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A public policy blog from AEI
“There is a meadow in my perfect world,” goes the haunting poem that opens the gorgeous, disturbing summer film “Wind River,” which concerns a murder on a Wyoming Indian reservation, “where wind dances the branches of a tree, casting leopard spots of light across the face of a pond. The tree stands tall and grand and alone, shading the world beneath it.”
Last week, life imitated art, as the Saint Regis Mohawk Tribe agreed to stand tall and provide shade for a family of patents that was otherwise in danger.
Allergan PLC, one of the world’s leading pharmaceutical firms, agreed to transfer ownership of six patents covering the groundbreaking—and highly profitable—eye-care drug Restasis to the Akwesasne, a New York-based tribe.
Under the terms of the deal, the tribe granted Allergan an exclusive license to use the patents in exchange for a $13.75 million lump sum and a royalty of up to $15 million per year until the patents expire in 2024.
“The tribe has many unmet needs,” Dale White, the general counsel of the tribe, told The New York Times. “We want to be self-reliant.”
In a press release, the tribal council elaborated: “This is a viable and sound opportunity for the Saint Regis Mohawk Tribe to enter into the patent, technology, and research sector as part of our overall economic diversification strategy. We realize that we cannot depend solely on casino revenues.”
From the tribe’s perspective, the deal makes perfect sense. But what was in it for Allergan?
The Ireland–based company has been embroiled in high-stakes litigation over Restasis against generic drugmakers such as Mylan, Teva, and others. A cyclosporine-based medication for chronic dry eyes, Restasis was responsible for $336 million in revenue in the second quarter of 2017 alone and roughly $1.5 billion in 2016.
In addition, Allergan faces a related inter partes review (IPR) challenge to its Restasis patents before the US Patent and Trademark Office. As explained previously in this space, IPR proceedings were created by the 2011 America Invents Act as a quicker, cheaper, and easier way to test the validity of patents.
However, the Patent Office has recently held that sovereign immunity may present a complete defense to an IPR challenge. Thus, a patent holder that is a sovereign entity, such as a foreign country, US state, or state-owned university, may summarily terminate such a proceeding.
Thus, Allergan reckons that by transferring its Restasis patents to the Saint Regis Mohawk Tribe, it can insulate them from IPR scrutiny. In a press release, Allergan’s general counsel said that the tribe “approached Allergan with a sophisticated opportunity to strengthen the defense of our Restasis intellectual property in the upcoming inter partes review proceedings” and noted that “we are impressed with the Tribe’s thoughtful and enterprising approach.”
(This apparently isn’t the first time the Mohawk Tribe took ownership of another company’s patents, according to the Times.)
Allergan’s clever and creative approach will be tested before the Patent Office later this month, but in the meantime, its competitors are displeased, to say the least.
A representative for Teva, the world’s largest generic drugmaker, called the transfer “a new and unusual way for a company to try to delay access to high-quality and affordable generic alternatives.” But while others have grumbled privately that Allergan is exploiting Native Americans, branded pharma companies have long contended that generics have abused IPR by targeting patented drugs.
Either way, the ramifications of the deal are likely to materialize over the coming months, as officials examine it and as other companies investigate replicating it.
Allergan CEO Brett Saunders acknowledged to Fortune that, “yeah, there are some folks [in the pharmaceutical industry] who may pursue this. But they’ll also have to find the right partners.”
For now, in the Mohawk Tribe, Allergan has found a perfect partner, grandly providing protective cover for its patents in exchange for an equally grand sum.
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