The hot topic of Native American sovereign immunity and inter partes review (IPR) is set to be put under the microscope in a hearing by the House of Representatives’ Judiciary Committee. Although details on the hearing are scant at the moment a House Judiciary aide confirmed to IAM that Chairman Bob Goodlatte is “very interested in this topic and intends to hold a hearing”. It’s not clear when that might happen, but given the amount of attention this issue is currently receiving it seems likely to be a matter of weeks rather than months.
Since early September, when Allergan agreed a deal to transfer and then license back all Orange Book listed patents relating to its blockbuster drug Restasis to the Saint Regis Mohawk Native American tribe, the issue of using sovereign immunity to ring fence patents from the IPR process has caught the attention of the courts, Congress and the mass media. Allergan effectively paid the tribe $13.75 million to take the patents off its hands and agreed an annual royalty of up to $15 million so that it could continue to use the IP. The tribe has also done a deal with SRC Labs by which it received more than 42 assets from the small tech firm; these have since been used in infringement litigation against Amazon and Microsoft.
The transfer strategy has already attracted a fair amount of scepticism and outright criticism. In district court in East Texas, where Allergan has been embroiled in litigation with several generic pharma companies since late last year, a judge recently ruled that some of the patents in question were invalid and called into question Allergan’s deal with St Regis. “The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed,” Judge Bryson wrote in a 16th October. He went on to add: “What Allergan seeks is the right to continue to enjoy the considerable benefits of the US patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents. If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice.”
That, of course, is why the agreememt between the pharma company and the tribe is such a big deal. If sovereign immunity for native American Indian tribes does apply to the PTAB - and we are still awaiting a final ruling on this - then it drives a coach and horses through the entire system: any company that is worried about a PTAB hearing can transfer its patents to a tribe and eliminate those concerns. And as the SRC Labs example shows, defensive assignments would not be the only option: there would be no reason why tribes might not become active patent purchasers and asserters, too.
For example, we have recently reported on Nokia's transfer of a huge portfolio of assets to Provenance Asset Group, a special vehicle set up by the principles of Quatela Lynch McCurdy. If similar assets in future are sold to Indian tribes with sovereign immunity at the PTAB, perhaps advised by an advisory like QLM, that might well have the effect of speeding up negotiations with parties subsequently approched to take licences and increasing the value of any deals done.
It's not just judges who have expressed concerns, some legislators have also heaped scorn on the transfer strategy, with Senator Claire McCaskill of Missouri introducing a bill to clamp down on the use of sovereign immunity in this way. A group of representatives from the House Oversight and Government Committee, meanwhile, has launched a probe into the Allergan/St Regis deal.
With the involvement of the House Judiciary Committee, one of the principal drivers of IP policy on Capitol Hill, the topic isn’t about to fade from view. But perhaps the bigger picture, as committee members will surely hear from some quarters in the next few weeks, is that the steps taken by Allergan and SRC Labs are symptomatic of what many patent owners see as broader problems with the IPR process.
That may cause some to argue that the focus should not be on whether sovereign immunity can be applied, but whether changes should be made to the IPR process so that some patent owners don’t feel like the deck is stacked against them and are forced to look for novel ways of protecting their IP. With the Supreme Court due to hear arguments next month in two IPR cases, including one questioning the constitutionality of the process, the "death squads" look set to remain firmly in the spotlight.
Additional reporting by Joff Wild