Five testimonies from the Allergan-tribe patent hearing
On November 7, the House Judiciary Committee’s subcommittee on IP took part in the “ Sovereign Immunity and the Intellectual Property System” hearing.
The committee called the hearing after Allergan announced a patent deal with a Native American tribe, the Saint Regis Mohawk Tribe.
The Saint Regis Mohawk Tribe acquired the patent rights to Restasis (cyclosporine ophthalmic emulsion), a dry eye treatment, from Allergan in September.
Allergan paid the tribe $13.75 million and, soon after, the tribe filed a motion to dismiss inter partes reviews (IPRs) brought by Mylan, based on the tribe’s sovereign immunity from IPR challenges.
Last week, LSIPR reported on a statement made by Bob Goodlatte, chairman of the House Judiciary Committee, on the hearing.
LSIPR looks into the testimony provided by the Saint Regis Mohawk Tribe and four experts on patent law.
Unfortunate misconceptions
The Saint Regis Mohawk Tribe addressed what it called a number of “unfortunate misconceptions and false statements”.
“It is not coincidental that the interest in sovereign entities owning intellectual property and exercising their right to sovereign immunity in certain, limited circumstances has only recently gained attention now that a federally recognised tribal government has exercised its sovereign right to do so,” claimed the Native American tribe.
First, the tribe countered the committee’s assertion that sovereign immunity exempts patents from any future challenges, a statement the committee made when announcing the hearing.
According to the tribe, the statement “perpetuates a false narrative” that the exercise of sovereign immunity somehow shields patents from future challenges.
“This demonstrably false scare tactic cannot withstand scrutiny,” claimed the Saint Regis Mohawk Tribe, adding that under the Hatch-Waxman process, courts have full jurisdiction to hear challenges to otherwise valid patents (including patents held by sovereign state and tribal governments).
It went on to say that cases where sovereign immunity has been asserted have been limited to the Patent Trial and Appeal Board and the IPR process and are “specifically intended to return patent challenge litigation to the federal courts”.
The tribe stated that the committee should defer any action on the question of sovereign immunity and the IPR system until after the Supreme Court decides Oil States Energy Services v Greene’s Energy Group.
The tribe also claimed that its critics “have not actually articulated any coherent legal theory to support their often repeated allegation that this transaction is a sham or a scheme to buy or rent tribal immunity”.
It added that that tribes have been innovators for centuries and are entitled to the same treatment as state universities, and that immunity from IPR proceedings will not delay access to generics or raise drug prices.
Avoiding IPR abuses
Some patent owners find it necessary to assign their patents to sovereign entities to avoid the “unfairness of, and the many abuses that surround, IPRs as they currently exist”.
That’s the opinion of Philip Johnson, former senior vice president of IP strategy and policy at Johnson & Johnson.
He added that to “level the playing field” so that no meaningful advantage can be gained by assignments to sovereigns, a revision of the post-grant procedures is required.
The revision is to ensure that post-grant procedures “will conform in substance and outcomes with those achieved in the federal courts, thereby removing any incentive to arbitrate the differences between these two, which are now fuelling a wide range of abuses”.
Johnson added: “Fortunately, the problems with IPRs are now widely recognised within the IP community, and their fixes are well within this subcommittee’s purview. But time is of the essence, as this same recognition is now rapidly eroding confidence in our patent system.”
The former Johnson & Johnson employee explained that the situation can only be remedied by correcting the underlying problem of the unfairness of IPRs, and not be enacting legislation that discriminates against one class of sovereigns.
Sham transfers
William Jay, partner and co-chair of appellate litigation at Goodwin Procter, testified on behalf of the Association for Accessible Medicines, which represents companies that develop and bring to market generic and biosimilar medicines.
“The tribe pointed out that some such universities enjoy sovereign immunity, such as when they are sued for patent infringement. But no state university has accepted a sham patent transfer from a corporate patentee to avoid IPR.”
Jay added: “It would be like me paying you a massive lump sum to take title to my house, and then continuing to pay you huge amounts of money each year to rent my house back to me. Something is plainly not right here.”
According to the Goodwin Procter lawyer, if this type of transaction is successful, it would have “serious repercussions” for patients and drug competition, as review is an important component of a healthy patent system and tribal immunity threatens to limit judicial proceedings as well.
“This type of transaction is antithetical to the goals of the America Invents Act,” he claimed.
On the impact on district court litigation, Jay noted that district court cases generally take much longer than an IPR proceeding and cost much more.
“Second, while it is still an open question whether tribal sovereign immunity applies in IPR proceedings at all, there is no dispute that tribal immunity applies in federal court,” he explained.
Jay added that unless a court finds that such transactions are a sham, a tribe “renting its immunity” to a brand-name manufacturer could potentially block generic manufacturers from bringing their own lawsuits to declare a patent invalid.
Immunity is out of place
Assertions of sovereign immunity are “out of place in a modern IP system”, claimed Christopher Mohr, vice president for IP and general counsel at trade association the Software and Information Industry Association (SIIA).
In his testimony, Mohr said that when the state commercially exploits federally-created rights, the law should “require them to play by the same sets of rules as any other commercial participant”.
The SIIA’s members are concerned about the inequity of states “playing by two sets of rules”, said Mohr.
He continued: “On the one hand, states are able to exploit the full range of remedies as an owner of IP, as one state recently did against Apple to the tune of hundreds of millions of dollars. That same state, however, may be immune from damages when it infringes the intellectual property of others, whether patent, copyright or trademark.”
Allowing “artificial arrangements” like Allergan’s litigation to prosper will disrupt the IPR system and “destroy those benefits”, said Mohr.
Distorting the patent system
And last but not least, Karl Manheim, professor of law at Loyola Law School, also provided testimony.
“State and tribal sovereign immunity in patent cases distorts the patent system and can lead to anti-competitive conduct harming consumers and the public welfare,” explained Manheim.
He added that although states and tribes “deserve special solicitude (including immunity) in many contexts, the patent system is not one of them”.
Manheim believes that the “delicate balance” between innovation and competition policies would be reinforced by creating a “limited exception” to sovereign immunity.
“It can be done without violating the Eleventh Amendment or the respect and comity our nation owes to Native Americans,” he said.
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