In a setback for Allergan, four of the company’s patents covering its blockbuster eye drug Restasis were ruled invalid on Monday by the US District Court for the Eastern District of Texas. Allergan has said it will appeal the decision, but what might have a wider ripple effect was another order that raised questions about Allergan’s decision to transfer the patents to a Native American tribe to prolong the launch of Restasis generics.
In the order on the agreement between Allergan and the Saint Regis Mohawk Tribe, US Circuit Judge William Bryson wrote: "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."
About a month ago, Allergan agreed to transfer the patents on its blockbuster Restasis to the Saint Regis Mohawk Tribe, which has sovereign immunity and could protect them from challenges from generic competitors. As part of the agreement, the tribe received a one-time payment of $13.75 million and possible annual royalties of about $15 million.
Generics company Mylan essentially called the move by Allergan a sham and said that it was merely an attempt to evade generic competition for a longer period of time.
Sen. Claire McCaskill (D-MO) also questioned the deal, adding, "This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal …Given its recent comments regarding corporate responsibility, PhRMA can and should play a role in telling its members that this action isn’t appropriate, and I hope they do that."
However, industry group BIO late last week called on senators in the judiciary committee to look into numerous deficiencies in the US Patent & Trademark Office’s (PTO) inter partes review (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."
In an 11-page order separate from the one invalidating the Restasis patents for obviousness, US Circuit Judge William Bryson wrote that the court "has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed. 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.
"What Allergan seeks is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents," Bryson added.
Rachel Sachs, an assistant professor of law at Washington University in St. Louis, told Focus that the order does not mean that other companies cannot attempt these types of patent transfers with Native American tribes, "but it expresses reservations that should make companies nervous."