By Kevin E. Noonan --
In a development that could moot (once and for all) the controversy over tribal sovereign immunity occasioned by the St. Regis Mohawk Tribe's ownership of patents relating to Allergan's Restasis formulation for treating disorders of the eye, a group of Senators including Tom Cotton (R-AK), Claire McCaskill (D-MO), Pat Toomey (R-PA), Joni Ernst (R-IA), and David Perdue (R-GA) introduced a bill to broadly abrogate assertion of tribal sovereign immunity in any patent-related proceeding. The bill, entitled the Preserving Access to Cost Effective Drugs (PACED) Act, provides that tribal sovereign immunity cannot be asserted:
• In derivation proceedings under 35 U.S.C. § 135 and judicial review of PTAB decisions thereunder;
• In reexamination proceedings under 35 U.S.C. § 305 and both administrative and judicial review of PTAB decisions thereunder;
• In inter partes review proceedings under 35 U.S.C. § 316 and judicial review of PTAB decisions thereunder;
• In post-grant review proceedings under 35 U.S.C. § 326 and judicial review of PTAB decisions thereunder; or
• In exclusion proceedings under 19 U.S.C. § 1337 and judicial review of International Trade Commission decisions thereunder.
The bill also expands the abrogation of sovereign immunity under 35 U.S.C. § 296 to include Indian tribes and specifically to include biosimilars under 42 U.S.C. § 262. Each of these provisions is expressly limited by the proviso that abrogation "shall apply only to the extent permitted under the 11th amendment to the Constitution of the United States."
Curiously, when the patent owner is a foreign state, the bill gives the Patent Trial and Appeal Board the power to determine whether the state is immune from PTAB jurisdiction, applying the principles set forth in 28 U.S.C. Chapter 97 "as if the Patent Trial and Appeal Board were a court of the United States," blurring anew the lines between Article I and Article III courts that has produced a certain amount of mischief in the implementation of the Leahy-Smith America Invents Act.
Statements from the Senators illustrate the political motivations behind the bill: the belief that the assignment and license arrangement between Allergan and the tribe was a sham (despite the PTAB's strenuous avoidance of that conclusion) and that such arrangements are a misuse of the patent system that only serves to increase drug prices (or, more accurately, delay generic competition that could decrease drug prices):
• Senator Cotton: "It's far past time that we crack down on patent abuse, which is raising costs for our seniors. This bill will make sure unscrupulous patent holders can't game the system and block their competitors from entering the market. That'll go a long way to help seniors get the drugs they need,"
• Senator McCaskill: "We watched a company brazenly try to exploit a potential legal loophole to game the system in an effort to protect their bottom line-and keep Missourians from access to cheaper generic drug options in the process. That should be illegal, and our bipartisan bill would make it so by ending this astounding assertion of sovereign immunity to avoid patent review, before any other companies follow suit."
• Senator Toomey: "Sham transactions involving the transfer of patent ownership from a pharmaceutical company to a tribe for the sole purpose of shielding the patent from challenges are a clear abuse of our patent system and set a dangerous precedent for other consumer products. The PACED Act will improve our patent system and protect patients and consumers from higher drug prices by eliminating this egregious loophole."
• Senator Ernst: "Congress cannot look the other way as some pharmaceutical companies attempt to stifle competition and prevent Americans from accessing affordable generic drugs. Failure to act could incentivize other industries to use similar tactics to block competitors. Through the Preserving Access to Cost Effective Drugs Act, we can speed up the entry of safe and affordable generic drugs into the market while maintaining the integrity of the U.S. patent system."
• Senator Perdue: "Gaming the patent system is not good for consumers or businesses. I'm disappointed this legislation even has to be offered due to a few bad actors trying to do an end run around the U.S. Patent and Trademark Office."
According to Senator Cotton's webpage, the following groups support the PACED Act:
R Street, The Electronic Frontier Foundation, Engine, American Consumer Institute Center for Citizen Research, Public Knowledge, America's Health Insurance Plans (AHIP), Association for Accessible Medicines, United for Patent Reform, High Tech Inventors Alliance, Patients for Affordable Drugs Now, BlueCross BlueShield Association, Blue Shield of California.
Insofar as Congressional authority over tribal sovereign immunity is "plenary," United States v. Lara, 541 U.S. 193, 200 (2004) ("the Constitution grants Congress broad general powers to legislate in respect to Indian tribes, powers that we have consistently described as 'plenary and exclusive'"), and in view of the Senators' politic framing of the issue both as an abuse and a cause of higher drug prices, only the seeming inability of this Congress to pass anything other than tax "reform" is likely to stop the bill from being enacted into law. Perhaps the Supreme Court will rule IPRs unconstitutional in Oil States Energy Services v. Greene's Energy Group, or the pharmaceutical industry or Native American tribes can arrange matters to have naysayers be the last group to speak with Mr. Trump before he is called upon to veto the bill. Otherwise it is likely that this particular procedural gambit has run its course.