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Federal Judge and U.S. Senators Weigh in as PTAB Considers Tribal Sovereign Immunity Defense in IPR Proceeding

Senior U.S. Circuit Judge William Bryson ruled on Monday that all the asserted claims in the six Restasis patents that Allergan PLC (“Allergan”) accused generic-drug manufacturers of infringing were invalid for obviousness.[i] Last month, Allergan transferred the patents for this dry eye drug to the Saint Regis Mohawk Tribe (“Tribe”) in an endeavor to use the Tribe’s sovereign immunity to shield the patents from inter partes review (“IPR”) before the Patent Trial and Appeal Board (“PTAB” or “Board”). Based on the prior art, the evidence of unexpected results, the evidence of objective considerations, and the motivation to combine the prior art references, the court concluded that the defendants in the case had satisfied their burden of showing the asserted Restasis claims would have been obvious.

In a separate order Monday morning, Judge Bryson granted Allergan’s motion to add the Saint Regis Mohawk Tribe as a co-plaintiff to ensure that any judgment in the case would not be subject to a challenge based on the omission of a necessary party, leaving the question of the validity of the assignment of the patent rights from Allergan to the Tribe to be decided in the IPR proceedings.[ii] However, he noted that he had “serious concerns” about the assignment.

“[I]t is clear that Allergan’s motivation for the assignment was to attempt to avoid the IPR proceedings that are currently pending in the PTO by invoking the Tribe’s sovereign immunity as a bar to those proceedings.” If successful, Judge Bryson noted, Allergan’s tactic “could spell the end of the [Patent Office’s] IPR program, which was a central component of the America Invents Act of 2011.”

Judge Bryson is not the only person worried over the tactic employed by Allergan; the assignment has also raised concerns on Capitol Hill. In a letter to the Senate Judiciary Committee, Sens. Maggie Hassan (D-New Hampshire), Sherrod Brown (D-Ohio), Bob Casey (D-Pennsylvania), and Richard Blumenthal (D-Connecticut) called Allergan’s deal “a blatantly anti-competitive attempt to shield its patents from review and keep drug prices high.”[iii] The letter noted that the Board has considered sovereign immunity as an affirmative defense to IPR review in recent PTAB decisions. The senators expressed concern that deals of this type exploit the law and undermine IPR review of patents.

“Allergan’s actions directly circumvent the IPR process,” wrote the senators. “We are deeply concerned with the numerous patent law and anti-competitive implications of Allergan’s deal …. Companies should not be allowed to pay States and Tribes simply to invoke their sovereign immunity.”

The Tribe recently wrote a letter attempting to clarify misperceptions in the media and in the senators’ letter regarding the Restasis deal with Allergan.[iv] Among the various considerations put forth, the Tribe argued that the current IPR system is not working with respect to pharmaceutical patents.

“IPR proceedings were intended to be a cheaper and quicker alternative to federal court over frivolous patent claims,” stated the Tribe. “For Orange Book-listed patent owners, IPR proceedings allow repetitive attacks on patents, lack finality and due process, and use legal standards that are systematically unfavorable to patentees.”

The Tribe noted that the Supreme Court is set to review the constitutionality of IPR proceedings in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, and that “consideration of important questions surrounding the Hatch Waxman Act, the America Invents Act and the intersection of sovereign immunity should benefit from the Supreme Court’s guidance on this issue.”

The PTAB is still considering the Tribe’s motion to dismiss the IPR proceedings based on sovereign immunity. Without waiting to see how the Board rules on the issue of tribal sovereign immunity, Sen. Claire McCaskill (D-Missouri) has introduced a bill that would prevent Indian tribes from asserting sovereign immunity as a defense in IPR proceedings.[v] “This is one of the most brazen and absurd loopholes I’ve ever seen, and it should be illegal,” said Sen. McCaskill in a statement to the Pharmaceutical Research and Manufacturers of America, a pharmaceutical lobby group.[vi]

Although the PTAB has ruled previously that state sovereign immunity applies to IPR proceedings, the Tribe is the first to argue tribal sovereign immunity as a defense. The bill has generated some controversy, as it would only abrogate tribal sovereign immunity in IPR proceedings, while allowing state universities to continue asserting sovereign immunity as a defense.

It is unclear how the PTAB will rule on the issue of tribal sovereign immunity and whether Judge Bryson’s and the senators’ comments will have any effect on the decision. In addition to the IPR proceeding, patent owners thinking of making similar deals with Indian tribes should also keep an eye on Sen.McCaskill’s bill.

 

[i] Allergan, Inc., v. Teva Pharmaceuticals USA, Inc., No. 2:15-CV-1455-WCB (E.D. Tex. Oct. 16, 2017).

[ii] Allergan, Inc., v. Teva Pharmaceuticals USA, Inc., No. 2:15-CV-1455-WCB, 2017 WL 4619790 (E.D. Tex. Oct. 16, 2017).

[iii] https://www.hassan.senate.gov/imo/media/doc/170927.%20Grassley%20Feinstein%20Restasis%20Letter%20FINAL%20SIGNED.PDF

[iv] https://www.srmt-nsn.gov/_uploads/site_files/2017-SRMT-Ltr-to-Grassley-Feinstein-Judiciary.pdf

[v] S. 1948, 115th Cong. § 1 (2017) (available at https://www.congress.gov/115/bills/s1948/BILLS-115s1948is.pdf).

[vi] https://www.mccaskill.senate.gov/media-center/news-releases/mccaskill-to-phrma-are-you-comfortable-with-allergans-action-with-saint-regis-mohawk-tribe