Efficient infringer lobby achieves bipartisan effort to abrogate Native American tribal sovereignty

By Steve Brachmann
October 13, 2017

Capitol BuildingIn early October, both houses of the United States Congress were simmering with activity that proves that the legislative branch of the federal government has very little respect for owners of intellectual property in this country or the sovereign rights of Indian tribes. On October 3rd, multiple news outlets including Reuters and The New York Times reported on a bipartisan effort among four members of the House Oversight & Government Reform Committee to probe a patent agreement between multinational pharmaceutical firm Allergan (NYSE:AGN) and the Saint Regis Mohawk Tribe. The representatives, which include House oversight chairman Rep. Trey Gowdy (R-SC) and ranking Democrat member Rep. Elijah Cummings (D-MD), sent a letter to Allergan voicing concerns that the deal could “impair competition across the pharmaceutical industry.” According to reports, Allergan is planning to comply with the committee’s requests as it continues to defend the deal with the St. Regis tribe as a way to shield its property rights from the “flawed and broken” inter partes review (IPR) process at the Patent Trial and Appeal Board.

Over in the U.S. Senate, similar action is taking place, giving more evidence that the entire legislative branch doesn’t understand the innovation economy, and the ignorance is bipartisan in nature. On October 5th, Sen. Claire McCaskill (D-MO) introduced a bill to abrogate the sovereign immunity of Indian tribes as a defense in IPRs, S.1948. This discriminatory bill does nothing to actually end sovereign immunity as a defense against patent validity challenges, as is evidenced by the University of Florida Research Foundation’s successful 11th Amendment defense at the PTAB this January. It’s almost as if Sen. McCaskill thinks that many Indian tribes don’t deserve a legitimate avenue for providing care for their elderly, or housing, or education, that tribes couldn’t be licensing entities but must rather stick to revenues from gambling or tax-free gasoline and tobacco products.

Sen. McCaskill is not the only member of the Senate who is proving themselves to be staunch allies of the efficient infringer lobby to the detriment of tribal sovereignty and patent owners everywhere, and the problem seems to be especially strong on the Democrat side of the aisle. In late September, news reports indicate that four Senate Democrats sent a letter addressed to Sen. Chuck Grassley (R-IA), chairman of the Senate Judiciary Committee, which called the Allergan deal a “blatantly anti-competitive attempt to shield its patents” from review. Those Senators include Sen. Maggie Hassan (D-NH), Sen. Sherrod Brown (D-OH), Bob Casey (D-PA) and Sen. Richard Blumenthal (D-CT).

The only thing blatantly anti-competitive about this whole situation are the misguided actions of our nation’s lawmakers working in concert to dismantle Allergan’s competitive advantage in the marketplace. As a letter sent by Allergan to Sen. Grassley and Sen. Dianne Feinstein (D-CA), the ranking Democrat on the Senate judiciary committee, notes, there is no attempt to shield the patents covering the eye treatment Restasis from legitimate patent validity review. The patent deal with the St. Regis tribe doesn’t shield the patents from validity challenges coming from a Hatch-Waxman trial recently concluded in Texas federal court. “To be clear, if the District Court ruling is adverse to Allergan’s patent position, and there is an FDA approval of a generic version of RESTASIS®, that product could enter the market many years in advance of the listed patent expiry dates,” Allergan’s note reads. The drugmaker further argues that the IPR process in force at the PTAB undermines the 33-year-old Hatch-Waxman statutory regime regarding validity challenges to pharmaceutical patents, is subject to changes to validity proceedings implemented within the executive branch which are not impartial, and creates an unfair burden on innovators by opening patents to challenge proceedings which are often inconsistent before both the PTAB and the Court of Appeals for the Federal Circuit, the court to which PTAB decisions can be appealed.

It is both outrageous and appalling that not a single Congressional investigation has occurred during the past five years which has seen the most egregious destruction of patent owner rights in our nation’s history. Incredibly, despite press coverage on this site and elsewhere of anti-patent owner abuses occurring through the Sensitive Application Warning System (SAWS), anti-patent bias at the PTAB leading to more than 90 percent of challenged patents being found defective, the stacking of administrative patent judges (APJs) on PTAB trials in order to achieve desired policy outcomes, the presence of certain APJs on panels deciding petitions filed by former employers which would be a conflict of interest at the district court level, testimony to the House IP Subcommittee from former Chief Judge Paul Michel on how PTAB improperly interprets legal statutes, and not a single Congressional inquiry. One Indian tribe makes a deal with a patent owner to try to avoid a single avenue among many patent validity challenges and we already have draft legislation and a Congressional probe on the matter. It appears that far too many members of Congress are in the pocket of the efficient infringer lobby to save us from our current 10th place international standing in the enforcement of patent rights. The swamp, it seems, continues to require draining.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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There are currently 15 Comments comments. Join the discussion.

  1. Bemused October 13, 2017 8:07 am

    Excellent article, Steve. And yet another example of typical DC behavior where politicians are bought and sold by corporate interests.

    The election of President Trump was a clear repudiation of both parties because both Democrats and Republicans are part of this problem. Unfortunately, its a lesson that neither party has figured out yet and won’t figure out until/unless they are voted out of office.

  2. Valuationguy October 13, 2017 11:16 am

    Steve,
    While I agree with most of your outrage with the PTAB and IPR process….the quick and simple answer to your question is any Congressional inquiries must be APPROVED by the requisite Committee chairs (or very rare occasions…a majority of the Committee overriding the Chairman).

    In this case, either the Senate Judiciary Committee Chairman (Grassley) and the House Commerce Committee (Goodlatte) would need to support the inquiry in reality.

    Grassley has a complicated relationship with the pharma industry…in that he generally supports pharma corporate interests while ralling against high drug pricing. Since the election he has been showing his populism colors (given the pain over healthcare premium increases) to reduce drug pricing and what Allergen is doing is a roadmap to bypass (unfair) competition.

    Goodlatte is a lost cause as he is a main supporter of the efficient infringment meme…and large corporate high tech standard-bearer in Congress (along with Sub-Committee Chairman Issa).

  3. Tiburon October 13, 2017 7:42 pm

    Small software innovators are thriving without patents – and Congress is well of this. Only the patent industry are complaining. Congress has chosen the software industry over the parasitic patent industry. Tricks like Native Sovereign Immunity will not be tolerated.

  4. Paul Morinville October 14, 2017 12:26 am

    Tiburon, What small software innovators are thriving? Phone app companies? Or those creating the real software that those phone app companies build their apps on?

    What new innovative software has been brought to market in the last fifteen or so years by small software innovators? Facebook who owes their billions to the “like” and “friends” buttons”? Amazon, who owes their billion to the shopping cart? Google, who owns their very existence to a page ranking algorithm?

    Where are the Sun Microsystems of the world inventing new languages or the Microsoft’s of the world developing new operating systems?

    Why is it they have been replaced by phone apps and like buttons? Why is it that China is taking the lead on real software innovations like artificial intelligence?

  5. Confused Pharmacist October 15, 2017 4:54 am

    A few things I’ve noticed:

    1. You’re losing the propoganda war. “Efficient infringer” just doesn’t sound as good as patent troll.

    2. Furthermore, you’re so entrenched in your position that you of necessity take the side of bad actors.

    3. If China is so great, then why not just go there?

  6. Anon October 15, 2017 10:15 am

    Confused Pharmacist,

    Did you intend all of the irony of your post?

    Specifically, “entrenched” may well fit a description of you, with your siding with the bad actors of the Efficient Infringers, eh?

    Further, the notations that China is surpassing the US on the innovation front is not a call of abdication (“well, just move there”), but rather is intended as a wake up call to us here. You appear ready to abdicate on that front as well.

    The path of the US is not a fait accompli.

  7. Steve Brachmann October 15, 2017 3:53 pm

    @Confused Pharmacist – So that’s what it comes down to for you? You can’t support the efficient infringer argument because it’s not as catchy as the phrase used by the other side? Wow. What a highly principled, philosophically thought-out argument you raise here. Let me know when you write a treatise on your views.

  8. Tiburon October 15, 2017 6:33 pm

    Paul Morinville, I cannot tell whether you are being sarcastic or honestly do not know of software companies that are thriving. I’ll assume the later.

    There are literally thousands of small software startups that are thriving in today’s world without relying on patent protection. For example, look at ipwatchdog.com and the source code to this very web page and you’ll see some components used to construct it:

    WordPress: 0patents
    jquery: 0patents
    OpenTracker: 0patents
    FormSwift: 0patents
    Feedburner: 0patents

    To see this for yourself: hit CTRL-U in your browser while open to this web page and then CTRL-F once for each of: wordpress, jquery, opentracker, formswift, feedburner.

    It is difficult to believe that investors would continue to invest in corporations like these to employ high-priced salaries and bandwidth costs without some ROI.

  9. Jeff Lindsay October 15, 2017 9:52 pm

    WordPress is owned by Automattic, which has filed a patent application: US20150288715A1, “Systems And Methods For Protecting Websites From Botnet Attacks”

  10. Gene Quinn October 16, 2017 3:00 pm

    Tiburon-

    It seems it is you that are unfamiliar with the software industry. In addition to Jeff Lindsay’s comment, it obviously will come as a shock to you to learn that Feedburner is owned by Google. Google owns tens of thousands of patents. A quick search found this patent to Google relating to RSS feeds in a matter of seconds:

    http://www.freepatentsonline.com/8239494.html

    As for small software startups thriving, it is interesting that you point to FormSwift, which simply offers a streamlined approaching to making an online form. That, of course, is hardly patentable. Companies can make money selling services that are clearly unpatentable, but if you have a revolutionary software solution obtaining a patent is certainly a wise move. Otherwise others simply come in and take over.

  11. Tiburon October 17, 2017 9:57 am

    Jeff Lindsay shot himself in the foot: WordPress was first released 2003, the US20150288715A1 patent app he cites was 2015. WordPress was able to grow WITHOUT patent protection for 12 years.

  12. Tiburon October 17, 2017 10:03 am

    Gene:

    2004 Feedburner was created
    2007 Google acquires Feedburner for $100million

    Before acquisition Feedburner had 0 patents issued and 0 patent applications filed.

    Again: evidence aplenty that startups do not need patents.

  13. Gene Quinn October 17, 2017 11:23 am

    Tiburon-

    There is one important start-up that you miss in your statement — Google. When Google was a start-up they had patents and patent applications. In fact, if you follow a Google timeline you will discover the company filed two patent applications BEFORE even acquiring the domain name Google.com.

    Twitter filed patents on Tweeting in the early stages, Apple obviously had patents on the Wozniak innovations. Uber has a patent portfolio. So too does Snap. I could go on and on and on. Of course, the difference is the companies I’m citing are worth billions. You cite Feedburner that was acquired for $100 million. That is many orders of magnitude different.

    If you actually understand the industry you know that start-up companies without patents are worth much less, and that is if they are able to survive.

    Of course, start-up companies happy with offering services don’t really need patents, but when you offer a service you are limited to size and monetary value because there are only so many hours in the day to sell.

    You really ought to educate yourself on the market realities before you come here and demonstrate a complete lack of understanding.

  14. Tiburon October 17, 2017 12:16 pm

    Gene: Google started in 1997 – a far different world from the past decade. Feedburner acquired for $100million after a few short years is a fantastic deal for its creators. Ask any true inventor here and they’d jump at a tiny fraction of that.

    In contrast, the patent industry that cannot provide recent success examples yet continue with a narrative built on hope and changes are just around the corner. I suggest the changes will not be what you are deluding yourselves into believing are coming. Instead, the spirit of AIA will continue if not progress further simply because it makes more sense economically job-wise.

  15. Gene Quinn October 17, 2017 1:05 pm

    Tiburon-

    You erroneously say: “the patent industry that cannot provide recent success examples…”

    Obviously you aren’t reading my comments. I did give recent success examples. Uber and Snap. There are many others.

    You can also look at both Twitter and LinkedIn, which had patents but had woefully incomplete patent portfolios and were forced to go on a buying spree in order to obtain patents.

    Again, the examples I’m providing are billion dollar companies while you provide examples of companies that are million dollar companies. If you are happy with a company that has a ceiling on its valuation and will never go public and will struggle to obtain Venture Capital funding and is putting all eggs in the basket of getting acquired by someone who already owns patents you are infringing, then patents aren’t necessary. That, however, is a stupid gamble.

    You say: “the spirit of AIA will continue if not progress further simply because it makes more sense economically job-wise.”

    What you are saying is obviously unclear. What I’ll just point out is that software patents are granted every week by the USPTO, and those who operate in this space know how to write patent applications to satisfy Alice and which won’t be susceptible to challenge at the PTAB (even if the PTAB survives). As I’ve predicted before, ultimately when the dust settles the AIA and Alice will create nearly impenetrable patents that infringers won’t be able to challenge. My track record on predictions is very good, you’d do well to listen. Further, data that will soon be reported will show that 2017 has been a banner year for patent acquisitions. The market is picking up because the assets remaining are strong.

    Put your head in the sand if you want, but doing that is a stupid business strategy that will lead companies with real innovation to get trampled.

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