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US Congress Investigates Patent 'Gifts' That Evade Inter Partes Review (arstechnica.com)

Posted by BeauHD on from the chink-in-the-armor dept.

AnalogDiehard writes: Congress created the Inter Partes Review (IPR) in 2012 within the U.S. Patent Office Patent Trials and Appeals Board (PTAB) as a faster and cheaper way to challenge and invalidate bad patents. The IPR expense is a fraction of the cost of a multimillion dollar patent court trial; it is loved by patent challengers and hated by patent owners. The pharmaceutical company Allergen has exploited a novel tactic to evade the IPR process: they hand them to a Native American Indian tribe for safekeeping. Under the arrangement, the tribes earn millions in royalties as long as the patents are valid, they license them back to Allergan, and the patents under the tribes' ownership is immune from lawsuits via sovereign immunity. Under the colonial-era concept of "sovereign immunity" which is codified in the 11th amendment, certain groups like states, universities, and tribes are immune from lawsuits, thus the drug patents are shielded from the IPR process leaving only a full blown multimillion dollar court trial for generic drug companies. This tactic is also attracting the attention of non-practicing entities -- the polite term for "patent trolls" -- and one such NPE company has already exploited sovereign immunity with the intention to sue Apple for infringement.

But court cases have limited the scope of sovereign immunity (especially for commercial activity), and now Congress is investigating Allergan over the tactic that has Congress not only greatly concerned about competition in the drug industry (and exorbitant prices of pharmaceuticals), but also the questionable use of the sovereign immunity law. The four lawmakers who signed the letter to Allergan state: "The unconventional maneuver has received considerable criticism from the generic competitors challenging the drug's patents under the process Congress created (IPR) to enable timelier review of such challenges (read: a fraction of the cost of a court trial)." The letter also notes that the key ingredient in the patent was set to expire in 2014 and that Allergan had filed more patents to extend patent protection to 2024, a signal that Congress is watching for exploitation of patent law to enable "perpetual patents" widely used by the pharmaceuticals.

33 of 55 comments (clear)

  1. After EU actions, US has to do the same by WillAffleckUW · · Score: 2

    All of this follows on the "legal" IP transfers by multinational corporations to Ireland and Luxembourg inside the EU to avoid taxation. The EU is coming down on these, and now the US is coming down on tribal IP transfers (for the same reason).

    Just.
    Pay.
    Your.
    Taxes.

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    -- Tigger warning: This post may contain tiggers! --
    1. Re:After EU actions, US has to do the same by Anonymous Coward · · Score: 3, Informative

      This has nothing to do with taxes. This has everything to do with corporations using transfers to the tribes to obstruct justice.

      Just.
      Read.
      The.
      Fucking.
      Article.

    2. Re:After EU actions, US has to do the same by Darinbob · · Score: 2

      Gifting to native American tribes because they're sovereign doesn't make sense. If the US can't so them, then they can't sue the US for patent infringement either. It's the same as if the patents were gifted to Tonga.

  2. I gotta say by 93+Escort+Wagon · · Score: 3, Informative

    That's a pretty clever work-around.

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    #DeleteChrome
    1. Re:I gotta say by Anonymous Coward · · Score: 4, Insightful

      An equally clever solution to their work around would be one simple law passed so all american courts would refuse to hear any patent lawsuit brought by a native american tribe due to lack of jurisdiction.

      Then the patents can be violated and ignored completely.

      The drug company has no standing to sue since they own none of the related patents.
      The native american tribe has standing, but can only take legal action within their own sovereignty.

      It would of course mean you can't set foot within their sovereign soil without facing their punishment, but that's pretty easy to avoid.

    2. Re:I gotta say by viperidaenz · · Score: 1

      How do I visit their casinos then?

    3. Re:I gotta say by Darinbob · · Score: 1

      Many of those casinos are not on actual reservations and would fall under US jurisdiction. You just need to be pickier about where you go to dispose of your extra cash.

    4. Re:I gotta say by gnick · · Score: 1

      It would of course mean you can't set foot within their sovereign soil without facing their punishment, but that's pretty easy to avoid.

      I'm in New Mexico. For a lot of travel around the state, that sovereign soil is not easy to avoid. Specifically, you have to drive right by the casinos as the tribes won't allow construction of more direct routes that would avoid them.

      --
      He's getting rather old, but he's a good mouse.
    5. Re:I gotta say by chiguy · · Score: 1

      Being in New Mexico, I'm sure you're aware that not all Native American tribes are the same. I'm sure you can reasonably avoid the ones that are tied up in patent litigation. Especially since most tribes are outside New Mexico.

      --
      passetspike!
  3. Allergan not Allergen by HalAtWork · · Score: 1

    The name of the company in the summary is not Allergen, but Allergan.

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    Twinstiq, game news
    1. Re:Allergan not Allergen by cfalcon · · Score: 1

      > The name of the company in the summary is not Allergen, but Allergan.

      Their behavior is kinda making me break out in hives tho

    2. Re:Allergan not Allergen by Darinbob · · Score: 1

      I sniffed at the story.

  4. Are they really watching? by NaCh0 · · Score: 1

    Congress might say they are watching but are they going to do anything about it?

    I severely doubt it. Too many donors.

    1. Re:Are they really watching? by rgmoore · · Score: 1

      Your pessimism is misplaced. The whole reason Allergan pulled this maneuver is to get around a new review process that Congress passed quite recently. That seems like very solid evidence Congress is not completely in thrall to patent holders.

      --

      There's no point in questioning authority if you aren't going to listen to the answers.

    2. Re:Are they really watching? by Anonymous Coward · · Score: 1

      That's like saying a car wreck isn't a complete aircraft disaster.

      This is really a failure to address the root causes, which comes down squarely on the head of congress again.

      The problem of this train wreck in slow motion is the existence of imperial masses of poor, weak, bad, and outright excreable patents that are nonetheless stupidly expensive to invalidate, and so defending against patent suits brought with those patents is such a pain that patents regardless of quality are a potent weapon. Of course patent trolls will use every trick in the book and a bunch more besides to keep those letters of marque^Wpatent.

      What congress should and ought to have done is to make the patent office properly review each and ever patent, and not issue new ones before the backlog was cleared. And if that's unfair, why, maybe we should suspend patents entirely for a while, until we figure out how to make them a positive force driving invention again.

  5. Intellectual property is theft by hackwrench · · Score: 1

    Intellectual property is theft of common knowledge and culture. We are waking up to the fact that we buy things because it is fun to do so, and it is no longer being fun to buy intellectual property with these terms.

  6. Don't sue the tribe, sue the patent by Anonymous Coward · · Score: 3, Interesting

    > Sovereign immunity prevents states from being sued in federal court unless they agree to the suit.

    So, just do like law enforcement does with civil forfeiture -- Don't use the tribes/states, sue the patent. The patent itself has no sovereign immunity.

    > The IPR process, which went into effect in 2012, is a kind of mini-litigation system that takes place before the Patent Trial and Appeals Board (PTAB), rather than in district courts.

    Alternatively, stop calling it a "mini-litigation system" and instead call it "binding arbitration". We already know that companies can force you to give up your rights to litigate, if you want to do business with them. The US Patent and Trademark Office can simply say, if you want to do business with us (get a patent), you must agree to "arbitrate" your patent or you don't get one. So sorry.

    1. Re:Don't sue the tribe, sue the patent by WorBlux · · Score: 1

      The patent isn't a legal person, and can't be sued. However you can view the IPR process as a suit against the patent office challenging the underlying validity of an issued patent. I don't thing it's a stretch at all for the patent office and PTAB to have jurisdiction over the validity of patents, if not, then how in the world do you know your patent is valid. Of course the party interested in the patent is invited to weigh in of the process and provide further information with regard to their patent, but I don't see how their participation is absolutely necessary for IPR.

  7. Change the law, make it about money by budsetr · · Score: 2

    Allow unlimited patents. But they have to pay for that right every 5 years. The cost: 10% of what is has made in its lifetime so far.

    1. Re:Change the law, make it about money by PopeRatzo · · Score: 1

      Allow unlimited patents.

      No. Absolutely not.

      A more elegant solution would be to make an example of any CEO whose company has abused patent or tax law. It would be bloody for a while, but you'd be surprised how fast the rest will fall in line.

      --
      You are welcome on my lawn.
    2. Re:Change the law, make it about money by vux984 · · Score: 1

      Of course, once we have a taste for blood like that; its only a matter of days before we apply the same rules to other perceived injustices, and bad-think according to the people in power.

      And anyone who objects? Make an example of them too.... "it would be bloody for a while, but you'd be surprised how fast the rest will in line."

    3. Re:Change the law, make it about money by PopeRatzo · · Score: 2

      Of course, once we have a taste for blood like that; its only a matter of days before we apply the same rules to other perceived injustices, and bad-think according to the people in power.

      Nah. The funny thing about "slippery slopes" is that they almost never happen. The whole idea of the slippery slope is a canard that's been propagated by people in power to make people afraid of changing the status quo.

      I'm just saying, we should start treating some criminal CEOs the way a black man at a traffic stop is treated. Watch how fast things change.

      --
      You are welcome on my lawn.
  8. Say it's not so! by Virtucon · · Score: 1

    A big multinational corporation finds a loophole that allows them to make money hand over fist? Say it isn't so?!?! How can that be? Oh yeah

    1) They have huge teams of lawyers that have one job, protecting their profits and them from legal risks.
    2) There are professional consulting legal firms that specialize in setting this up.
    3) The tribal nations also advertise the fact and knock on company doors soliciting this kind of business.
    4) Congress is bought/paid for by lobbying dollars. Shit, no congressman even writes their own legislation, lobbyists do and then they attach their name to
    it.

    Do any of us think that what's been described here hasn't been discussed/known for decades in the halls of DC? It's not new, it's not shocking it's just business.

    --
    Harrison's Postulate - "For every action there is an equal and opposite criticism"
    1. Re:Say it's not so! by Hal_Porter · · Score: 1

      You have to admire the way legal innovation happens and the free market spreads knowledge of it really. It's a thing of beauty - private and public sector working together in perfect harmony.

      What's even funnier is that people think that the solution to large corporations gaming a Byzantine system of rules against the public interest is to introduce more rules.

      --
      echo -e 'global _start\n _start:\n mov eax, 2\n int 80h\n jmp _start' > a.asm; nasm a.asm -f elf; ld a.o -o a;
  9. It may not be the most ethical thing to do but.. by Neuronwelder · · Score: 2

    This is the very first time I have ever heard of anyone GIVING something to an Indian. Normally they rob them blind and steal or abuse their land.

  10. Tribal sovereignty is bullshit by swb · · Score: 4, Interesting

    Don't get me wrong, the red man has taken it up the ass. Once the sole proprietor of a mighty hemisphere, he's now hawking gambling, cut rate cigarettes and and has-been rock bands after the white man fucked him over but good.

    But this sovereign tribe thing is BS. You want to hold the patent? Fine, then it's only valid on the reservation. Unless the patent violation occurs on tribal land, you're outside your sovereign territory and authority.

    If you want to wave your sovereignty around, do something brave. Legalize pot and tell the state legislature to fuck off.

  11. Every time by stabiesoft · · Score: 1

    A drug company does something amoral I think wow, no one can stoop lower than that, they always surprise me and do. I hope all these major execs get a MRSA bug and just die.

  12. Rings a bell by Tablizer · · Score: 4, Funny

    I've heard about the Sue Indians.

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    Table-ized A.I.
  13. Respond in kind by TimothyHollins · · Score: 3, Informative

    This is a black and white case. There are no moral ambiguities, no reasoning that could make it appear less heinous. This is exactly what we have maximum penalties for.

    Annul the patents, revoke the charter for Allergen, arrest the board. There is no other response possible. When foreign nations do not respect your sovereignty you declare war; when a company so flagrantly shows that they care not one iota for your laws or for your people, you respond in kind.

    Take everything - it is in the best interest of your country, your population, and your democracy.

  14. Big fish, little fish,,,, by Slugster · · Score: 1

    ... Under the arrangement, the tribes earn millions in royalties as long as the patents are valid, they license them back to Allergan, and the patents under the tribes' ownership is immune from lawsuits via sovereign immunity. ...

    This concept seems odd to me--that you can have a business transaction where you transfer legal ownership of a thing to somebody else, and then still dictate after the sale what they are allowed to do with it.

    I think in the long run, it'd be better to throw this concept out right away, and 3-5 years to see what effect that has on patent gifts. As well as a lot of other things...

    It'd be amusing if the tribe suddenly gained this option and decided to license it to somebody else instead. [Homer Simpson voice] "D'oh!"

    1. Re:Big fish, little fish,,,, by Shotgun · · Score: 1

      Buy a house in a sub-division some day. You will most likely have to sign several documents dictating what you can do with the house and land AFTER you buy it.

      --
      Aah, change is good. -- Rafiki
      Yeah, but it ain't easy. -- Simba
  15. Translation by GrumpySteen · · Score: 1

    A difficult election season is coming up and Congress would appreciate it if the pharmaceutical industry increased their campaign donations.

  16. Not limited to tribes by belg4mit · · Score: 1

    This is not limited to tribes, and not everyone in pharma is happy about it either:

    http://blogs.sciencemag.org/pipeline/archives/2017/09/26/more-on-the-mighty-mohawk-maneuver/

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    Were that I say, pancakes?