By Tom Engellenner
In an unusual move to combat the perceived bias in favor of patent challengers at the U.S. Patent Office’s Patent Trial and Appeal Board (PTAB), the Irish drug company Allergan has decided to warehouse its key patents on the dry-eye drug Restasis with the Saint Regis Mohawk Tribe in upstate New York. Allergan generates over a billion dollars in revenue annually from sales of Restasis worldwide. By assigning ownership to the Mohawks, the company believes its patents will be exempt from PTAB review on the grounds of “sovereign immunity.”
Under the deal announced last week, Allergan will pay the tribe $13.75 million. In exchange, the tribe will claim sovereign immunity should the patents be challenged at the PTAB. The tribe will also exclusively license the patents back to Allergen and be eligible to receive $15 million in annual royalties for the remaining life of the patents. According to Mr. Dale White, the general counsel for the 13,000 member tribe, the deal will further the tribe’s goal of being self-reliant. The New York Times has reported that Mr. White was approached in April by a Dallas law firm that pitch the idea and that the tribe has taken ownership of patent portfolios for other companies as well.
The defense of sovereign immunity has already been accepted by the PTAB in cases where the owner of the patent is a state university. The leading cases are Covidien LP v. University of Florida Research Foundation Inc., IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017). and Neochord, Inc. v. University of Maryland, IPR2016-00208 (PTAB May 23, 2017). (See our analysis of the Covidien case here.) In both cases the PTAB dismissed IPR proceedings against the universities based upon their claims of sovereign immunity – in particular, the Eleventh Amendment – that bars the proceedings unless the state-entity that owns the patent consents to jurisdiction.
The Eleventh Amendment provides that the “judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another state, or by citizens or subjects for any foreign State.” The Supreme Court has interpreted the Eleventh Amendment as a grant of immunity to the States against certain adjudicative proceedings brought against them by private parties.
The broader doctrine of “Sovereign Immunity” is rooted in common law and likewise prohibits actions against foreign states in federal courts and administrative tribunals. Although somewhat murky, the Supreme Court has held, as recently as 2014 in Michigan v. Bay Mills Indian Community, 572 U.S. 12-515, that native American tribes retain inherent sovereign authority and tribal immunity as “domestic dependent nations” and that such immunity extends beyond reservation land to commercial cases in the absence of Congressional action to the contrary.
The Times also reported on an interview last week with Brent Saunders, the chief executive of Allergan, during which he explained that the company made the move to avoid the “double jeopardy” of having the same issue heard in two venues (e.g., a federal district court and the U.S. Patent Office). “We did this to really make sure that we can defend these patents in only one forum,” he reportedly said.