Court Says Allergan Can't Shield Restasis Patents With Tribe

(Bloomberg) -- Allergan Plc and the St. Regis Mohawk Indian Tribe can’t use tribal sovereign immunity to shield patents on the dry-eye drug Restasis from challenges at the U.S. Patent and Trademark Office, an appeals court ruled Friday.

Allergan had agreed to pay the tribe $15 million a year to take ownership of the patents and then sought to dismiss challenges filed by Mylan NV, Teva Pharmaceutical Industries Ltd. and and Akorn Inc. The tribe’s argument that it’s a sovereign government doesn’t apply before the patent review board, the U.S. Court of Appeals for the Federal Circuit said in a decision posted on its electronic docket.

For Allergan, the agreement to give up about a days’ worth of Restasis sales was a way to keep the patents away from a board that’s been called a “death squad” by critics because it has a higher rate of invalidity rulings than district courts. The upstate New York tribe, which got an initial $13.5 million plus the promise of annual payments as long as the patents are in force, was looking for a much-needed source of revenue.

‘Nice Footnote’

“I always viewed it as maybe one company getting away with it, but I didn’t see it becoming a thing,” said Scott McKeown, a patent lawyer with Ropes & Gray in Washington who wasn’t involved in the case. “For the few folks that were still trying to use this defense, it’s now gone.”

Allergan’s actions “will go down as a nice footnote” in the history of patent reviews, he said.

Sovereign immunity limits the ability to sue governments in federal court. Allergan and the Mohawks -- who weren’t invoking sovereign immunity in the lawsuits against the generic-drug makers -- argued the immunity extended to challenges in the patent office.

The review process “is more like an agency enforcement action than a civil suit brought by a private party, and we conclude that tribal immunity is not implicated,” the three-judge panel ruled. The patent office “is acting as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies within their legitimate scope.”

Reviews to Proceed

The decision means the reviews will proceed at the Patent Trial and Appeal Board in Alexandria, Virginia. The patents were, separately, ruled invalid by a trial court judge under a more stringent legal standard and that case also is before the Federal Circuit in Washington, which handles all patent appeals. Allergan needs to win in both venues to keep its medicine from generic competition before the challenged patents expire in 2024.

Restasis is Allergan’s second-biggest seller, behind the wrinkle treatment Botox. It generated $1.5 billion in sales last year, more than 9 percent of the company’s revenue, though that’s expected to drop dramatically next year if low-cost versions of the drug enter the market.

Amy Rose, a spokeswoman for Allergan, said the company doesn’t comment on current litigation. The tribe said it was disappointed in the ruling.

“We fundamentally disagree that this is an action of the United States,” Brendan White, director of communications with the tribe, said in an emailed statement.

Widely Derided

“The Tribe is reviewing the decision and consulting with our attorneys. We will continue to work on other innovative projects that have come out of this initiative which are not impacted by this decision,” White said.
Allergan’s agreement with the Mohawks was widely derided by politicians, tech companies. banks and insurers, who said it threatened to upend a system created by Congress to be a low-cost alternative to litigation and weed out invalid patents. Thousands of challenges have been filed, with most directed at technology inventions.

Petitions directed at drug patents are less common, and the patent owner wins more than often than the challengers, according to a March report by the agency. Even as drugmakers complain about the petitions filed by would-be generic-drug companies, they often file their own petitions against competitors. Congress has considered legislation that would eliminate the ability to file dual challenges, though it faces an uphill climb.

Constitutional Issue

The panel left undecided “for another day” whether state institutions can continue to claim immunity from the reviews. Still, “the reasoning should compel a similar result for state sovereign immunity,” said John Thorne, general counsel for the High Tech Inventors Alliance, a group that supports the review process and has members including Google, Amazon.com Inc. and Intel Corp.

While tech and finance companies came out publicly against Allergan’s actions and filed legal arguments in the case, the trade group for the drug industry said it was an issue for “constitutional and human rights scholars,” not companies.

The Mohawks had reached an agreement with another company, SRC LLC, and together they sued Amazon.com Inc. and Microsoft over patents for high-speed computing. Apple Inc. was sued over a patent owned by three North Dakota tribes, though the case was settled.

The case is St. Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., 18-1638, U.S. Court of Appeals for the Federal Circuit (Washington)

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