Allergan’s unusual legal tactic attracts political scrutiny

“BRAZEN” and “absurd”: Allergan certainly drew a reaction from American lawmakers when it transferred its patents for Restasis, a dry-eye drug, to the Saint Regis Mohawk Tribe in September. Last week a congressional committee held a hearing on the deal, which, if recognised as valid, risks undermining the American patent-review system.

As entities granted sovereign status, Native American tribes enjoy legal immunity and so, Allergan hopes, can ward off challenges to the patents by rival drugmakers. The tribe, which is based in New York state, wants to reduce its reliance on revenues from its local casino. It received $14m when it acquired the patents, and will relicense them to Allergan for a yearly fee of $15m.

Tribes are targeting other industries, too. The Mohawk tribe holds patents for SRC Labs, a tech firm, and says it expects to earn a “significant amount of money” by suing other firms for infringement. It has already sued Amazon and Microsoft. Another patent-holding company, owned by three Native American tribes, is suing Apple.

The Mohawk tribe argues that it should be treated the same as a state institution. State universities have used sovereign immunity to dismiss challenges brought to the Patent Trial and Appeal Board (PTAB), which conducts patent reviews. The universities’ argument has not been tested in the courts, where patents can also be challenged, says Rachel Sachs of Washington University in St Louis; in theory, immunity could be invoked there, too.

The tribe has asked the PTAB to dismiss challenges to the Restasis patents. A ruling is expected by April. If the regulators side with the tribe, a rise in review-dodging deals seems likely. The tribe has set up a patent office in anticipation of greater interest.

But tribes are different from states in two ways, says Michael Carrier of Rutgers Law School. The first is that state universities contribute to the research behind the patent. Regulators may treat tribes, which contribute nothing, differently. The second distinction is that, although states’ sovereignty is built into the American constitution, tribal immunity can be modified by Congress; a Democratic senator has introduced a bill to prevent tribes from invoking immunity in administrative reviews. But abrogating tribal rights may prove a sensitive issue. And the bill would not prevent immunity from being invoked in court.

Either way, other firms may be deterred from following Allergan’s lead by the heavy price it is paying for its gambit. Not only is the firm facing political ire—which could lead to awkward questions about the ever-rising price of Restasis—but its share price has fallen by a quarter since it struck the deal. The move to protect its dry-eye drug may end in tears.