Allergan’s Mohawk Patent Defense Strategy Is Eyewash, Court Rules

October 18, 2017, 1:37 PM UTC

A U.S. court ruling on Monday invalidating Allergan’s patents on its blockbuster $1.5 billion dry-eye medicine, Restasis, has cast doubt on the company’s novel and controversial strategy to enlist a Native American tribe to help shield those patents from challenge by generic drugmakers.

In a deal announced last month, Allergan transferred the Restasis patents to New York state’s Saint Regis Mohawk Tribe, claiming the group’s status as a sovereign nation meant the patents could not be reviewed by the U.S. patent office.

Allergan said the move was justified because the same patents were already being reviewed in federal court, but critics said it was a cynical attempt to prolong the company’s monopoly on Restasis.

The federal judge, William Bryson, expressed concerns about the legitimacy of the tribal transfer, calling it a ploy by Allergan to “rent” the tribe’s sovereign immunity.

He did not rule directly on whether the transfer was legal, however, because that question was not squarely before him. But his decision on Monday rendered Allergan’s move largely meaningless, since he invalidated the Restasis patents himself instead of waiting for the patent office to rule.

Allergan said it was disappointed by Bryson’s decision to invalidate the patents and vowed to appeal.

Legal experts said the rebuke from a prominent judge will make other patent owners reluctant to copy Allergan’s maneuver.

“This should flash some serious yellow lights, if not red lights, in front of parties considering a deal like this,” said Michael Carrier, a professor of patent law at Rutgers Law School.

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The dispute over the Restasis patents dates back to 2015 when generic drug companies led by Mylan NV asked a federal judge sitting in Texas to invalidate Allergan’s Restasis patents, in the hope of launching their own generic versions of the medicine.

The generic drugmakers also asked the U.S. Patent Trial and Appeal Board (PTAB), an administrative court run by the patent office, to revoke the patents. Companies often ask both a federal judge and PTAB to cancel patents.

Allergan said in September that it had transferred its Restasis patents to the tribe, which agreed to license the patents back to Allergan in exchange for ongoing payments.

The company said the PTAB proceeding should be terminated because the tribunal did not have jurisdiction over the tribe. Allergan said it wanted to avoid defending the patent in both federal court and before PTAB.

But after Bryson’s ruling, other patent owners will be less likely to transfer such patents to tribes to shield them from review, said Rachel Sachs, a professor of patent law at Washington University in St. Louis.

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Bryson said “sovereign 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.”

Sachs said Bryson is a well-regarded judge and that his reasoning could be cited by other courts, including PTAB judges.

She noted the ruling comes after weeks of criticism on Capitol Hill, where politicians have slammed Allergan’s move as a sham, with one U.S. senator introducing a bill to ban attempts to take advantage of tribal sovereignty.

In a research note on Monday, analysts at Credit Suisse said Allergan suffered a “public relations backlash” from the deal without helping its bottom line.

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Allergan said in a statement on Tuesday that its deal with the tribe has helped raised awareness about the need to reform the PTAB process, which the company said does not provide due process to patent owners.

Some legal experts said it is too early to declare Allergan’s patent gambit a failure.

Jacob Sherkow, a professor of patent law at New York Law School, said PTAB may still rule in favor of Allergan on its sovereign immunity defense.

If that happens, Allergan’s deal with the tribe could be copied by other patent owners, said Joshua Landau, a patent lawyer with the trade group Computer & Communications Industry Association.

Bryson’s decision “will make patent owners question the arrangement, but I don’t know if the ruling will prevent it entirely,” Landau said.

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