On Thursday, October 12th, a pair of letters addressed to the bipartisan leadership of the Senate Judiciary Committee were delivered in an attempt to inform Senators on that committee of various issues in play regarding the recent patent deal between multinational pharmaceutical firm Allergan and the sovereign St. Regis Mohawk Tribe. The two groups sending the letters represent stakeholders in the U.S. patent system coming from very different backgrounds who realize that there are fundamental flaws in the system created by inter partes review (IPR) proceedings which are carried out at the Patent Trial and Appeal Board (PTAB).
“Tekwanonhwerá:tons,” the Mohawk word for “Greetings,” begins the letter sent from the St. Regis tribe and addressed to Sen. Chuck Grassley (R-IA), chair of the Senate Judiciary Committee, and Dianne Feinstein (D-CA), the ranking Democrat on that committee. The tribe notes that its tribal territory resides in an economically depressed region located in northern New York State. Although tribally-owned entities in casino and television networks enable $52 million in salaries to 1,600 employed tribal members, healthcare costs have risen dramatically due in part to hazardous pollution from Superfund sites located upstream and upwind of the tribe’s territories; tribal members drank contaminated water for decades until the New York State Department of Health issued a warning in the 1990s. Further, gaming revenue from the Akwesasne Mohawk Casino have leveled off in recent years, forcing the St. Regis tribe to diversify investments. These factors made the new revenue stream available from the executive license with Allergan look like a very beneficial option to the tribe.
“The fact that we are being attacked for diversifying our economy and obtaining a revenue source that could remedy the current environmental disaster that is polluting our community and endangering our well-being, while also offsetting healthcare costs is, at best, another sad example of colonial paternalism,” the St. Regis letter reads. The tribe points out that many of the members of Congress who have ramped up their inquiries into the St. Regis/Allergan deal come from states where state entities own patents and would therefore have similar sovereign immunity protections in front of the PTAB. For example, the four states represented by Senators calling for a Senate Judiciary review of the deal collectively own more than 7,000 patents. State entities in Pennsylvania, the home state of Sen. Bob Casey (D-PA), currently own 3,686 patents, according to the St. Regis tribe. Ohio, represented by Sen. Sherrod Brown, includes state entities holding a total of 2,267 patents. Similar stories play out in Connecticut, home of Sen. Richard Blumenthal (D-CT) (1,066 patents), and New Hampshire, home of Sen. Maggie Hassan (D-NH) (257 patents).
Along with maintaining parity between tribal governments and state and public universities, the St. Regis tribe asks the Senate Judiciary leadership to protect a revenue stream that offsets budget shortfalls for housing, education, healthcare, eldercare and more. The tribe is also hoping that the committee will gain a greater understanding of the role the tribe is playing. Far from being a shell company, the tribe notes that it has created an Office of Technology Research and Patents to actively protect the tribe’s intellectual property. As for the argument that the tribe’s ownership of the patents will delay generic drugs in the marketplace, the tribe notes that its own rising healthcare costs means that it’s not in the tribe’s interest to delay generics from the marketplace. “To suggest the Tribe would engage in price-gouging or hinder access to medicine is a complete opposition of the core values of the Tribe and its own financial interest,” the St. Regis letter reads.
The St. Regis tribe also calls on the Senate Judiciary Committee to recognize that the current system involving IPRs at the PTAB is not working as intended. Although the PTAB was established in response to concerns over patentability in the high-tech sector, pharmaceutical companies are greatly impacted by the ability to “answer shop” among patent challengers seeking a declaration of invalidity outside of district court. “For Orange Book-listed patent owners, IPR proceedings allow repetitive attacks on patents, lack finality and due process, and use legal standards that are systematically unfavorable to patentees,” the St. Regis tribe writes. While federal district courts invalidate about 28 percent of challenged patents, the tribe notes that 76 percent of patents challenged through IPRs are invalidated, although it bears adding that more than 90 percent of challenged patents end up defective after being challenged at PTAB. The tribe also cites the fact that the constitutionality of the entire PTAB is currently under review after the U.S. Supreme Court granted writ to take up Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.
St. Regis is not the only sovereign tribe to oppose Congressional inquiries into the sovereign immunity issue. Also on October 12th, a resolution was adopted by the Indian leadership organization United Southern and Eastern Tribes (USET) to take all steps necessary to oppose Congressional abrogation of tribal sovereign immunity and maintain parity with state sovereign immunity in any future amendments of the America Invents Act (AIA).
On the same day that the St. Regis letter was sent to Senate Judiciary leadership, the Biotechnology Innovation Organization (BIO) also sent a letter to Sens. Grassley and Feinstein on the patent licensing agreement between Allergan and the St. Regis tribe. The world’s largest biotechnology trade organization representing more than 1,100 medical field entities, BIO voiced similar concerns over how IPRs at PTAB have strayed from their original intent. “IPR as it exists today, is undercutting the patent system’s intended incentives for innovation by serving as an open-ended and duplicative forum for a new class of ‘patent trolls’ that is introducing significant business uncertainty and cost,” BIO’s letter reads.
Like the St. Regis tribe, BIO argued that the IPR process lacks finality and due process for the patent owner and BIO repeats the “answer shopping” charge raised by the tribe. The IPR process further tilts the playing field towards generic drugmakers in a way that goes beyond the scheme contemplated by Congress in passing the Hatch-Waxman Act in 1984 to provide a pathway for expedited approval of generic drugs. “If timed strategically, this parallel IPR proceeding can be used as a hedge against the results of the district court litigation,” BIO notes. “If the federal court determines the innovator’s patent to be valid, the IPR may still produce the opposite result.” While BIO takes no official position on the sovereign immunity argument presented by the St. Regis tribe, it did acknowledge that sovereign immunity is not a new issue in the patent system. “State-owned patents have been part of the Hatch-Waxman system for decades, and we are aware of no instance where sovereign immunity has ever interfered with or delayed resolution of innovator-generic patent disputes in federal court,” BIO argues.
At the PTAB, the panel of administrative patent judges (APJs) sitting on the IPR trial reviewing the validity of the patent now owned by the St. Regis tribe issued an order on October 4th that denied a motion filed by petitioner Mylan to produce additional discovery in the case. The judge also dismissed without prejudice a motion by Allergan to withdraw from the IPR as a real party in interest.
The order from the PTAB APJs stem from a conference call on September 26th involving counsel representing petitioner Mylan, patent owner St. Regis Mohawk Tribe and patent licensee Allergan. A transcript of the conference call shows that counsel representing Mylan sought additional discovery to produce documents including a short form agreement filed by the St. Regis tribe in order to determine “who actually owns the rights, holds the rights and whether the agreements are valid.” Once again, counsel representing Mylan referred to the patent deal between the St. Regis tribe and Allergan as a “sham” transaction. Mylan argued discovery was necessary to determine if the tribe was the actual patent owner or whether Allergan had retained enough rights in the patents so that the tribe is not a necessary party.
“Before the panel takes into account what they heard as being in any way factual or truthfully, it is not,” said Michael Shore, partner at Shore Chan DePumpo LLP serving as counsel representing St. Regis in the IPR. Quickly, the conversation moves back to Mylan’s counsel, Richard Torczon of Wilson Sonsini Goodrich & Rosati, to keep up the allegations that there must be some information in documents yet to be produced that nulled St. Regis’ claims as patent owner. “We believe that it is almost unbelievable that there aren’t additional side agreements and that those side agreements would tend to show things like additional license-back provisions or things to that effect,” Torczon said.
“This is a fishing expedition, and it is a fishing expedition that goes far beyond establishing whether the Tribe is sovereign, we all know it is, and whether or not sovereign immunity applies to PTAB proceedings, which we already know they do,” Shore said. Chris Evans, another Shore Chan partner representing St. Regis, noted that the case cited by Torczon in support of additional discovery on tribal sovereign immunity matters, Finn v. Great Plains Lending, was directed at jurisdictional discovery, which was not the kind of discovery Mylan was seeking in this case.
Before ending the conference call, the PTAB panel asked St. Regis’ counsel whether they would be okay with filing opposition in the event that the court did grant the motion for additional discovery. Shore declined, stating that the proposed 48-hour time window for filing such opposition was too small a window and instead wanted the typical 15-day window for responding to motions. “We are a very busy law firm and we do not have the ability to drop everything we are doing and be a slave to what Mylan wants us to do on 48 hours notice,” he said.
Much of the reasoning behind the patent deal between Allergan and the St. Regis tribe is outlined in an op-ed published by The Wall Street Journal on October 8th. The piece, authored by Allergan CEO and chairman Brent Saunders, notes that while generic competition is good for the marketplace, the effects of IPRs on pharmaceutical patents threatens the “social contract” Allergan has with its patients as patent protections are stripped, leaving Allergan and others without the significant resources to commit to research and development of new drugs. Saunders identifies “reverse trolls,” hedge funds and others using the PTAB to extort from drugmakers.
“The IPR system is discouraging biopharmaceutical innovation and putting new medicines in jeopardy, along with the jobs they support and the lives they save. Without the stability and predictability provided by strong patent protection, innovation will suffer. That means patients will suffer.”