Sen. McCaskill: “One of the most brazen and absurd loopholes I’ve ever seen.”
Allergan’s move to stop its patents from being reviewed by handing them off to a Native American tribe is winning support from few people outside the drug company. Now one lawmaker is seeking to ban it.
Sen. Claire McCaskill (D-Mo.) has introduced a bill (PDF) that would head off Allergan’s strategy without waiting to see whether the judges at the Patent Trial and Appeals Board will even approve it.
“This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal,” McCaskill said last week in a statement to a pharmaceutical lobby group.
The Native American patent shelter, promoted by Allergan’s outside law firm, seeks to avoid the process of “inter partes review,” or IPR, for the patents protecting the blockbuster drug Restasis. The IPR process is a kind of quasi-litigation that takes place at the Patent Trial and Appeals Board for the sole purpose of determining whether a patent is valid or not.
Now that the Restasis patents are owned by the St. Regis Mohawk tribe and licensed back to Allergan, the drug company’s lawyers have asked for an impending IPR to be dismissed. The tribe argues that it’s protected from IPRs by “sovereign immunity.”
Allergan has said the IPR process, which was implemented in 2012, is “flawed and broken.” The company says it has no problem with the validity of its patents being challenged, as long as that challenge takes place in federal court.
Sovereign immunity is a concept that descends from the idea that you can’t haul a king or other monarch into court. In US law, it’s enshrined in the 11th Amendment to the US Constitution, which prevents states from being sued in federal court without the state’s consent.
In some cases, Native American tribes are protected by a different version of sovereign immunity—one that is not constitutionally mandated. Thus, Native American sovereign immunity can be altered or removed by a simple vote of Congress. McCaskill’s bill would do just that by simply stating that “an Indian tribe may not assert sovereign immunity as a defense” in an inter partes review of patents.
The bill, which was introduced Thursday and referred to the Senate’s Committee on Indian Affairs, only affects IPR proceedings, not patent disputes in federal court. It was reported earlier by Patently-O.
Restasis earns revenue of around $1.5 billion per year. The original patents that protected Restasis expired in 2014, but Allergan filed a new batch of patents that will keep out generic competition until 2024. Generic drug companies have challenged the validity of those follow-on patents at both the US Patent Office and in federal courts.
McCaskill has attacked what she sees as abuses of the patent system before. In 2013, she sought to take action against patent owners who send out masses of demand letters, calling them “bottom feeders.” While that didn’t result in any new federal law, many states ultimately passed laws limiting how patent demand letters can be used.
The St. Regis Mohawk tribe will get paid $15 million annually as long as the Restasis patents are valid. The tribe has also cut a deal with an unnamed technology company.
The strategy is being used in the tech sector as well. A lawsuit against Apple has been handed off to a patent-holding company that’s wholly owned by the Mandan, Hidatsa, and Arikara Nation, also known as the Three Affiliated Tribes.