Allergan’s controversial effort to avoid its patents for dry eye treatment Restasis being invalidated at the Patent Trial and Appeal Board (PTAB) by transferring them to a Native American tribe has taken a surprising turn – the judge in its parallel district court litigation has invalidated the four patents in the suit, and thrown in strongly-worded criticism of the deal.
Allergan in September transferred the title of all six Orange Book-listed Restasis patents – all of which are being challenged in inter partes review (IPR) at the PTAB – to the Saint Regis Mohawk Tribe. The tribe received an initial $13.75 million payment and will be eligible to receive $15 million in annual royalties. The drug company is attempting to benefit from the tribe’s sovereign immunity and have the IPRs cancelled.
Judge Bryson, a Federal Circuit judge sitting by designation in the Eastern District of Texas, granted Allergan’s motion to join the Tribe as a party to the litigation against Mylan and Teva. But Bryson took the opportunity to outline concerns about the deal, noting the profound impact it could have.
“The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed,” he wrote. “The essence of the matter is this: Allergan purports to have sold the patents to the Tribe, but in reality it has paid the Tribe to allow Allergan to purchase – or perhaps more precisely, to rent – the Tribe’s sovereign immunity in order to defeat the pending IPR proceedings in the PTO. This is not a situation in which the patentee was entitled to sovereign immunity in the first instance. Rather, Allergan, which does not enjoy sovereign immunity, has invoked the benefits of the patent system and has obtained valuable patent protection for its product, Restasis. But when faced with the possibility that the PTO would determine that those patents should not have been issued, Allergan has sought to prevent the PTO from reconsidering its original issuance decision.”
He continued: “What Allergan seeks is the right to continue to enjoy the considerable benefits of the US patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents. If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice. In short, Allergan’s tactic, if successful, could spell the end of the PTO’s IPR program, which was a central component of the America Invents Act of 2011.”
The judge noted that Allergan in its brief was “conspicuously silent about the broader consequences of the course it has chosen”.
He added: “[S]overeign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities. It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit.”
In a separate order, Bryson ruled Allergan had proved that the defendants had infringed the asserted claims of the four patents in the suit but that the patents were invalid.
“[B]ased on the extensive amount of pertinent prior art and the Court’s factual assessment of Allergan’s showing of unexpected results, the Court has concluded that Allergan is not entitled to renewed patent rights for Restasis in the form of a second wave of patent protection,” he wrote.
Allergan said it was “disappointed by the decision.
"We are carefully reviewing the decision and are considering all options," said Robert Bailey, chief legal officer of Allergan. "Allergan remains committed to vigorously defending the intellectual property of our products, which allows us to continue to invest in developing and bringing forward new medicines for millions of patients."
Restasis had nearly $1.5 billion of revenues in 2016.
The Native American tribe deal has proved very controversial. Democratic Senators Maggie Hassan, Bob Casey, Sherrod Brown and Richard Blumenthal requested that the Senate Judiciary Committee investigate the deal.
Senator Claire McCaskill also introduced legislation to abrogate tribal sovereign immunity as a defence in IPR. The bill explicitly states that tribal sovereign immunity cannot be used to block USPTO review of a patent in IPR. In a statement to PhRMA, McCaskill commented: ““This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal,” McCaskill said.
On October 12, the tribe delivered a letter to the Senate Judiciary Committee “to clarify certain claims and misperceptions”.
BIO also sent a letter the same day. It stated: “While BIO does not comment on specific business transactions of its members, BIO believes that any inquiry by the Judiciary Committee in this area must include a serious review of the numerous deficiencies of the [IPR system], and the extent to which its use by certain generic pharmaceutical manufacturers undermines longstanding and carefully-balanced procedures governing market entry and patent dispute resolution under the highly successful Hatch-Waxman Act.”
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