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July 26, 2018

Can drug companies dodge patent reviews by transferring patents to Native American tribes? An appeals court says no.

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    A federal appeals court on Friday ruled that the U.S. Patent Trial and Appeal Board (PTAB) has the authority to determine the validity of patents Allergan transferred to the Saint Regis Mohawk Tribe.

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    Background: Allergan transfers Restasis patent to Saint Regis Mohawk Tribe

    Several generic drugmakers—Akorn, Mylan, and Teva Pharmaceuticals—have sought to invalidate Allergan's patents for Restasis through the U.S. Patent and Trademark Office's inter partes review (IPR) process, which runs through the PTAB. IPR was created about six years ago as a faster, lower-cost alternative to determining patent validity through the federal courts.

    However, Allergan in September 2017 announced the company had transferred its patents for Restasis to the Saint Regis Mohawk Tribe. Under the arrangement, Allergan agreed to pay the tribe $13.75 million, and the tribe agreed to claim sovereign immunity as grounds to dismiss the IPR challenges—a move that some legal experts said could give pharmaceutical companies a new avenue to block patent disputes from generic drug companies.

    Allergan CEO Brent Saunders at the time said the company made the move to "make sure that [it could] defend these patents in only one forum." He added, "We are completely open to having these patents adjudicated in the federal courts. But we don't think going through that we should be subject to a second review" through IPR.

    There was legal precedent for claiming sovereign immunity in IPR cases. In 2017, the University of Florida successfully argued that a university-owned patent could not be challenged because the university is a state institution and as such should have sovereign immunity.

    Dale White, general counsel for the Saint Regis Mohawk Tribe, at the time of Allergan's announcement said, "Indian tribes have sovereignty that is stronger than states," adding, "We feel that we have an extremely strong case."

    However, PTAB in February ruled that it had the authority to determine the validity of the transferred patents and denied the Tribe's motion to dismiss Mylan's IPR challenge. PTAB ruled that tribal immunity does not apply to IPR cases and that Allergan retains an ownership interest in the IPR case. As such, PTAB said the IPR challenge could continue without the tribe's participation in the case.

    Allergan appealed the ruling to the U.S. Court of Appeals for the Federal Circuit.

    Appeals court upholds PTAB's authority to review transferred patents

    A three-judge panel for the U.S. Court of Appeals for the Federal Circuit upheld PTAB's authority to review the transferred patents. The panel wrote that PTAB's 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 judges added that PTAB "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."


    According to Bloomberg, the ruling means PTAB can continue reviewing challenges brought against the transferred patents.

    Allergan spokesperson Amy Rose said the company does not comment on ongoing litigation, Bloomberg reports.

    Brendan White, a spokesperson for the Saint Regis Mohawk Tribe, said the tribe "fundamentally disagree[s] that this is an action of the United States." He said, "The Tribe is reviewing the decision and consulting with our attorneys" (Wolfe, Reuters, 7/20; Decker, Bloomberg, 7/20).

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