On Monday, September 11th, counsel representing multiple parties involved in an inter partes review (IPR) proceeding challenging patents covering the eye treatment Restasis marketed by multinational pharmaceutical company Allergan (NYSE:AGN) called in to a telephone hearing regarding the case at the Patent Trial and Appeal Board (PTAB). During the call, counsel representing the IPR petitioners challenging validity of the Restasis patents voiced its opposition to legal challenges posed by the recent sale of those patents to the St. Regis Mohawk Tribe, a sovereign nation which crosses the border between New York State and Canada.
Representing the St. Regis tribe was Michael Shore, partner at Shore Chan DePumpo LLP, who opened the call by informing the board that the tribe was seeking a stay on all IPR proceedings involving the Restasis patents they recently acquired from Allergan. The tribe is raising a sovereign immunity defense in the case as the tribe is a sovereign entity which is not amenable to a suit unless it consents or Congress abrogates its immunity. Shore argued that the sovereign immunity defense is based on binding Supreme Court precedent. “It would frankly be unprecedented for the board to deny the tribe the right to seek a dismissal before conducting the hearing on the merits,” Shore said.
Representing petitioner Mylan Pharmaceuticals was Richard Torczon, counsel at Wilson Sonsini Goodrich & Rosati, who voiced Mylan’s concerns over the patent sale and the tribe’s sovereign immunity defense. Torczon raised objection to the fact that Allergan didn’t pursue a meet and confer leading up to the call, arguing that the tribe has known about the issue since April. On seven occasions during the call, Torczon called the sale of the patents to the St. Regis tribe a “sham” transaction, arguing that the tribe didn’t purchase the patents but rather were paid to take them. Torczon drew parallels between the patent sale and racketeering cases in the context of lending fraud. “So facially this transaction is a sham. There’s no reason to believe that it will lead to any success,” he said.
Despite Mylan’s claims, sovereignty as a defense has been successful in overcoming IPR challenges instituted at the PTAB. A final written decision issued this January by a panel of administrative patent judges (APJs) found in favor of a sovereign immunity defense raised by the University of Florida Research Foundation under the 11th Amendment, finding that the amendment prevented Covidien as a private entity from pursuing federal claims against a state entity. The St. Regis tribe isn’t afforded 11th Amendment protections but the tribe has a similar sovereign immunity defense as the patent owner.
“Sovereignty is clearly a policy issue,” Torczon said during the hearing. “Destroying IPRs with sham transactions is a policy pattern.” Of course, Mylan is perfectly fine with any policy patterns which help its own cause, such as stacking the panel of APJs on a particular IPR trial in order to reach an outcome preferred by the director of the U.S Patent and Trademark Office. Mylan wanted to suggest that the PTAB expand the panel of APJs on the trial, despite the fact that the board has refused such expanded panel requests in the past:
“Mylan strongly suggests that if the board decides to authorize this motion that it do so in a manner that allows the director to play the director’s policy role and speak on how the director’s institution powers would be used in this context.”
Shore responded and pushed back on some of Torczon’s assertions, including the argument that the tribe had been contemplating the patent purchase since April. Shore noted that the tribe and Allergan didn’t talk to each other until August. “So this is not just something that anyone is sitting on their hands about at all,” Shore said. Although Shore acknowledged that petitioner’s counsel likely needed more time to get prepared on the tribal law issues but he maintained that tribal sovereign immunity only allowed an opposing party to make counterclaims for recoupment, and the tribe hasn’t filed an action against Mylan.
“I think that the more facts they have, I think their minds will be put at ease there’s no racketeering here or anything like that going on. And I understand it is a concern, but I think the more he knows, the more his mind will be put at ease this is a legitimate transaction.”
At the end of the call, the PTAB set an initial briefing schedule on the tribe’s sovereign immunity defense motion. The St. Regis tribe has a filing deadline of September 22nd with petitioners having until October 13th to file a 25-page response brief. The tribe will then have until October 20th to file a 15-page reply.