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Patents and IP

Allergan Brings the Roof Down On Its Head

In case you missed it, Allergan’s Restasis patent fight took a sudden turn yesterday, when federal judge William Bryson ruled in Texas to invalidate six of the company’s patents. That will not come as welcome news to either Allergan nor to the St. Regis Mohawk Nation, to whom the company (in)famously transferred those patent rights. Update: the case is indeed in a Texas district, but Judge Bryson is actually designated from the Court of Appeals for the Federal Circuit to handle it. Reading his opinion, I was very impressed with its detailed handling of intellectual property law, and a CAFC judge is where you would go for that!

The patent dispute itself deals largely with whether there is a real difference between a particular formulation of cyclosporin, castor oil, and emulsifying agents and the range of possible formulations from Allergan’s initial patent filings. One of Allergan’s witnesses testified that the efficacy of a particular 0.05% formulation (Restasis itself) was surprising and unexpected, which those of you wise in the patent art will recognize as the jungle call of Non-obviousness. This contention had been a key part of the prosecution of some of Allergan’s later patent filings, which otherwise would have run into problems due to their own prior art (they actually persuaded the patent examiner to reverse course).

The case itself was Allergan suing four generic companies, claiming that they were violating the Hatch-Waxman act by infringing those Allergan patents, and the generic folks claiming that the patents were invalid from the start – not only was the particular formulation obvious from the earlier patents, but the clinical results on various combinations were in the public record by the time Allergan filed on the specific one. The judge found that while Allergan made its case for infringement, they did not do so for nonobviousness, and that the patents in question are invalid from the start. The opinion is 135 pages long, and most of it is a painstaking and ferociously detailed account of the issues above and the relative merits of what was presented at trial. If you feel a need to dig into the fine details of this method of overturning a patent, close study of this document will give you a concentrated course in it with copious case citations, but very few people without law degrees will be that motivated.

To make matters worse, the judge added about ten pages of commentary in a separate opinion about that exact deal, calling its legality into question and basically laying out the strategies that could best be used to challenge it in court. (This came up to make sure that the decision could not be challenged on the basis that the relevant parties had not been included). My favorite line from this opinion is: “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“. I think that’s exactly the situation. The question is whether sovereign immunity can be commodified in this way, and it looks like the answer is going to be “No, now that you bring it up, it can’t”. Says Judge Bryson:

“. . .sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities. It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit.”

Allergan is naturally going to appeal this decision, which would take things to the Court of Appeals for the Federal Circuit, and it’ll be interesting to see how far this case gets. It has the potential to end up before the Supreme Court, if someone wants to try to fight it that far, because it raises some fairly high-level issues – not least, as Judge Bryson noted, the potential to undermine the entire patent review system established by Congress in 2012. Inter partes review may or may not be a good idea in its present form, but it’s safe to say that (as I put it when this deal happened) the plan was not that patents would be so reviewed unless you paid off some Indian tribe, in which case you could flip the PTO the bird and walk off laughing.

The judge also got off a good line about what seems so wrong about this whole deal. Allergan, he said, is trying to take advantage of “the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits“. Exactly. Heads I win, tails you lose. And this sort of egregrious loophole maneuver has given the drug industry yet another self-inflicted black eye, and probably to no purpose whatsoever. Smooth move, guys. How much did you pay for the advice to try this one out, exactly?

17 comments on “Allergan Brings the Roof Down On Its Head”

  1. SirWired says:

    I am encouraged by the fact that the courts can recognize bizarre dodges of no economic sense that attempt to circumvent IP law.

    I’m reminded of the place that, in order to avoid fees for streaming movies to clients, set up a room full of hundreds of DVD players hooked to the internet, with physical retail copies of the disks spinning in each one.

    And another outfit that didn’t want to be classified as a cable company, so they set up a room full of tiny TV antennas and claimed they were just like thousands of VCRs hooked to a whole forest of rabbit ears.

    In both cases, there was no convincing explanation as to why they would do things this way other than to do an end-run around IP law.

    There are a lot of things wrong with IP laws, (I for one, am surprised that a judge in the Eastern District of Texas actually ruled against a patent-holder; it’s a notoriously patent-friendly district, which is why it accounts for so many patent cases.)

    1. Derek Lowe says:

      See above – it’s not a judge from that district, as it turns out, but one from the CAFC.

  2. anon says:

    This judge deserves a raise.

  3. Dr. Patent J.D., Ph.D. says:

    Judge Bryson is not a judge from the Eastern District of Texas. He’s a judge on the Court of Appeals for the Federal Circuit (yes, the court that hears appeals in patent cases). He was “sititng by designation” in this case. Some CAFC judges do this from time to time so that they can get a better idea for how patent cases are litigated and see what the real world effect of their rulings is. If (when) Allergan appeals, Judge Bryson will not take any part in the appeal. (And, yes, the CAFC has, on occasion, reversed one of its members who was sitting by designation.)

    1. Derek Lowe says:

      Ah, that makes sense. I’ve updated the post. Thanks!

  4. MoMo says:

    It’s the tribe that is going to suffer the most. Spending valuable time, effort and money instead of helping their people.

    Although I can’t wait for the new sequel movie “Dances with Allergan Executives” to come out.

    In the end everyone loses, as in the original.
    Except the lawyers.

    1. Kazoo Chemist says:

      Don’t lose a lot of sleep worrying about the poor tribe helping their people. The casino and other enterprises will endure this blip on the financial ledger.

  5. Simon says:

    interesting case

  6. Anonymous Researcher snaw says:

    Clearly the Judge in this case was not born yesterday. And he has a gift for pithy prose in among the detailed legal analysis.

    “The Court does not credit Dr. Perry’s testimony on that point”
    Nicely-understated sentence from the patent ruling you linked to in your post about Allergan. In plain English, the Judge here delivers both Allergan and one of its scientists a sharp slap to the wrist (with the implication that he is being nice not to also hit that scientist over the head with a Perjury charge).

    The other decision also has some nice lines such as:
    “But sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities. It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit.”

    1. Janex says:

      We the people are rather lucky that this particular judge was hearing the case.

      Appeals courts are the feeders for the Supreme Court. This judge seems to have potential and I would love to see a judge who has his in depth understanding of patent law and other similar laws on the supreme court.

      1. Duncan McLean says:

        That would be ideal, but don’t hold your breath as long as the greedy Republi-cons get to choose our Supreme Court judges!

        1. Scott says:

          I’m not sure that the Democrats would be any better about nominating a competent SCOTUS judge. Even the Democrats liked Trump’s SCOTUS pick Gorsuch, for goodness sake.

  7. Jon says:

    I’m still bothered by this.

    I know anyone can own a US patent. Anyone can own an EU patent. But if you want to enforce your patent in the US, you had better have a US patent. If you want to enforce your patent in the EU, you had better have an EU patent.

    Given that a patent, awarded under sovereign rule of law (A) is transferred to a sovereign government (B) in an attempt to make it immune from the rule of law of (A) then that patent is no longer under the rules of (A). And therefore, in the land in which (A) rules, the patent is not enforceable. It’s not enforceable anywhere that isn’t (B), because it’s not an (A) rule patent anymore.

    Basically, what I’m trying to say here is that if Native American tribes (and state universities, incidentally) claim special sovereign rights for their patents, then those patents are only enforceable upon their own domain. All the rest of the world can (and probably will) just laugh at them.


    1. tangent says:

      Well, the claim is that it’s an (A)-system patent that happens to be owned by an entity that also may administer its own patent system. Or may not, does it matter to your argument if the Mohawks don’t have a patent system?

      You’re saying they flat-out can’t hold a U.S. patent, correct? And Luxembourg can’t either. Whether they buy it from a shady pharma, or whether they fund the research by Mohawk / Luxembourgois employees. That seems a bit strong.

      1. Lloyd T J Evans says:

        I don’t think the argument here is that the Mohawk tribe can’t (or shouldn’t be able to) own a patent, since legally, they clearly can. The real argument is that if the patent is owned by the Mohawk sovereign nation (aka tribe or whatever they want to call themselves), then said patent should not be enforceable anywhere outside of their sovereign influence.

        It’s like Allergan obtaining a patent for a drug in the EU and then trying to claim that this automatically gives them an equal patent in the USA. Which of course it doesn’t – if they want to enforce a patent in the USA, they have to actually apply for and obtain a patent in the USA. Patents obtained or owned elsewhere don’t count.

  8. Barry says:

    “This week, Senators Tom Cotton, R-Arkansas, and Claire McCaskill, D-Missouri, introduced the Preserving Access to Cost-Effective Drugs or PACED Act in response to Allergan’s recent transfer of its patents covering its dry-eye drug, Restasis, to the Saint Regis Mohawk Tribe in exchange for the Tribe’s invocation of sovereign immunity against inter partes review.

    While the US Patent Trial and Appeal Board (PTAB) ultimately decided that the Tribe could not claim sovereign immunity in this case, Allergan’s unusual gambit to protect its market share—and the Tribe’s motion to seek discovery into the internal workings of the PTAB itself—sparked ire among lawmakers and other pharmaceutical industry stakeholders who feared that other drug makers would follow in Allergan’s footsteps, essentially insulating their high-earning innovator products from competition from generic or biosimilar drugs.

    According to Cotton, “It’s far past time that we crack down on patent abuse, which is raising costs for our seniors,” and the newly introduced bill “will make sure unscrupulous patent holders can’t game the system and block their competitors from entering the market. That’ll go a long way to help seniors get the drugs they need.”

    “We watched a company brazenly try to exploit a potential legal loophole to game the system in an effort to protect their bottom line,” added McCaskill. “That should be illegal, and our bipartisan bill would make it so by ending this astounding assertion of sovereign immunity to avoid patent review, before any other companies follow suit.”

    The bipartisan bill would amend title 35 of the United States Code to provide that a patent owner may not assert sovereign immunity as a defense in actions before the United States Patent and Trademark Office. In cases in which foreign states are the owners of patents, the PTAB will make the determination of whether the owner is immune from the PTAB’s jurisdiction. Under the proposed law, in any action involving a patent claim that is otherwise within the jurisdiction of the United States, a tribe may not assert sovereign immunity as a defense.

    The bill has support of organizations including America’s Health Insurance Plans, the Association for Accessible Medicines, Patients for Affordable Drugs Now, and the BlueCross BlueShield Association.”

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