Tribal Sovereign Immunity & the Patent System

By Trey Reed

In September, the drug company Allergan transferred its patents for Restasis to the Saint Regis Mohawk Tribe for $13.5 million with up to $15 million/year in royalties. Allergan did this to take advantage of the tribe’s sovereign immunity, which would prevent patent trolls, and anyone else, from challenging the validity of the patent. Tribal Sovereign Immunity prevents tribes from being sued without their consent unless Congress passes a waiver.  In general, Congress has plenary power over the tribe’s sovereign immunity. This means that Congress may alter the scope of the tribe’s sovereign immunity at will, just as it may alter or breach the terms of a treaty with a tribe at will.

Currently, Congress is considering passing a bill that would prevent tribes from being able to use this immunity to circumvent the patent system. However, there are conflicting views on whether using sovereign immunity to bypass a key feature of the patent system should be allowed. On one side are people who wish to see tribal sovereign immunity left whole and not chipped away by creating pockets of invalidity. On the other side are people who are afraid of drug companies abusing their monopolies and gouging prices unconscionably. Recent history supports both sides of this argument. For instance, the history of the United States is riddled with stories of Indian tribes being taken advantage of. From treaty abrogation to the taking of Standing Rock to build a pipeline, tribes have not been treated well by the federal government. As such, they have good reason to distrust any federal encroachment of their rights. On the other hand, the news has been full of companies hiking up prices on vital, life-saving medicine in order to increase profits. For example, the price of an Epipen was increased from about $110 to almost $610 due to the monopoly the patent owners have. Given the ease of abusing the monopoly stemming from patent rights, this issue should be examined to ensure that the balance between tribal immunity and sound law is maintained.

To fix this problem, it seems likely that Congress will create another caveat to restrict the use of sovereign immunity to prevent patent validity from being challenged. All in all, this will probably not be a large blow to the tribes. This is a new legal strategy that, if allowed, could become a great way for tribes to see an increase in income; however, it also bypasses some of the new checks that the America Invents Act (AIA) has introduced to the patent system to prevent bad patents from being issued and abused.

With the passage of the AIA, the patent system saw the introduction of inter partes review (IPR). IPR is an important post grant review method that aimed to fix some of the issues that plagued the old post grant review system. In practice,  IPR allows third parties, normally competitors, to challenge a patent’s validity without having to go through an egregiously expensive legal battle that typically accompanies patent litigation. Traditional patent battles cost upwards of $2 million, so the barrier of entry for challengers is quite large.  Instituting an IPR proceeding requires the United States Patent and Trademark Office (USPTO) to reexamine the patent with the materials (usually prior art claims) the challenger provides that may invalidate the patent. The average cost of IPR is estimated to be around $450k. Although this amount is hefty, it is relatively cheap when compared to the millions of dollars required for traditional patent litigation. This relative cheapness allows less-wealthy parties to access the patent system and prevent large companies with deeper pockets from monopolizing technology. Allowing entities to legally avoid this challenge needs to be carefully considered and balanced.

In addressing these issues, Congress must weigh keeping tribal sovereign immunity whole against the ability to use the immunity to avoid checks that the patent system uses to prevent bad patents. Congress’ response must be measured because, in the end, either tribal sovereign immunity could be diminished or the patent system could be left compromised.

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