Allergan transfers patents to Native tribe

As the Restasis patent is challenged, the tribe would invoke its sovereign immunity, which Allergan hopes will force the matter to be taken to US federal court, where the rules are much more favourable to it. Patents are the future.

The St. Regis Mohawk Tribe here in the North Country is set to receive more than $13 million from the drug-maker Allergan as part of a deal created to help protect the company’s pharmaceutical patents. The accord will entitle the tribe to a $13.75 million initial payment along with $15 million in annual royalties, beginning in 2018, until the cyclosporine (Restasis) patents either expire or are no longer valid.

As an American Indian tribal council, St. Regis can make use of a legal doctrine in the US known as “sovereign immunity” to protect itself from litigation of various kinds – states and public universities also have this right.

For the Mohawk tribe, a community of 13,000, the deal offers the promise of a new revenue stream that would bring in income beyond that of a casino the tribe runs near the reservation.

Because make no mistake, what is at stake here is not just the fate of six Allergan patents and some others owned by United States universities, but the entire future of the PTAB as a viable tool for defendants to challenge patents asserted against them, or ones that they fear may be asserted in the future.

Allergan received $1.5 billion in sales for Restasis past year.

Restasis’s patents are under attack on two fronts, and moving the rights may shield them on one side.

The announcement Friday is perhaps the most novel attempt to avoid a patent-review process that the brand-name drug industry has railed against in recent years. Over the lifetime of the assets concerned that could represent hundreds of millions of dollars – a sum which demonstrates just how valuable the pharma company believes those patents to be and how important it is they are kept away from the eyes of PTAB judges.

The patent board recently ruled in two cases that state university-owned patents were not subject to the review process, because states had sovereign immunity. Without such power, the incentive to do a deal grows significantly, even if you will still have a shot at the patent owner in court. But many patent holders have argued that the process is unfair and unnecessary because patents are challenged in the federal courts. The agency previously determined that Mylan has established a “reasonable likelihood” of winning its arguments that the patents are invalid, though a hearing on the case is scheduled for next week in Alexandria, Virginia. They have to win in both the court and before the agency.

Success for Allergan’s deal with the Saint Regis Mohawk Tribe would open a whole host of questions for the patent-review process, which was set up under a 2011 law.

“The Saint Regis Mohawk Tribe and its counsel approached Allergan with a sophisticated opportunity to strengthen the defense of our Restasis intellectual property in the upcoming inter partes review proceedings before the Patent Trial and Appeal Board”, Bob Bailey, Allergan’s chief legal officer, said in a release. Tech companies are the biggest users of the system, intended as a lower-cost way to resolve patent disputes.

“We will probably see multiple branded companies housing their patents with Indian tribes”, said Ronny Gal, an analyst for the financial firm Bernstein in a video message to its investors shortly after the partnership was announced on Friday.

By transferring ownership to the tribe, Allergan can try to limit its legal battle to the courts, where it is harder to invalidate patents because of a more stringent legal standard.

“We will vet them through the Shore firm to make sure that these are legitimate companies that we want to do business with”, he said. Take IPRs out of the equation and the USA starts to look a whole lot more comfortable for patent owners once more.

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