Dancing with wolves
Allergan’s recent patent deal with the Saint Regis Mohawk Tribe has drawn the ire of the industry, and the jury is still out on whether it will work
In September, Dublin-based pharmaceutical giant Allergan made the controversial decision to transfer all of its Orange Book-listed patents for its Restasis dry eye treatment to the Saint Regis Mohawk Tribe, in an attempt to grant the patents immunity from inter-partes review (IPR) at the US Patent Trial and Appeal Board (PTAB).
What Allergan may not have anticipated is the fallout and controversy that has stemmed from that deal, which has seen vehement opposition from its rivals and an investigation by US Congress.
Allergan’s patents expired in 2014 and generic manufacturers, including Mylan, began working towards releasing generic versions of the dry eye drug. However, aiming to extend Restasis’s exclusivity, Allergan obtained new patents for minor variations of the drug and sued the generic makers at the US District Court for the Eastern District of Texas.
In October, Judge William Bryson, who wrote the opinion for the Texas court, ruled that four of Allergan’s new patents were invalid based on obviousness.
The ruling stated that Allergan’s patent protection for Restasis had ended in 2014 and that the company was not entitled to renewed patent rights.
Bryson referred to Allergan’s patent deal with the Saint Regis Mohawk Tribe, arguing “sovereign immunity should not be treated as a monetisable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities”.
He added: “It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit.” He continued: “Because that is in essence is [sic] what the agreement between Allergan and the Tribe does, the court has serious reservations about whether the contract between Allergan and the Tribe should be recognised as valid, rather than being held void as being contrary to public policy.”
Bryson suggested that Allergan had “invoked the benefits of the patent system”, but refused to accept the limitations of those benefits.
At a governmental level, certain US senators have complained that the move is anti-competitive, prompting a congressional investigation, which has asked Allergan to disclose all terms and documents relating to the agreement.
The Committee on Oversight and Government Reform, which is conducting the investigation, described the agreement as an “unconventional maneuver”.
It stated: “The implications of Allergan’s patent transfer raise questions for Congress as the exchange may impair competition across the pharmaceutical industry and ultimately dissuade companies from pursuing less-costly generic alternatives to brand drugs.”
Joshua Landau, writer of the Patent Progress blog and patent counsel at the Computer & Communications Industry Association, notes: “No one wants a Congressional investigation against them.”
He adds: “That said, the investigation is narrowly targeted to just this deal and its structure. Allergan could simply revoke the deal (if they left themselves a revocation clause), admit it was a bad idea, and Congress would probably leave them alone.”
He said: “If they continue to pursue ways to avoid the Congressionally-created IPR procedure, I’d expect Congress to continue their investigation.”
Allergan has “made this deal in order to avoid having to face IPR of their patents”, he says.
IPR allows technically and legally trained judges employed by the US Patent and Trademark Office to review the work of patent examiners. Landau explains that this is “an efficient and accurate way to determine patent validity”.
“Allergan doesn’t want their patents to face review by the PTAB (unsurprising, given that some of their patents were already found invalid in court) so they cut this deal to try to avoid having to do so.”
Whether Allergan’s deal will work is another question. Bob Bailey, chief legal officer at Allergan, describes the deal as a “sophisticated opportunity to strengthen the defense of our Restasis intellectual property in the upcoming IPR proceedings before the US Patent Trial and Appeal Board”.
However, Landau suggests that the deal’s success is still a possibility, considering previous use of sovereign immunity by universities at the PTAB, but a failure is also highly probable.
He explains: “Judge Bryson, who wrote the decision on Allergan’s patents in Texas, questioned the validity of the transaction.”
“Judge Bryson is normally a member of the Federal Circuit, so his words will carry a bit more weight than those of a district court judge.”
“I suspect that the strategy will ultimately fail, as this sort of laundering of sovereign immunity has failed in other contexts (for example, payday lending).”
Since the deal was reached in September, the Saint Regis Mohawk Tribe has already filed to dismiss an IPR challenge from Mylan.
In its motion to dismiss, the tribe explained that only Congress can determine whether or how to limit tribal immunity.
However, when US senator Claire McCaskill introduced legislation, which could abrogate tribal immunity from IPR proceedings, the Saint Regis Mohawk Tribe said it was “outraged” that McCaskill had specifically targeted Indian tribes, “yet exempts state universities and other sovereign governments engaged in the very same IPR process”.
The tribe said: “The double standard that is being introduced by the senator as a solution for a perceived abuse of the IPR proceedings does nothing to solve the underlying problem.”
“The tribe’s authority is inherent and has been reaffirmed through treaties and legislation from the earliest days of the country.”