10/13/2017 Sovereign immunity protects patent owners from what some see as PTAB's kangaroo court, says tribe lawyer - Blog - Intellectual Asset Management (IAM) - …
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`Sovereign immunity protects patent owners from what
`some see as PTAB's kangaroo court, says tribe
`lawyer
`
`15
`SEP 17
`
`The recent news that pharma giant Allergan and tech company SRC Labs have
`licensed patents to a Native American tribe in an attempt to protect the patents
`from inter partes review (IPR) has once again catapulted the controversial post-
`issuance review process into the wider business press. With the Supreme Court
`due to hear Oil States, a case concerning the constitutionality of IPRs, in its next
`term, the Patent Trial and Appeal Board (PTAB) is in the spotlight like never
`before.
`
`Richard Lloyd
`
`Since the move by the pharma giant was announced early last week there has been an avalanche
`of press and blog coverage (you can read what this blog had to say here and another piece on
`Indian tribes and sovereign immunity, which is particularly worth reading, here). The Saint Regis
`Mohawk Tribe was clearly unimpressed by some of the ensuing coverage and so yesterday put out
`a statement in what it described as a clarification. Clearly keen to play to the patent gallery the
`statement ended with: “A strong patent system is in everyone’s best interest, which is why patent
`protection is one of our original constitutional rights.”
`
`As the tribe pointed out, the idea of using sovereign immunity as a shield against IPRs is nothing
`new. The University of Florida Research Foundation was the first to raise it as a defence earlier this
`year in a review brought by Covidien. Since then a number of other universities have claimed
`sovereign immunity, but the cases involving Allergan and SRC Labs appear to be the first where an
`entity that enjoys immunity has proactively approached patent owners and proposed to take
`ownership of their IP.
`
`One of the University of Florida’s law firm, Dallas-based Shore Chan DePumpo is also acting for
`Saint Regis alongside the tribe’s strategic IP advisers at Soryn IP Group. Yesterday I caught up with
`Saint Regis general counsel Dale White, and tribe’s advisers from Shore Chan and Soryn to hear
`more about how the two deals with the tribe came about.
`
`Shore Chan counts a number of state universities among its client base and first used sovereign
`immunity in a case involving the University of Texas back in the mid-2000s. After the firm’s success
`in the University of Florida case (which Shore says forced Covidien to settle with the university
`within hours of the PTAB’s decision for “a lot of money”), Shore and Evans started to consider other
`entities that enjoy sovereign immunity.
`
`“We realised that there’s an arbitrage here — there’s the value of a non-sovereign patent which is
`much lower than the value of a sovereign patent,” Shore commented. However, according to Shore,
`bureaucracy and politics mean it can be difficult to convince state universities to more actively take
`advantage of their sovereign status. That led them to contacting several native American tribes, but
`they struggled to convince any of them to agree to a deal. “We could not get any traction for a while
`because it was such a new concept and some of the tribes we talked to didn’t understand it,” Shore
`said. “We went to the St Regis through a contact we had in the tribal economic development
`community and if they hadn’t gone for it we probably would have given up. But we got lucky and ran
`into a tribe with a very sophisticated business operation.”
`
`The Allergan and SRC Labs deals have placed the St Regis tribe and its advisers at the heart of the
`debate around the fairness of the IPR process that has dogged it for much of the last five years.
`Unless the courts or Congress somehow step in to limit the application of sovereign immunity in
`patent cases, native American tribes could suddenly become significant players in the IP value
`creation market. It’s probably fair to say that no one who helped hash out the America Invents Act
`(AIA) saw that one coming.
`MYLAN - EXHIBIT 1147
`Mylan Pharmaceuticals Inc. et al. v. Allergan, Inc.
`IPR2016-01127, -01128, -01129, -01130, -01131, -01132
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`10/13/2017 Sovereign immunity protects patent owners from what some see as PTAB's kangaroo court, says tribe lawyer - Blog - Intellectual Asset Management (IAM) - …
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`The tribe’s lawyers, however, are clearly well aware of any accusation that tribe-owned IP now has
`a pass against any validity challenges. “We want to make it really abundantly clear that the tribe is
`not going to insulate a patent from being attacked on validity — if a patent is invalid, it’s invalid. But
`what they are insulating it from is what has been perceived as a kangaroo-court type atmosphere
`where all the expectations of patentees that have existed for 150 years are thrown out of the
`window,” Shore stated.
`
`“So now if you want to invalidate a patent where fees have been paid, costs have been incurred,
`investments have been made then you have to go to court, you have to face a jury and you have to
`have an Article III judge, not some associates that have been appointed by Michelle Lee, an ex-
`Google lawyer. Plus you get a presumption of validity and a clear and convincing evidence standard
`— basically the expectations of the patentee that existed for 150 years are respected.”
`
`While the patent transfer involving SRC Labs was the first to go through, many of its details - such
`as the motivation for doing it - remain private (you can see details of the assignment here). But
`Shore did reveal that the planned commercialisation deal involving the assets is “not an IPR-
`centred transaction” and added that it “would be either a go or no-go by the end of the month”.
`
`For the St Regis tribe there’s no doubt that these agreements have the potential for
`transformational change. As part of the Allergan deal the tribe has netted $13.75 million up front
`and stands to make a further $15 million a year in royalties. “This is a game changing development
`in terms of the needed revenue that it will bring to tribe,” commented White, who is both the tribe’s
`GC and a tribal member. So far they have received the initial $13.75 million payment and have set
`up a special operation to help manage the patents and possible technology-related projects.
`
`“We’re probably going to sit on the upfront money for a while as we decide what to do but the vision
`of the tribe is to use all the funds that we receive, including putting some back into our technology,
`research and patent office,” White said. “This is diversification for us and the remaining monies will
`be used in areas like housing, for elders and for youth programmes.” On the technology front White
`revealed that they were looking at a possible data storage centre. “The ultimate goal is to be nearly
`identical to a technology transfer office at a major research university,” he added.
`
`Although this latest development in IPR sovereign immunity will no doubt be of interest to many
`patent owners, it could be particularly powerful for the pharma sector where brand name companies
`derive hundreds of millions of dollars from the IP behind their drugs. As Soryn IP Group’s Michael
`Gulliford pointed out: ”In life sciences you have companies of all sizes who are disproportionately
`exposed to the IPR process because you have drugs and billions of dollars in R&D that are
`supported by a handful of patents.” That creates opportunities both for generic manufacturers and
`investors (as was the case with Kyle Bass and Erich Spangenberg) to challenge brand name drugs
`at the PTAB and profit from any successful IPRs.
`
`Not surprisingly, the news about the Allergan deal has generated a huge amount of interest in the
`tribe and its lawyers. Shore estimated that he had fielded 200 calls from interested parties since the
`news broke. But he cautioned against this becoming a motivation for lots of copycat agreements.
`“This is not a high volume business — this is a high quality, very heavily vetted business plan,” he
`said. “We’re going to continue to execute our strategy in a responsible way and hopefully that will
`result in more deals but if they’re not the right deals it won’t.”
`
`Sectors
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`10/13/2017 Sovereign immunity protects patent owners from what some see as PTAB's kangaroo court, says tribe lawyer - Blog - Intellectual Asset Management (IAM) - …
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