*Strange Bedfellows: Native American Tribes, Big Pharma, and the Legitimacy of Their Alliance* by Daniel C. Kennedy provides an in-depth look at a controversial legal strategy that leverages tribal sovereign immunity to protect pharmaceutical patents from legal challenges. This strategy was tested in a landmark case involving the St. Regis Mohawk Tribe and Allergan, a biopharmaceutical company. Here is a detailed analysis of the key arguments, structure, and implications of Kennedy’s paper.
The paper opens by establishing the high stakes associated with pharmaceutical innovation, especially the reliance on patents for safeguarding revenue against early generic competition. Kennedy frames the central issue: the increasing vulnerability of pharmaceutical patents due to challenges brought through inter partes review (IPR) by competitors, including hedge funds, which has shaken the stability of patent protections that biopharmaceutical companies rely upon. The concept of using tribal immunity to protect patents emerged as a novel solution to this problem, notably when Allergan transferred its Restasis patents to the St. Regis Mohawk Tribe to shield them from IPR scrutiny.
Kennedy provides a foundational understanding of IPR, a process established under the America Invents Act of 2011 to allow third parties to challenge the validity of existing patents before the Patent Trial and Appeal Board (PTAB). Unlike traditional court proceedings, IPR is designed to be a cost-effective, expedited means of resolving patent disputes, primarily aimed at weeding out weak patents. However, Kennedy points out that IPR has become a "death squad" for patents, with a high rate of patent invalidation. The paper highlights that pharmaceutical patents are especially vulnerable in IPRs, a concern for an industry that depends heavily on patent protection to recoup extensive R&D costs.
In response to these challenges, some entities, including the St. Regis Mohawk Tribe, sought to leverage tribal sovereign immunity to protect patents from IPR. Sovereign immunity, historically a shield for tribes against many forms of litigation, has been inconsistently applied in agency settings, including the PTAB. Kennedy critiques the decisions by the PTAB and Federal Circuit to reject tribal immunity in IPR, arguing that this denial deviates from precedent allowing similar immunity for state entities.
The paper uses the Allergan-St. Regis Mohawk Tribe case as a core example of the potential benefits and challenges of such alliances. Allergan assigned its patents for Restasis, a dry-eye treatment drug, to the tribe, which then invoked its sovereign immunity to try to dismiss an IPR challenge filed by Mylan Pharmaceuticals. In return, Allergan paid the tribe a substantial upfront fee and royalties, essentially using the tribe's sovereign status as a shield for its patents. Kennedy points out that this setup offered dual benefits: it provided a steady income for the tribe while also creating a legal barrier for Allergan’s patents.
The PTAB, however, rejected the tribe’s claim to immunity in February 2018, contending that IPR proceedings are more administrative than judicial and thus do not trigger immunity protections. This decision was subsequently upheld by the Federal Circuit. Kennedy argues that the ruling is inconsistent with precedent, particularly cases that allowed state universities to use sovereign immunity to protect patents from IPR challenges.
The author examines the legal inconsistency in denying tribal immunity in IPR while allowing state immunity in similar cases. For instance, Kennedy points out that the PTAB has granted immunity to state universities—also holders of sovereign immunity—when they have engaged in similar partnerships to shield patents from review. Kennedy argues that this inconsistency undermines the doctrine of tribal sovereignty, particularly given the Supreme Court’s long-standing recognition of Native American tribes as “domestic dependent nations” with a right to sovereign immunity unless expressly abrogated by Congress.
Ethically, Kennedy confronts the criticisms of such alliances as "shams" that subvert the intent of IPR. Critics argue that these alliances allow pharmaceutical companies to extend monopolies on essential drugs and prevent generic competition, ultimately raising drug prices. However, Kennedy counters that such alliances also fulfill an important economic function for tribes, offering financial benefits in the form of royalties and supporting tribal self-sufficiency, a right grounded in federal recognition of tribal sovereignty.
A significant portion of the paper is dedicated to the broader economic and technological impacts of the IPR system on pharmaceutical innovation. Kennedy describes the high costs and long timelines associated with drug development, emphasizing that pharmaceutical companies rely on the security provided by patent exclusivity to justify these investments. The risk posed by IPR, Kennedy argues, is that it disproportionately targets pharmaceutical patents, thus jeopardizing incentives for companies to invest in new drug development. He highlights the asymmetrical nature of IPR, where patents can be invalidated by a preponderance of the evidence standard, as opposed to the higher “clear and convincing” standard required in district courts. This lower threshold, Kennedy suggests, makes IPR an appealing venue for hedge funds and other entities to challenge patents opportunistically, aiming to benefit financially from a stock's decline rather than to promote genuine competition.
Kennedy’s paper delves into the role of hedge funds like Kyle Bass’s Coalition for Affordable Drugs, which have filed numerous IPR petitions targeting pharmaceutical patents while shorting the stocks of the companies involved. This “short and sue” strategy, Kennedy argues, distorts the purpose of IPR by allowing financial players with no intention of producing competing drugs to challenge patents. He views this as a predatory exploitation of IPR, which disrupts the already complex balance between encouraging innovation and allowing competition.
Kennedy advocates for a reevaluation of the PTAB’s refusal to acknowledge tribal immunity in IPR proceedings. He calls for greater consistency in how sovereign immunity is applied to both state and tribal entities. Additionally, he suggests that if Congress intends for tribal immunity not to apply to IPR, it should expressly legislate this exception. Kennedy also recommends that reforms to IPR should account for the unique vulnerabilities of the pharmaceutical industry, possibly by instituting protections for biopharmaceutical patents similar to those already in place for state-owned patents.
Kennedy’s paper concludes that tribal alliances with pharmaceutical companies, while controversial, represent a legitimate exercise of sovereign authority by Native American tribes. He argues that tribal immunity should apply to IPR proceedings, and that dismissing such claims represents a misunderstanding of both tribal sovereignty and the role of patents in fostering innovation. Ultimately, Kennedy sees these alliances as a practical, albeit unconventional, solution to the challenges pharmaceutical companies face in the current IPR landscape.
Kennedy’s *Strange Bedfellows* offers a compelling, well-reasoned defense of the use of tribal sovereign immunity in patent protection. His analysis is nuanced, acknowledging the ethical and legal complexities while advocating for consistency in how sovereign immunity is applied. The paper raises important questions about the role of tribal sovereignty in a commercial context and underscores the potential unintended consequences of the IPR system on pharmaceutical innovation. By focusing on the case of Allergan and the St. Regis Mohawk Tribe, Kennedy provides a concrete example of how tribal partnerships could reshape patent law and pharmaceutical investment, challenging existing assumptions about sovereignty, patent law, and innovation incentives.
The America Invents Act's Inter Partes Review (IPR) system has dramatically influenced the pharmaceutical industry, particularly its approach to innovation. The IPR process was designed to address concerns about low-quality patents by creating a fast-track mechanism to challenge patents at the Patent Trial and Appeal Board (PTAB) without the high costs and lengthy timelines of federal court litigation. However, while this process has successfully invalidated numerous patents in other industries, its impact on pharmaceuticals has been more controversial. Because of the enormous investment required to bring a drug to market—often totaling over a billion dollars—pharmaceutical companies rely heavily on patent protection to recoup research and development (R&D) costs. IPR's relatively low threshold for invalidation has made it easier for competitors, as well as non-practicing entities such as hedge funds, to challenge pharmaceutical patents, placing these critical intellectual properties at heightened risk. As a result, the IPR system has introduced a layer of unpredictability that can discourage investment in new drug research, potentially slowing the pipeline of innovative treatments.
Allergan’s partnership with the St. Regis Mohawk Tribe introduces a novel strategy within the existing legal framework, testing the boundaries of patent protection through tribal sovereign immunity. By transferring its Restasis patents to the St. Regis Mohawk Tribe, Allergan sought to protect these patents from IPR challenges under the shield of tribal immunity, a legal doctrine that traditionally prevents tribes from being sued without their consent. This arrangement pushes the legal system to clarify the extent of tribal immunity in administrative proceedings like IPR, where the PTAB—an executive agency—oversees patent disputes rather than a judicial court. This partnership challenges existing precedents by raising questions about whether tribal sovereign immunity applies to IPR. Though state-owned patents have been granted immunity in similar cases, the PTAB and the Federal Circuit ultimately rejected the application of tribal immunity in Allergan’s case, marking a controversial deviation that has sparked significant debate about the consistency and scope of sovereign immunity in patent law.
The ethical and economic implications of using tribal sovereign immunity in this manner are complex. Economically, partnerships like that between Allergan and the St. Regis Mohawk Tribe offer tribes a valuable revenue stream through royalty agreements, potentially supporting economic development and self-sufficiency in historically disadvantaged communities. For pharmaceutical companies, this legal strategy serves as a defensive tool to preserve market exclusivity, which is crucial for recovering substantial R&D investments and sustaining profitability. Ethically, however, such alliances raise concerns. Critics argue that using tribal immunity in this context might circumvent the intent of the IPR system, which is to remove weak patents that could unfairly extend monopolies and hinder generic competition. This can lead to prolonged periods of high drug prices, limiting access to affordable medications for consumers. Additionally, there is an ethical tension in what some perceive as a “rent-a-tribe” model, where corporations appear to exploit tribal sovereignty for commercial gain, potentially undermining the respect and intent behind tribal immunity.
In sum, the use of tribal sovereign immunity in protecting pharmaceutical patents from IPR challenges represents a significant test of the legal framework governing patents and sovereignty. It underscores both the unique vulnerabilities of the pharmaceutical industry in the patent system and the ongoing debate over how to balance innovation incentives with fair market competition and public health access.
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Tribal Sovereign Immunity and Inter Partes Review (IPR) of Pharmaceutical Patents: FAQ
1. What is the main issue discussed in the article?
The article focuses on the controversial partnership between Allergan, a pharmaceutical company, and the St. Regis Mohawk Tribe, wherein Allergan transferred its patents for the dry-eye drug Restasis to the Tribe. This move aimed to shield the patents from Inter Partes Review (IPR) challenges by invoking the Tribe's sovereign immunity. The legality and ethical implications of this strategy are debated, with critics labeling it a "sham" while supporters argue it protects innovation and promotes tribal self-sufficiency.
2. What are IPRs and how do they work?
Inter Partes Review (IPR) is a legal proceeding established by the America Invents Act (AIA) in 2011, enabling third parties to challenge the validity of existing patents before the Patent Trial and Appeal Board (PTAB). IPRs offer a faster and cheaper alternative to traditional patent litigation in district courts. A petitioner must demonstrate a "reasonable likelihood" of prevailing on at least one challenged claim for an IPR to be instituted. The PTAB then reviews the patent's validity based on a "broadest reasonable construction" standard, which can be more favorable to challengers than the standard used in district courts.
3. Why is the pharmaceutical industry particularly concerned about IPRs?
The pharmaceutical industry heavily relies on patents to recoup the significant investments required for drug development, which can cost billions of dollars and take over a decade. IPRs, with their lower burden of proof and broader claim construction, increase the risk of patent invalidation, potentially discouraging investment in risky and innovative research. Additionally, pharmaceutical patents are already subject to the Hatch-Waxman Act, a specialized review process for generic drug approval, leading some to argue that IPRs create an unnecessary "double jeopardy" scenario for the industry.
4. What is tribal sovereign immunity and how does it relate to this case?
Tribal sovereign immunity is a legal doctrine rooted in federal common law that protects Native American tribes from lawsuits unless Congress explicitly authorizes them or the tribe waives its immunity. In this case, the St. Regis Mohawk Tribe argues that its sovereign immunity shields the Restasis patents from IPR challenges as the PTAB is an administrative agency and not a court. The Federal Circuit, however, ruled against the Tribe, stating that IPRs are more akin to agency enforcement actions where sovereign immunity typically doesn’t apply.
5. What are the arguments in favor of upholding the St. Regis Tribe's sovereign immunity claim?
Supporters of the Tribe's claim argue that the Federal Circuit's decision misinterprets the nature of IPRs, which share many characteristics with traditional civil litigation. They point to the Supreme Court's characterization of IPRs as "adversarial" proceedings resembling litigation and argue that the PTAB lacks the expertise to adjudicate complex questions of tribal sovereign immunity. Furthermore, they emphasize that Congress did not explicitly abrogate tribal immunity in the AIA, leaving the Tribe's sovereign right to shield its property intact.
6. What are the criticisms of Allergan's partnership with the St. Regis Mohawk Tribe?
Critics argue that the partnership is a "sham" designed solely to circumvent IPR proceedings and maintain artificially high prices for Restasis. They also contend that it undermines the intent of the AIA, which aimed to improve patent quality and prevent frivolous litigation. Additionally, concerns have been raised that allowing this strategy could set a dangerous precedent, encouraging other companies to exploit tribal sovereign immunity for similar purposes.
7. How does the St. Regis Mohawk Tribe benefit from this partnership?
The St. Regis Mohawk Tribe views the partnership as a legitimate means of promoting economic development and self-sufficiency. The agreement provides the Tribe with significant financial resources through upfront payments and ongoing royalties, which can be used to fund essential services and infrastructure. The Tribe has also established a technology and innovation center, aiming to leverage its newly acquired expertise in intellectual property management for future economic opportunities.
8. What is the potential impact of the Federal Circuit's decision on pharmaceutical innovation and tribal sovereignty?
The Federal Circuit's decision could further discourage investment in pharmaceutical research, particularly in early-stage development where patent protection is crucial for attracting venture capital. Additionally, the ruling could undermine tribal sovereignty by limiting tribes' ability to utilize their inherent rights for economic advancement. The outcome of the ongoing appeal to the Supreme Court will have significant implications for both the pharmaceutical industry and Native American tribes, potentially shaping the future of drug development and the scope of tribal immunity in patent law.
Innovation at Odds: How the America Invents Act and Tribal Sovereign Immunity Reshape Pharmaceutical Patent Protection