Is the Allergan patent deal a misuse of sovereign immunity?
Earlier this month, in a bid to obtain immunity against an inter partes review (IPR), Allergan transferred its patent rights for a dry eye treatment to a Native American tribe.
Almost immediately, there was a backlash. Was the deal a stroke of genius or a misuse of sovereign immunity? Perhaps it was both.
Mylan, the company that had requested the IPR, filed a statement at the US District Court for the Eastern District of Texas, Marshall Division, on September 11.
“Allergan’s desperate tactic further demonstrates what was presented in detail at the trial held in this matter, that the patents covering Allergan’s Restasis product are invalid,” said Mylan.
The Saint Regis Mohawk Tribe acquired patents for Restasis (cyclosporine ophthalmic emulsion) and granted Allergan an exclusive licence to the treatment.
The tribe has filed a motion to dismiss the ongoing IPR, based on the tribe’s sovereign immunity from IPR challenges.
Mylan claimed that it will “vigorously oppose this transparent delay tactic before the Patent Trial and Appeal Board (PTAB)”.
The filing went on to claim that Allergan is “attempting to misuse” the tribe’s sovereignty to “shield invalid patents from cancellation”, and that this is further evidenced by the fact that Allergan paid the Saint Regis Mohawk tribe to take the assignments.
Under the agreement, the tribe will receive $13.75 million and will be eligible to receive $15 million in annual royalties.
On Thursday, September 14, the tribe provided more details on the agreement in a press release.
“The tribe’s agreement utilises the same business model and legal positions long employed by public universities and other state sovereigns,” it said.
Universities have successfully employed this strategy, added the tribe.
In May this year, the PTAB held that a heart valve patent owned by the University of Maryland, Baltimore, is immune to IPR.
“It appears that the strategy is a concern only when a tribe decides to enter the same business for the benefit of its community,” said the Saint Regis Mohawk Tribe.
“The tribe is very confident the public, once the transaction and its benefits are fully understood, will understand that the tribe is helping to strengthen the US patent system in a way that is mutually beneficial to innovators and for the community of Akwesasne and the US economy.”
Brendan O’Malley, partner at Fitzpatrick, Cella, Harper & Scinto, explained that Allergan has made strategic use of the laws governing sovereign immunity.
“Experts on sovereign immunity who have weighed in via the media seem to be in agreement that what was done was perfectly legal,” he added.
According to O’Malley, patent challengers are “strenuously objecting” to Allergan’s strategy and arguing that the transaction is a “misuse of sovereign immunity”, with Allergan paying the tribe in exchange for its immunity status.
“But the challengers’ concerns are perhaps rooted more in the perception that Allergan violated the spirit of state sovereign immunity—which in the patent realm is usually thought of as protecting state-run research institutions such as state universities—than in the law itself,” he said.
Jonathan Stroud, chief patent counsel at Unified Patents, added that the strategy was “a risky move based on a nonprecedential board ruling that hasn’t yet been challenged at the Federal Circuit”.
He said that the tribe has effectively admitted it is a “straw man”—in a FAQ published by the tribe, it claimed that “its only role is to hold the patents, get assignments, and make sure of the patent’s status with the US Patent and Trademark Office”.
If Allergan is successful, Stroud expects non-practising entities to follow suit by transferring ownership of patents to other bodies which enjoy sovereign immunity.
What is clear is that the future of this strategy and its validity are uncertain.
A spokesperson for Allergan said: "This agreement allows Allergan to focus the defence of the Restasis patent family in the federal court system and avoid the double-jeopardy created by the IPR process."
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