Judge Questions Whether Allergan's IPR Strategy Is a "Sham"

Judge William C. Bryson has ordered Allergan to file a brief for a federal patent infringement case by Friday, October 13, after questioning whether the drug maker’s recent transfer of drug patents to a sovereign tribe was a “sham.”
Kelly Davio
October 11, 2017
Judge William C. Bryson has ordered Allergan to file a brief for a federal patent infringement case by Friday, October 13, after questioning whether the drug maker’s recent transfer of drug patents to a sovereign tribe was a “sham.” Allergan recently transferred patents for its dry-eye drug, Restasis, to the Saint Regis Mohawk Tribe, who invoked sovereign immunity against inter partes review (IPR) of the drug’s patents in exchange for a bulk payment of $13.75 million and an additional $15 million per year in royalties.

Bryson, who is presiding over an unrelated Hatch-Waxman litigation over Restasis, noted that the Irish drug maker had told the court that the Tribe would join Allergan as a co-plaintiff in the case, which it has not yet done despite being the new patent holder. Allergan is suing rival drug makers who have hoped to develop and market generics for Restasis. Bryson has ordered Allergan and the defendants in the case to file briefs “addressing the question of whether the Tribe should be joined as a co-plaintiff in this action, or whether the assignment of the patents to the Tribe should be disregarded as a sham.”

Allergan’s CEO, Brent Saunders, previously argued that the patent transfer would only have bearing on IPRs of its Restasis patents, and that its agreement with the Tribe would have “no impact” on the Federal District Court Hatch-Waxman litigation. However, Bryson’s order suggests that that the court may disagree with Saunders’ position. Dan Ravicher, JD, a professor of law at the University of Miami, told CNBC that "Once [representatives of the Tribe] appear in federal court, they've now waived their tribal immunity."

While Bryson’s forthcoming ruling in the case has the potential to impact Allergan’s ability to shield its patents through such arrangements, law makers are hoping to make further patent transfers to sovereign tribes illegal. Last Thursday, Senator Claire McCaskill (D-Missouri) announced that she has drafted legislation that would expressly prohibit the use of tribal sovereign immunity to block review of patents before the US Patent and Trademark Office. “Congress never imagined tribes would allow themselves to be used by pharmaceutical companies to avoid challenges to patents,” said McCaskill in a statement, “and this bill will shut the practice down before others follow suit.”

However, bigger legal challenges for the IPR process are underway, and the outcomes of those challenges could have a significant effect on the biosimilars marketplace. An argument before the Supreme Court in Oil States Energy Services v Greene’s Energy Group, a case that challenges the constitutionality of the IPR process, has been set for November 27; should IPRs be ruled unconstitutional, generic drug and biosimilar developers could lose an important tool by which to clear patents. Robert Cerwinski, JD, told The Center for Biosimilars® in a recent interview that, “Everybody in the biosimilars world is watching this Supreme Court matter pretty closely. The upshot is, if in fact the law that created IPRs is governed to be unconstitutional, Congress is going to have to take another shot at either modifying or redoing the statute that created IPRs. So, the potential impact on biosimilar applicants from having the IPR scheme eliminated entirely will be quite significant.”

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