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September 12, 2017

Why one drugmaker just transferred its patents to an Indian tribe

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Drugmaker Allergan on Friday announced that it had transferred patents for its best-selling eye drug Restasis to the Saint Regis Mohawk Tribe—a move that some legal experts say could give pharmaceutical companies a new avenue to block patent disputes from generic drug companies.

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The drug is the company's second-biggest seller after Botox, bringing in $336.4 million the second quarter of 2017.

Drug's patent has faced legal challenges

Several generic drugmakers—Akorn, Mylan, and Teva Pharmaceutical—have sought to invalidate Allergan's patents for Restasis through the U.S. Patent and Trademark Office's inter partes review process (IPR). IPR was created about six years ago as a faster, low-cost alternative to determining patent validity through the federal courts. The process has its critics, including some pharmaceutical companies, and the Supreme Court is considering the constitutionality of the process in a separate case.

Allergan has argued in federal court in Texas that the six patents for Restasis should not expire until 2024. According to the Wall Street Journal, the generic rivals argue Allergan should not have been granted the patents and should be ruled invalid. The U.S. District Court in Texas heard that case but has not yet issued a ruling.

The deal

Dale White, general counsel for the tribe, said the tribe has entered into an agreement with the law firm Shore Chan DePumpo to review companies and patents before directing them to the tribe. The firm presented the Allergan deal to the tribe.

Under the arrangement, Allergan will pay the tribe $13.75 million, and the tribe will claim sovereign immunity as grounds to dismiss the IPR challenge. The tribe will lease the patent to Allergan and receive $15 million in annual royalties until the patents expire or are no longer valid.

White said the tribe would use the money address to diversify revenue beyond its casino and address "unmet needs," in areas such as education, health care, and housing.

The deal will not affect the case in the U.S. District Court in Texas.

Allergan CEO Brent Saunders said, the company made the move to "make sure that we can 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.

According to the Journal, there is legal precedent for claiming sovereign immunity in IPR cases. Earlier this year, the University of Florida successfully argued that a university-owned patent could not be challenged because it is a state institution and as such as should have sovereign immunity.

In regards to the Allergan deal and the tribes request that IPR dismiss the patent challenges, White said, "Indian tribes have sovereignty that is stronger than states," adding, "We feel that we have an extremely strong case."


Jacob Sherkow, an associate professor at New York Law School's Innovation Center for Law and Technology, said, "Barring some radical change in the law, it looks like Allergan just checkmated everybody."

Separately, Michael Carrier, a professor at Rutgers Law School who studies patent law, called the announcement "concerning," noting that the tribe was not involved in the drug's development. He added, "Challenges at the patent office play a crucial role in overturning invalid patents, and that role could be undermined by agreements like this" (Rockoff, Wall Street Journal, 9/8; Thomas, New York Times, 9/8).

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