Patent Trolls, Big Pharma Try To Use Native Tribes To Skirt Patent Review

Image courtesy of Louis Abate

There are always patent lawsuits and challenges happening around the country. But the new trend in patent suits — from major, established drug companies to fly-by-night outfits alike — seems to be an attempt to get a leg up by using tribal sovereignty to avoid certain parts of the process.

Patents, at their core, are designed to give some innovative party exclusive rights to make the thing they thought of for a certain period of time. They’re a legal tool to create incentives for research, development, and invention: If your efforts lead you to create a brand new widget, then we, the government, will give you the exclusive right to make and sell that widget for a while, so you recoup your costs and make a bit of profit, too.

But that means patents themselves — and not just the things they describe — are extremely valuable. And anything with value can be bartered, sold, traded, and sometimes abused in the name of money.

Patent trolls, for example, are an entire category of individuals and small businesses that exist to buy up patents for things, then sue anyone they can think of who may be using that patented thing. Most entities settle, and so a decent troll can make a steady stream of income through the courts.

Much in the same way that payday lenders have tried hiding behind tribal affiliation in order to skirt laws regulating debt instruments, some patent holders are now shifting their patents to native tribes in order to try to skirt review or prevent competitors from arising.

Big Pharma’s Big Patent

Allergan owns the patents on the dry-eye drug Restatis, which you’ve probably seen TV or magazine ads for.

In recent months, the company had been facing a legal challenge to its Restasis patents, however. And so Allergan tried a workaround: It transferred all of the patents for Restasis to the Saint Regis Mohawk Tribe in New York.

Under the agreement, the tribe became the patent-holder — but immediately granted Allergan an exclusive license to use the patents. For sitting on the ownership and letting Allergan do its thing, the tribe got more than $13 million up front and up to $15 million in annual royalties thereafter.

“I believe it’s novel,” Allergan CEO Brent Saunders told CNBC at the time.

But giving the tribe ownership of the patents can’t protect the patents from being thrown out in court — and that’s what happened anyway, a month later.

In a ruling [135-page PDF] issued Monday, U.S. Circuit Judge William Bryson not only invalidated the patents, but also made very clear he thought Allergan’s “novel” legal strategy was a terrible idea.

“The court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed,” Bryson wrote. “When faced with the possibility that the PTO [patent office] would determine that those patents should not have been issued, Allergan has sought to prevent the PTO from reconsidering its original issuance decision.”

“What Allergan seeks,” Bryson concluded, “is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits.”

Further, Bryson noted, “If that ploy succeeds, any patentee facing [review] proceedings would presumably be able to defeat those proceedings by employing the same artifice.”

The Same Artifice

And Bryson was indeed correct: Allergan is far from the only entity trying to use tribal sovereignty to skirt around patent law.

Amazon and Microsoft are both also facing patent suits from the Saint Regis Mohawk tribe, Reuters reports. In this case, the other patent holder trying to skirt review is a company called SRC Labs

Apple is also facing a patent-troll style lawsuit over patents owned by a new entity called MEC Resources, Ars Technica reports. And MEC Resources is owned in its entirety by the Mandan, Hidatsa, and Arikara Nation (Three Affiliated Tribes).