“The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed,” Judge Bryson wrote.
Yesterday, in a 135-page opinion, Judge William C. Bryson of the United States Federal District Court for the Eastern District of Texas found that Allergan’s RESTASIS patents were infringed by Teva Pharmaceuticals USA, but that Teva had demonstrated invalidity of those patents by clear and convincing evidence.
“We are disappointed by the Federal District Court’s decision on the RESTASIS® patents. We are carefully reviewing the decision and are considering all options,” said Robert D. Bailey, Chief Legal Officer for Allergan. “Allergan remains committed to vigorously defending the intellectual property of our products, which allows us to continue to invest in developing and bringing forward new medicines for millions of patients.”
The patents include United States Patent Nos. 8,629,111; 8,648,048; 8,685,930 and 9,248,191. These patents, along with United States Patent Nos. 8,633,162 and 8,642,556, are listed in the Orange Book for RESTASIS® and expire on August 27, 2024.
In a separate Order dealing with the issue of whether the Saint Regis Mohawk Tribe should be joined as co-plaintiff, Judge Bryson acknowledged that “the sovereign immunity issue is not presented in this case,” but nevertheless went to great lengths in dicta to express his opinion on the matter anyway.
“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. But when faced with the possibility that the PTO would determine that those patents should not have been issued, Allergan has sought to prevent the PTO from reconsidering its original issuance decision. 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.
If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice. In short, Allergan’s tactic, if successful, could spell the end of the PTO’s IPR program, which was a central component of the America Invents Act of 2011.”
While Judge Bryson unnecessarily opined sovereign immunity, he did acknowledge that the validity of the assignment and exclusive license transaction “may be dispositive in the IPR proceedings.” This admission by Bryson is warranted because there was consideration given by the Saint Regis Mohawk Tribe in exchange for the RESTASIS patents.
Indeed, one of the questions raised regarding whether the Allergan transaction with the Saint Regis Mohawk Tribe was a legitimate contractual transaction related to the issue of consideration. Every contract requires consideration; otherwise there is nothing more than a gift — or perhaps a sham transaction. According to the evidence submitted by Allergan to the Eastern District of Texas, “the consideration for the assignment of the patents to the Tribe was the Tribe’s promise not to waive its sovereign immunity with respect to any IPR or other administrative action in the PTO related to the patents.”
Nevertheless, Judge Bryson concluded: “[T]he assignment does not operate as a bar to this Court’s continued exercise of its jurisdiction over this matter.”
Indeed, neither Allergan nor the Saint Regis Mohawk Tribe asserted sovereign immunity in the Eastern District, which was in keeping with their stated intentions as discussed at the time of the transaction. Therefore, it was interesting (to say the least) for Judge Bryson to conclude sovereign immunity did not bar his consideration of the matter when that defense had not been raised.
Without saying directly that he viewed the assignment to the Saint Regis Mohawk Tribe to be valid, Judge Bryson explained that he would, nevertheless, join the Tribe as co-plaintiff. “[I]n order to ensure that any judgment entered in this case will be protected against challenge on the ground that the proper parties were not all joined as plaintiffs, the Court hereby orders the joinder of the Tribe as a co-plaintiff,” Bryson wrote.
While it is clear that Judge Bryson does not think much of the tactic used by Allergan to avoid adjudication of the RESTASIS patents at the Patent Trial and Appeal Board, the evidence submitted to the Court regarding consideration for the transaction should make it relatively clear that sovereign immunity will be successful at the PTAB; that is of course if the PTAB follows the law. Indeed, Bryson no doubt wanted to find the transaction a sham, but did not and at the end of the day joined the Saint Regis Mohawk Tribe as co-plaintiffs because they are the owners of the RESTASIS patents.
To date, none of the proposed generic versions of RESTASIS have received approval and none of these products would be able to launch in the market.
UPDATED: Tuesday, October 17, 2017 at 11:30am to add additional analysis, specifically adding the penultimate paragraph.