Casinos aren’t enough as native tribe makes deal on drug patents

For one Native American tribe, the money’s not in the casino anymore. Patents are the future.

On Friday, drugmaker Allergan Plc said it would transfer intellectual property on a blockbuster drug to the Saint Regis Mohawk Tribe, in order to avoid attacks on the medicine’s patents. For the tribe, it’s a new revenue stream that could lead to more down the road.

“Our options beyond the casino are few and far between so an opportunity like this is attractive to us, because we have a lot of unmet needs for our community,” said Saint Regis Mohawk Tribe’s general counsel Dale White. The agreement will pay the tribe USD13.75 million, plus $15 million a year in annual revenues, according to Allergan.

There are 13,000 Saint Regis Mohawk Tribe members nationwide, and they own a six-mile-by-six-mile square piece of land in a sparsely populated part of upstate New York. The Akwesasne Mohawk Casino Resort, is one of the tribe’s main sources of revenue. It’s open 24 hours a day, has 1,600 slot machines, 30 table games and a poker room, according to the website.

The attraction for a drug company is simple: The tribe has sovereignty, setting it apart from some legal proceedings – such as expedited patent reviews. For Allergan, it can serve as a small legal island guarding its valuable intellectual property.

Restasis’s patents are under attack on two fronts, and moving the rights may shield them on one side. Last year, the drug – which treats chronic dry eye – brought in $1.49 billion in sales.

“I would expect it creates a playbook for other cases down the road both for us and for others,” Bob Bailey, Allergan’s chief legal officer, said of the agreement with the tribe.

Shares of Allergan, which is based in the U.S., ended Friday up 2.5 percent.

There’s a legal basis for the strategy. The Patent Trial and Appeal Board recently ruled in two cases that state-university-owned patents aren’t subject to the review process because states have sovereign immunity. In those cases, however, the university was the original owner of the patents.

Drugmakers have been looking for any way they can to hold onto revenue. Several top pharmaceutical companies have recently reported slowing sales and shrinking profits due to the loss of exclusivity for top-selling medications, and the Trump administration has said it wants to drive down drug prices. At the same time, attacks on drug patents have been made easier under the patent office’s recently created fast-track legal review process.

Allergan said it had been approached by the tribe with what it called a “sophisticated opportunity to strengthen the defense” of Restatis’s patents, which have been challenged under a process called inter partes review, or IPR.

Drugmakers have long railed against the IPR process, which enables challenges before the patent board, because it means they have to defend their patents against assaults in two different forums. They have to win in both the court and before the agency.

Mylan NV has filed petitions with the patent office to challenge Allergan’s patents under the IPR process. The agency previously determined that Mylan has established a “reasonable likelihood” of winning its arguments that the patents are invalid, though a hearing on the case is scheduled for next week in Alexandria, Virginia.

By transferring ownership to the tribe, Allergan can try to limit its legal battle to the courts, where it’s harder to invalidate patents because of a more stringent legal standard.

“The way I think about this is what we’re doing here today is to really allow Allergan to focus the defense of the Restasis patent in the federal court system and avoid the double jeopardy of the IPR system,” Allergan Chief Executive Officer Brent Saunders said in an interview.

Success for Allergan’s deal with the Saint Regis Mohawk Tribe would open a whole host of questions for the patent-review process, which was set up under a 2011 law. Tech companies are the biggest users of the system, intended as a lower-cost way to resolve patent disputes.

“If they can do it, other drugmakers can do it, and not just other drugmakers but other companies,” said Wright, the patent lawyer. “It’s a massive loophole and you could drive a Mack truck through that.”

The tribe is ready, if they do. White, the lawyer, said the tribe will work with Shore Chan DePumpo, a law firm that helped vet the Allergan deal.

“We will vet them through the Shore firm to make sure that these are legitimate companies that we want to do business with,” he said. “We’ll probably take as many as the Shore firm can handle.” 

Cynthia Koons, Susan Decker, Bloomberg

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