Native Tribes Cannot Protect Patents From USPTO Examination


The strategy was breathtaking in its daring. Just days before the USPTO heard to challenge Allergan Inc.’s patents on a dry eye drug, Restasis, the company transferred those patents to a Native American tribe; the tribe then sought to dismiss the USPTO proceeding on the grounds of sovereign immunity. As a result of this action, several other patent holders made similar transfers to indigenous tribes, in order to protect their patents. More patentees were prepared to do so if this scheme proved to be effective. However, this was not the case. On July 20, the Federal Circuit Court of Appeals ruled that the tribe’s sovereign immunity did not protect its patents from USPTO scrutiny. The decision thus kept intact a key element of the US patent system.

The deal between Allergan and the Mohawk tribe of Saint Regis was strange and, according to many, rather suspect. Instead of the tribe paying a lot of money for Allergan’s patents on a successful drug, Allergan paid the tribe millions to accept the patents. Specifically, Allergan paid the tribe $ 13.75 million upfront, plus an annual royalty of $ 15 million in return for the tribe’s surrender of the patents to Allergan.

It was a fictitious operation, according to many observers. It had no commercial or economic justification, other than to protect the patents from USPTO scrutiny.

This new attempt to buy USPTO review immunity has stunned many intellectual property experts. “I’ve spent my career studying the tricks pharmaceutical companies use to maximize their patent rights, and I’ve never seen anything like it,” said Professor Michael A. Carrier of Rutgers Law School.

Beyond immunity

Allergan’s attempt to gain immunity quickly ran into trouble. The USPTO ruled that the tribe could not claim sovereign immunity under the agency’s inter partes examination (DPI) procedure, so that examination by the Restasis patent agency could proceed. to chase.

Allergan and the tribe appealed. Now the USPTO’s ruling has been upheld [pdf] through the federal circuit (which is sometimes referred to as the “US patent court”).

The three-judge panel noted that lawsuits against Native American tribes are generally prohibited by sovereign tribal immunity. This immunity extends to federal administrative actions which are similar to civil litigation in federal courts. However, the immunity does not apply to other types of investigative or arbitration actions by federal agencies.

The question for the court was whether the USPTO’s inter partes reviews were more akin to civil litigation or other types of agency actions. “Ultimately,” the court said, “there are several factors that convince us that IPRs are more akin to an enforcement action by an agency than a civil action brought by a private party.

A key factor was that private parties did not have the right to initiate IPR proceedings. These parties could request an intellectual property rights review of a patent, but the Director of the USPTO had the final say in initiating such review. The director “has a wide discretion to decide whether or not to initiate an appeal,” the court said.

A second key factor was that an IPR could be processed without the participation of the entity that requested the proceeding or the owner of the contested patent. “This reinforces the view that IPR is an act of the agency to reconsider its own granting of a public franchise,” the court wrote.

The judges found that IPRs differ significantly from civil litigation and are rather exercises of federal administrative power over the quality of patents. The tribunal said: “The important role of the Director as custodian and the power of the Council to proceed in the absence of the parties convinces us that the USPTO is acting like the United States in its role of superior sovereign to reconsider a grant. administrative authority and protect the public interest in keeping patent monopolies “within their legitimate scope”. [an] DPI.

Winners and losers

Had the court ruled in favor of Allergan and the Native Tribe, the consequences for the US patent system would have been dire. “It would have completely changed the pharmaceutical industry. All companies would have rushed to protect their patents through the safeguard of sovereign immunity, ”said Stephen R. Auten, partner at the law firm Taft Stettinius & Hollister.

Many companies in other industries have also reportedly sought protection from Native American tribes. After the announcement of the Allergan deal, for example, 44 technology patents were reportedly transferred to two Native American tribes, presumably to protect IPR patents.

The Federal Circuit decision thus protects an important means of eliminating falsely granted patents. “The IPR system plays a crucial role in ensuring that bad patents are overturned,” Carrier said. He added, “There is a strong public policy to invalidate patents that are not valid. “

Yet many pharmaceutical companies are unhappy with the Federal Circuit’s decision. Because a successful drug with billions in annual revenue can be based on a single patent, pharmaceutical patent holders want to do everything in their power to protect their patents, including excluding them from intellectual property rights. . “IPRs are a fairly robust mechanism for challenging pharmaceutical patents,” said Professor Arti Rai of Duke Law School.

Not all pharmaceutical patents are threatened. Innovative patents should have little difficulty outlining IPRs. Patents that can be revoked under IPRs are secondary patents – sometimes referred to as “evergreen patents”. These patents cover minor modifications to an expiring drug patent (for example, putting the drug in a capsule rather than a pill), and they are made for the purpose of extending the pharmaceutical company’s exclusive patent rights to the drug. medication. “It’s not a good day to protect secondary patents,” Rai said.

Yet it is a good day for consumers.


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