Background

While companies come up with many creative ways to protect their intellectual property, Allergan’s assignment of its Restasis patents to the St. Regis Mohawk Tribe to circumvent the inter partes review (“IPR”) proceeding smelled fishy from the beginning.

Restasis is a successful drug for treating dry eyes. Mylan, a generic drug manufacturer, challenged the validity of the Restasis patents in the Patent Trial and Appeal Board (“PTAB”) through IPR proceedings. But in the fall of 2017, Allergan assigned its Restasis patents to the St. Regis Mohawk Tribe. The St. Regis Mohawk Tribe received about $14 million to license the patents back to Allergan, and it was eligible to receive $15 million in annual royalties. The St. Regis Mohawk Tribe then attempted to intervene in the IPR proceeding and filed a motion to terminate the proceeding based on tribal immunity. There was a lot of public outcry, and Congress initiated an inquiry as to whether this transaction was a pretext to stifle competition across the pharmaceutical industry.

Rulings

On Feb. 23, the PTAB dismissed the motion to terminate IPR trials, holding that tribal immunity does not apply to IPR. The PTAB explained that the Supreme Court has stated the immunity possessed by Native American tribes is not similar to that enjoyed by the federal government or the states. Mylan Pharmaceuticals Inc. v. Saint Regis Mohawk Tribe, Case IPR2016-01127, Paper 130, p. 9 (PTAB Feb. 23, 2018). Id. As such, courts have not always granted the state sovereign immunity in the context of tribal immunity. Further, in the IPR context, the PTAB noted that Congress enacted a generally applicable statute providing that any patent (regardless of ownership) is subject to the conditions and requirements of the Patent Act. 35 U.S.C. § 101. Id. at p. 11.

Generic drug manufacturers, including Mylan, had also challenged the validity of the Restasis patents in the United States District Court for the Eastern District of Texas. On Oct. 16, 2017, Judge Bryson of the Court of Appeals for the Federal Circuit, sitting by designation, wrote a blistering 135-page opinion finding the Restasis patents invalid. In a separate order, he addressed the issue of sovereign immunity stating the “[c]ourt has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed.” Allergan v. Teva, Case No. 2:15-cv-1455, at 4 (E.D. Tx Oct. 16, 2017).

What this ruling means to your business

The PTAB’s decision that tribal immunity did not apply to IPR proceedings is another major setback to this strategy employed by Allergan. In an earlier decision, the PTAB held that states could also lose their sovereign immunity from IPR proceedings when they asserted the challenged patent in a federal court. According to the PTAB, it would be unfair to allow a sovereign entity like the state to avail itself of the federal government’s authority by filing a patent infringement action in federal court but then selectively invoking its sovereign immunity to ensure that a defendant is barred from an inter partes review for the same patents in a different branch of that same federal government. Ericsson Inc. v. Regents of the University of Minnesota, Case IPR2017-01186, paper 14 (PTAB Dec 19, 2017). The PTAB has now extended this analogy to the Native American tribe in the present case. The Restasis IPR decision is on appeal with the Federal Circuit.

While there are many creative ways to protect intellectual property, for now, the door seems to have closed on a strategy of assigning one’s patents to a tribal government to circumvent the IPR proceeding.