? There’s no way to take that one back; we’re now an industry where people do such things, lucky us. But is this going to be a feature of the patent landscape from now on?
Good question. Steve Usdin at Biocentury has what is the most comprehensive look at the issue I’ve seen, and there are several issues in play here. What Allergan is dodging, using the Mohawks as a shield, is the inter partes review process. This is not, as the Latin name might indicate, an ancient tradition in intellectual property law. It’s a process that’s only been around since 2012, and it’s a way to challenge the validity of an issued patent. The scope is tightly defined – it’s only for challenges under Section 102 (novelty) and Section 103 (obviousness), and it specifically addresses published prior art (which are the grounds under which such challenges are often made, anyway). The first thing to ask is whether an Indian tribe has the sovereign immunity to do such a thing, and there opinion seems pretty firm: they do.
As Usdin points out, we actually have the University of Florida to thank for the beginnings of that idea. In Covidien LP v. University of Florida Research Foundation Inc., the university, as part of the state of Florida, successfully argued that its sovereign immunity protected it, under the Eleventh Amendment, from an IPR patent challenge. This move was then used by the University of Maryland, and no one outside the world of patent law batted an eye. The Indian tribe almost certainly has similar sovereign immunity, and if Maryland and Florida can get out of IPR, then so can they.
But that brings up the second question: can a sovereign entity sell such immunity to customers who want a piece of it? That seems a bit murkier, and may well be the subject of a challenge. I have no idea of the odds of success there, but I can only assume that Allergan’s lawyers (and the tribe’s) have thought about this issue already and written things in a manner that don’t make it obviously dismissible as a sham transaction. On the one hand, patent holders can sell their rights to whomever they please, on what terms they can get. But selling it to a sovereign entity because it’s a sovereign entity somehow seems different. “Somehow seems”, though, is no basis for law. Congress could, in theory, just pass a law to the effect that patents are exempt from sovereign immunity considerations, but Congress is having trouble tying its shoes these days (not necessarily a complaint), so that seems unlikely. And any such law would surely head up for an eventual Supreme Court hearing as well, to be honest.
But (in one of the most interesting parts of the Biocentury article) it appears that you can lose or waive such immunity:
. . .in 2002 the Supreme Court ruled in Lapides v. Board of Regents of University System of Georgia that “sovereign immunity can be waived when parties are consciously trying to manipulate litigation outcomes.”
In Lapides the Supreme Court was asked to consider a suit against the Georgia Board of Regents alleging that university officials violated state law when they placed allegations of sexual harassment in an employee’s personnel file. The state successfully petitioned to have the case transferred from state to federal court and then argued that the federal case should be dismissed because the state had sovereign immunity from such cases.
The Supreme Court ruled that when Georgia moved a case from state court to federal court it voluntarily invoked the federal court’s jurisdiction and, in the process, waived its sovereign immunity.
Did the St. Regis Mohawks step into the same trap when they asked the USPTO to dismiss the IPR? That argument will probably be tried out as well, and lawyers will be well paid to thrash that one out, you can be sure.
The widest question is the whole inter partes review process itself. The review is conducted not in a court, but by the Patent Trial and Appeal Board. And that’s where the arguing starts, because the worry is that the PTAB may not consider patent claims in the same way that courts do – how broadly do you interpret their language? The whole idea of having a non-judicial review of patent validity which cannot be in turn challenged in court is also an issue – and as it turns out, these very issues have been working their way through the courts themselves. There is a case coming before the Supreme Court (Oil States Energy Services LLC v. Greene’s Energy Group LLC) that argues that the entire IPR system is unconstitutional. (There are other issues with a case in Texas, which I won’t go into, but Biocentury has more).
It’s fair to say that the biopharma industry in general hates IPR, for the same reason that the generic companies love it: it makes patent challenges easier and more frequent. But you don’t see anyone poking their head up to defend Allergan in this one, either, because everyone also knows just how bad it looks to pull a maneuver like this. There’s a huge range of possible outcomes here, all the way from “IPR disappears from existence” to “everyone sells everything to Indian tribes at every opportunity”. Where we land on that scale is yet to be seen.
Update: Allergan’s whole argument is that IPR is such an affront to decency that they’re justified in doing whatever they can to avoid it. But it turns out that they’re not above using it themselves, when it suits them. . .
Note: All opinions, choices of topic, etc. are strictly my own – I don’t in any way speak for my employer