The House Judiciary Committee met Tuesday to hear testimony on a patent deal between the drugmaker Allergan Plc and a Native American tribe. The deal has become a major scandal in the nation’s communities of innovators. The same tribe has struck an equally controversial copycat bargain with a notorious patent troll and is now suing Amazon and Microsoft. If these arrangements stand, they will deliver a harsh blow to the nearly decade-long national effort to improve the quality of the nation’s patent system, hurting the innovation and job creation on which our economic vitality depends.
The ploy was developed by Allergan, which is itself the product of a complicated 2015 transaction that allowed the maker of the mega-drug Botox to move its headquarters to Ireland, escaping U.S. corporate taxes. Trying to escape official scrutiny of the validity of some of its patents, the company sold some of its portfolio to upstate New York’s St. Regis Mohawk tribe.
As tribes are generally entitled to sovereign immunity, Allergan claimed that the patents in question were, therefore, exempt from U.S. Patent Office review. The tribe’s follow-on agreement was with a patent holding company called SRC Labs. This sovereign-immunity gimmick should not stand up in court. But in the meantime, the drugmaker and the troll will lease exclusive rights from the tribe and continue their questionable operations.
All of these shady players share one goal — shielding potentially mistakenly awarded patents from review by the Patent Trial and Appeal Board (PTAB) and the inter partes review (IPR) process. Both the PTAB and IPRs were established by the 2011 America Invents Act. Congress adopted the law after years of concern about the declining quality of U.S. patents. Particularly in the area of high technology (software and electronics), patents were being awarded that didn’t pass the laugh test. One applicant walked off with a legal lock on the concept of posting recordings on the internet, otherwise known as podcasts, long in existence at the time the patent was issued.
Patent examiners are a relatively small and overworked group of federal employees, given the more than 600,000 patent applications filed each year. Their responsibilities on the cutting edge of technology make them particularly vulnerable to inadvertent missteps. The PTAB and IPR have provided a relatively inexpensive and rapid way for the Patent and Trademark Office to take a second and impartial look at the work of examiners and strike down patents that should have never issued in the first place.
If adopted throughout the pharmaceutical industry, Allergan’s ploy could cost consumers billions of dollars a year without encouraging innovation in the least. Undermining IPR could hurt America’s high-tech industry even more. The volume of wrongly granted technology patents reached crisis proportions before 2011 and the creation of the PTAB and IPR. The flood of bad patents fueled an explosion of wasteful litigation in the tech industry, brought by patent trolls that exist for no reason other than to make money filing lawsuits. IPR has been a step toward reining in that problem. Tech companies can spend more money creating jobs and innovating when they aren’t fighting frivolous lawsuits on wrongly granted patents.
Not just SRC Labs but a number of other trolls with legally vulnerable patents are pursuing the Allergan strategy. Based on such deals, they have already filed suit against real innovators. It is a brazen ploy to shield weak patents from the PTAB’s careful review and should not be allowed to stand.
The goal of our patent system is to give innovators the opportunity to reap a significant reward for their achievements, and then, after 20 years, to provide open access to the technologies so that the public can benefit from the lower prices that competition brings. Emasculating the PTAB runs directly counter to those goals. It would allow non-inventors to enjoy unearned protections for their non-inventions.
Limiting patents to those who make genuine breakthroughs does not curtail innovation. It ensures that the benefits of innovation are more widely available. It does not undermine the opportunity for reward. It ensures reward is linked to genuine achievement. The role of the Patent Trial and Appeal Board and inter partes review is crucial to that process. It should be maintained, not undermined. No one who cares about America’s innovative culture should want our patent system to go backward.
• John Thorne is general counsel to the High Tech Inventors Alliance.