Sovereign Immunity: Circumventing the PTAB
A few weeks ago, I was in meeting with a prospective client and he asked me what my opinion was on “sovereign immunity.” This question caught me off guard because, until that point, I had not really heard this term used with respect to intellectual property. After doing some quick research and reading a few articles, I brought myself up to speed (using my limited legal knowledge) on what “sovereign immunity” was.
Sovereign immunity is a clause granted under the 11th Amendment of the Constitution. Specifically, the Eleventh Amendment provides that the “judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another state, or by citizens or subjects for any foreign State” (Mohawks). This reading and understanding of the 11th Amendment have been successfully used by universities to have PTAB and IPR proceedings dismissed and thus far has been upheld by the Supreme Court in other matters.
One particular instance of using sovereign immunity to protect intellectual property involved a pharmaceutical company named Allergan who sold the IP tied to their Restasis product to the St. Regis Mohawk tribe and the tribe gave Allergan an exclusive license back to those patents. In the deal with between Allergan and the St. Regis Mohawk Tribe, the tribe is eligible to receive up to $15 Million dollars per year in royalties from Allergan while these patents still have life. The reasoning behind this maneuver was to avoid having these patents put before the Patent Trials and Appeals Board (PTAB), dubbed the “Patent Death Squad” should they be challenged.
I respect loop holes in the law like this, not only because it shows legal ingenuity, but in this case, it helped a company PROTECT IT’S PROPERTY. There is also the added financial bonus to the St. Regis Mohawk tribe.
Now, of course, our government can’t stand being circumvented. They can’t stand seeing a company get away with protecting something they own. They can’t stand seeing a Native American tribe making extra income outside of what scraps they deem appropriate to throw them. The US Constitution may just be amended further by way of more anti-patent legislation passed by Congress. This new legislation may call in to question a so-called “dependent state’s,” such as a Native American tribe’s, ability to invoke sovereign immunity in cases like this.
The PTAB and IPRs are merely a way for major companies, with massive political influence, to efficiently infringe upon smaller companies’ and individuals’ intellectual property rights. If a small inventor or company wants to be paid fairly for their invention and files suit against a company like Apple, for instance, Apple will immediately circumvent federal courts and send this inventor’s patent to the PTAB ‘chopping block’. At this point, legal fees begin to stack up rather quickly. The patent owner is either bled dry via legal fees or their patent is invalidated (OUT OF COURT) by the PTAB. This gives large companies with seemingly unlimited financial resources free reign to infringe upon just about anyone’s intellectual property rights.
That is until some genius lawyer or businessperson sold their IP to a Native American tribe and structured an exclusive license-back agreement.
Do I think this maneuver will solve the problem of the PTAB and help protect patent rights for long? Unfortunately, no. Senator Claire McCaskill is already in the process of shooting this down. Do I think this will hopefully shed some light on the broken system we have today? I certainly hope so. Only time will tell.
Written by: Sebastian Nutter
“Mohawks To The Rescue? Can You Immunize Patents From PTAB Review By Assigning To A Native American Tribe? | Lexology.” Mohawks To The Rescue? Can You Immunize Patents From PTAB Review By Assigning To A Native American Tribe? – Lexology, www.lexology.com/library/detail.aspx?g=3ff32869-e01a-46a2-afcf-f01151d7f387.