Illustration by Golden Cosmos

The St. Regis Mohawk Reservation, in upstate New York, sits at the U.S. border with Canada, and most of its residents are citizens of both countries, as well as of the Mohawk Nation at Akwesasne, a territory that includes land on the Canadian side of the border. Much of the St. Regis Mohawk Reservation’s income comes from a casino, but its revenues have lately flattened, and the unemployment rate on the reservation is twice that of Franklin County, which abuts it and is itself one of the poorest parts of the state. Recently, however, the St. Regis Mohawk Tribe acquired a major new source of revenue. It has become the owner of six patents for Restasis, a drug for dry-eye syndrome that is the second-highest-selling product of the pharmaceutical company Allergan. Soon, tribal leaders say, they will have a small portfolio of patents, covering other medicines and also computer software and hardware. No tribe members were involved in designing these products. The business opportunity fell into their lap, thanks to an intellectual-property lawyer in Texas named Michael Shore.

For years, Shore had a successful practice representing patent holders, mostly universities, whose intellectual property had been infringed upon. Then, in 2012, Congress passed the America Invents Act, which created a streamlined procedure, known as “inter partes review,” for the adjudication of patent challenges by the U.S. Patent and Trademark Office. Shore immediately realized three things. First, a streamlined procedure would encourage many more challenges. Second, the law was written in such a way that it didn’t apply to sovereign entities, such as foreign countries, U.S. states, and Native American nations. Third, a patent held by a sovereign entity therefore had a greater effective value than the same patent held by an institution subject to the new procedure. By Shore’s calculation, transferring a patent from a non-sovereign entity to a sovereign one would increase its value anywhere from four to ten times over. If he could broker such deals, everybody—patent owners, sovereign entities, and Shore himself—could make millions.

Shore set about looking for a suitable sovereign. He didn’t know much about Native American tribes, but he knew they were often in need of money. He called the Alabama-Coushatta Tribe—as a kid, growing up in East Texas, he had visited a Coushatta-run campground. The Coushatta weren’t interested, but they mentioned a St. Regis Mohawk Tribe member who was a prominent attorney and might better understand Shore’s idea. A quick trip to the New York reservation got the tribe on board.

Next, Shore needed to find a non-sovereign patent holder. He looked first at some software firms, but then came across Allergan: patents for its drug Restasis were being challenged by companies, such as Mylan and Teva, that hoped to manufacture generics. Allergan stood to lose a monopoly worth more than a billion dollars a year, and didn’t need much convincing that cutting a deal with the tribe would be far cheaper than fighting claims in inter partes review. In the deal Shore brokered, the tribe agreed to lease the patent back to Allergan, exclusively, for a fee of fifteen million dollars a year (plus $13.75 million up front). Shore hopes to negotiate more deals for the tribe and is already talking to several other Native American nations about doing the same for them.

Without clear property rights, capitalism and the modern economy could not exist. After all, what are markets other than forums for trading ownership of things of value? When it comes to physical goods and land, property rights are usually fairly intuitive. But intellectual property is inherently more arbitrary. Even if we agree—and many sensible people don’t—that people should have the right to exclusively exploit their own inventions, how long should that right last? Who decides whether another invention is a mere copy or a substantive enhancement that deserves protection, too? There is no objective standard, and the answers will always involve some legal wrangling. This, together with the changing nature of our economy, explains why intellectual-property law is a burgeoning business. The Patent Office estimates that intellectual property currently represents more than a third of all value created in the U.S., and its value is growing far more quickly than the economy over all. Every year, patents and trademarks will collectively be worth trillions more than the year before. That creates enormous incentives to do what Shore did: find clever new ways of gaming the system.

Maneuvers like Shore’s rarely go unchallenged. Last month, a federal judge in Texas ruled that some of Allergan’s Restasis patents were invalid. (The company has said that it will appeal.) The judge also commented that “sovereign immunity should not be treated as a monetizable commodity.” On the same basis, some members of Congress, led by Senator Claire McCaskill, are so annoyed that they’re calling for the abrogation of Native American sovereign immunity in patent-claims cases. This is theoretically possible, because the sovereign immunity of tribes, unlike that of states, isn’t enshrined in the Eleventh Amendment. But Shore points out that such a measure would penalize Native Americans without actually closing the loophole. If Congress limits tribal immunity, he could easily shift the patent portfolios to state universities. Shore says that he’s in talks with several underfunded state-run historically black colleges and universities. As long as there’s money to be made gaming the system, he figures it’s desirable (and good P.R.) for some of that money to go to those who need it most. ♦