Allergan Finds Its Way Around Patent Procedures

For five years, the Patent Trial and Appeal Board (or PTAB) has been in charge of determining whether a patent is, well, patentable. The problem is that it’s really easy to launch a challenge against a patent either already in place, or in the process of being implemented. Critics of the board want big changes to the processes used to determine whether a drug or other product is suitable for patent, but not everyone is willing to wait for those changes. Allergan Plc is willing to pay a hefty price rather than see its drug opened up to an appeal process that might not go its way.

That’s why the drugmaker opted instead to transfer its patents to the Saint Regis Mohawk Tribe in Upstate New York. The tribe stands to make $15 million annually in royalties just for hanging onto the patent for Allergan, which made $1.49 billion in sales in 2016. Because Native American tribes aren’t bound by the same laws as anyone else who lives in any of the fifty states within the U.S., it can hold onto the patent without falling under the watchful eyes of the PTAB, thereby guaranteeing that the drug can continue to be sold into the foreseeable future.

When your company makes billions, it pays to be sneaky. The PTAB has reversed so many patents that it has been nicknamed a “death squad.”

Then again, not everyone thinks the board is bad news. Google and Apple are routine users of the board, using it to defend against potentially frivolous lawsuits that could damage their reputation and capacity to do business for the greater good, while also attacking patents they don’t like.

Because the PTAB is so controversial and has overturned so many patents, the Supreme Court is finally getting involved. As of June 2017, it decided to hear arguments as to whether or not the board’s recommendations and reviews are indeed legal. The potential that the court will rule in favor of the PTAB is more likely than not, but critics of the board are happy that the issue is finally getting the attention it deserves.

Opposition to the PTAB criticizes the board’s rulings because it regulates the kind of evidence that can be offered during appeals processes, and then often fails to explain the resulting decisions. That’s why Allergan and other companies are trying to bypass the board entirely rather than work with it. Others contend that the PTAB is overburdened. When originally conceived, there was an expectation of perhaps an annual pool of only a hundred or so petitions, while in reality there were thousands.

The tech companies that fought for the board’s creation aren’t backing down from the fight. After the board was created, the number of lawsuits filed against Silicon Valley tech startups and bigger companies like Apple or Google started to fall. On the other side of things, they’ve been able to challenge patents that are similar to their own.

Whether or not changes will be made might depend on whoever finds their way into the post–Barack Obama’s appointee has since left–and the decision of the Supreme Court.

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