It has been a few weeks since the St. Regis Mohawk Tribe announced a landmark partnership with drug giant Allergan. While some observers call it "brilliant," others vow to close the loopholes that are allowing the drug company to avoid competition through the Mohawks' sovereign status.
Allergan, based in Ireland, makes Botox and other hugely popular medicines. Its drug for dry eyes, Restasis, is a blockbuster. It racked up $1.5 billion in sales worldwide last year. So the company wants to protect its patent for the drug - and, therefore, its exclusive right to make it - for as long as it can, until it expires in 2024.
The Mohawks will essentially shield the patent for Allergan’s drug Restasis using the tribe’s sovereign status and get millions of dollars in the process. Ohio Senator Sherrod Brown said it “rips off consumers.”
It used to be a lot easier to protect patents. A generic drug maker would challenge a company like Allergan, arguing its Restasis drug, for example, is not new and novel enough to deserve the exclusivity of patent protection. The generic drug maker, often also a big corporation, would say it should be able to make the drug, too, and sell it for cheaper.
But Allergan could tie up the whole thing in expensive lawsuits for years. It often worked out in the patent holder’s favor.
But in 2011, Congress wanted a change, passing the America Invents Act. Bob Stoll was a commissioner for the U.S. Patent and Trademark Office at the time and helped streamline the process, creating what he says is "an effective and less costly manner than spending millions of dollars going to court."
Now instead of a lawsuit, there was a simpler system – a board that heard patent challenges through a legal process called inter partes review. The review process was quicker, and the legal bar to overturn a patent was lower. The cases were tried before administrative judges rather then in a court before a jury.
"Patent death squads"?
And you know what? It worked. The pendulum swung from the patent holder to the patent challenger. It has become easier to overturn patents, and therefore release that intellectual property for other people to use and build upon. Supporters say the new system encourages creativity and innovation.
But patent holders say it is more like double jeopardy. Now they have to defend their patents - inventions they may have poured years of work and million of dollars in research into - in two places: the traditional courts and the review board.
Even former U.S. Patent Commissioner Bob Stoll acknowleges the review board has its own problems. For example, so-called patent trolls can challenge patents again and again. Stoll says the new system should not be thrown out, but tweaks would make it better.
But Michael Shore, a patent lawyer with Shore Chan DePumpo in Dallas, pretty much despises the review board system.
"It’s pretty much known as the patent death squad," says Shore. "It’s a kangaroo court in my opinion."
Shore represents Fortune 500 companies, like Allergan, but also smaller patent holders and public universities who create patents as a part of their research.
The Akwesasne Mohawks, sovereignty and the patent pendulum swings back
The new review board made Michael Shore's job harder. However, in January, he found a work-around.
He was representing the University of Florida. He successfully argued his client’s patent could not be challenged at the review board because it is a state university, part of the government of Florida – a sovereign entity.
So savoring his victory sitting at his desk, Shore asked himself how he could do this for more of his clients. He needed more sovereign entities.
"Actually I think I did a google search on ‘sovereigns’ and Indian tribes came up," recalls Shore. "I thought, oh, that’s how Indian tribes are able to have casinos in states that don’t have gambling."
So Shore started calling Indian tribes. Two were not interested, or just didn’t get it. Eventually he ended up on the phone with Dale White, general counsel for the 13,000 member St. Regis Mohawk Tribe in Akwesasne, between Massena and Malone on the St. Lawrence River.
So Shore and the Mohawks came up with a plan. The Mohawks called Allergan and offered to use the tribe's sovereign immunity to protect the company's Restasis patent before the review board. Allergan tranferred the patents to the tribe, paid it $14 million cash up front and promised up to $15 million a year in royalties. The Mohawks will lease the Restasis patent to Allergan so it can continue to make the drug.
A "life-changing" deal for the Mohawks
Dale White, the St. Regis Mohawk Tribe's general counsel who helped broker the deal with Allergan, says it was surprising and exciting to have a business deal of this magnitude just plop out of the sky.
"Yeah, we’re all kind of shaking our heads a little bit," White says.
The tribe has the modest Akwesasne Mohawk casino, which White says does generate revenue for tribal operations. But like most native tribes, there is a lot of poverty on the reservation. Dale White says this deal allows the tribe to reduce its reliance on gambling, diversify the Akwesasne economy and help its people.
"We have housing needs. We have health needs. We have education needs that every other Indian tribe has," he says. "So having the ability or opportunity that might come along with this business venture is life-changing for the tribe."
Think of native sovereignty as a resource like any other, whether it be land or oil or forests. The tribe is monetizing its resource.
A legal loophole that 'games the system'?
"So now, one Indian tribe has acquired five patents and the world’s gonna end," he says.
White and patent lawyer Michael Shore also say the legal dodge, if it holds up, does not immunize the Restasis patent to all challenges, just to ones through the review board. In fact, a lawsuit over the Restasis patents is underway in federal court.
But some critics say this has nothing to do with the status of native tribes. It is about drug prices.
David Mitchell is founder of a new independent not-for-profit, called Patients for Affordable Drugs. He says he has nothing against the Mohawks, but says the deal keeps generics out of the market - and that means higher prices for people who need medicines.
"Allergan is gaming that system, thwarting the will of Congress, finding a way to abrogate the law, and thereby hurting patients, and it’s flat out wrong," Mitchell says.
It is a big question whether the sovereignty protection argument stands up. Some patent law scholars say it will not because the Mohawks did not actually do the work to make the drug themselves. Others say Congress could step in.
But the patent protection biz has already gone beyond drugs. The Mohawks have another deal with a technology firm called SRC Labs, according to federal documents.
People in the patent world say this could be the tip of the iceberg. Indian tribes could end up with lots of patents and a substantial revenue stream - and the pendulum would swing back in favor of the patent holder.