Markman Advisors
Patent Valuation, Monetization and Investments

Blog

Intellectual Property

Notable points from the Tribe's Reply Brief in Restasis® briefing before the PTAB.

 

Zachary Silbersher

Markman Advisors, LLC

Allergan’s attempt to evade the pending IPRs against its Restasis® patents should be resolved any day now.  The Tribe’s motion to dismiss was fully briefed as of October 20, 2017.  In the meantime, on October 16, 2017, Judge Bryson issued a decision in the parallel District Court action that invalidated all of the patents.  That essentially renders the IPRs a side-show for Restasis®’s longevity. 

While the IPRs might be a moot issue for Restasis®, the Tribe’s pending motion to dismiss the IPRs is far from irrelevant for the broader patent community.  If successful, Allergan’s transaction with the Tribe will undoubtedly be disruptive to the way patents both within and outside of the pharma space are litigated.  To that end, the PTAB’s upcoming decision is highly anticipated.  On October 20, 2017, the Tribe filed its Reply brief, and this post covers a few notable points from that brief.

Taking a step back, the District Court in Texas granted Allergan’s motion to join the Tribe as a co-plaintiff.  In that opinion, Judge Bryson also took the opportunity to question the propriety of the Allergan’s transaction with the Tribe.  He observed that tribal immunity exists because there are “sound reasons that sovereigns should be protected from at least some kinds of lawsuits,” but that does not mean sovereign immunity should be treated as a “monetizeable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities.”  (Case No. 2:15-cv-1455-WCB, Dkt. 522 at 5). 

Judge Bryson’s point, simply, is that an agreement to essentially “rent” tribal immunity is potentially invalid as against public policy.  Not all contracts are enforceable, even between consenting parties.  A contract to sell your limbs will not stand up in court.  Judge Bryson suggested that agreements to rent tribal immunity may be equally null and void.

Judge Bryson also observed that, even if the transaction was legitimate, it is questionable whether the Tribe retained enough rights in the patents to be the actual owner.  We were previously quoted on this issue here and here.  Judge Bryson observed, for instance, that Allergan retained all rights to use FDA-uses of the patents.  While the Tribe emphasized that it held onto other rights, such as the right to use the patents for other non-FDA uses, Judge Bryson observed it is “questionable whether those rights have any practical value.”  (Allergan v. Teva, Case No. 2:15-cv-1455-WCB (E.D. Tex.) Dkt. 522 at 7). 

In its Reply brief, the Tribe made a stab at arguing that those “other” rights do, in fact, have practical value.  It pointed to a recent press release by Imprimis Pharmaceuticals announcing plans to launch a compounded cyclosporine product that will compete with Restasis®.  The Tribe claimed that the product is purportedly non-FDA approved, and the Tribe has the right to sue Imprimis for infringement of the Restasis patents.  (PTAB Case IPR2016-01127, Paper 93 at 2).

The Imprimis press release is undoubtedly noteworthy, and responds directly to the concern articulated by Judge Bryson that the Tribe’s rights in the patents may have no practical value.  But the Tribe offered no suggestion why the Restasis patents would actually be infringed by Imprimis’ new product, or that there is reasonable, Rule 11 basis to conclude that they might be.  Without putting any meat on the bone whether the Tribe has a good faith basis to assert infringement of the patents, then it is just hand waving.  Theoretical lawsuits that may or may not exist just underscores Judge Bryson’s concern that the Tribe’s rights in the patents have limited value.

Further, Imprimis’s press release indicates that its formulation will be made “from FDA-approved drug components and compounded in FDA-inspected facilities.”  Given that the Tribe has claimed that Allergan’s exclusive license to the Restasis patents is limited to an “FDA-approved” field of use, would Imprimis’s drug infringe upon that field of use?  (PTAB Case IPR2016-01127, Paper 81 at 22).  Weighed against this is Mylan’s contention that Allergan has stated that the claimed uses of the patents are all “on-label.”  (Id. Paper 87 at 6).  As we previously discussed, this tension illustrates why these types of deals will never work if the brand pharmaceutical company wants to gain the benefit of immunity, without relinquishing any substantial rights in the patents.

Apart from this, the other notable aspect of the Tribe’s Reply was the Tribe’s argument that IPRs are just bad.  The Tribe reiterates a litany of talking points among those opposed to IPRs, including the supposed “double jeopardy” threat for patent owners, an alleged decline in the value of U.S. patents, the billions in purported losses for IP-industries, the drop in the US patent system worldwide, as well as commentary from the Federal Circuit that IPRs are “patent death squads.”  In his defense of Allergan’s transaction with the Tribe in The Wall Street Journal, Brent Saunders, CEO of Allergan, focused essentially on the same arguments. 

The problem with these arguments is that even if they are all true (which is questionable,) they are besides the point.  The issue at stake is whether renting sovereign immunity to evade having to defend the validity of your patent is either permissible or should be permissible.  Indeed, Judge Bryson admonished Allergan for being “conspicuously silent about the broader consequences of the course it has chosen.”  (Allegan v. Teva, Dkt. 522 at 4-5).  Mr. Saunders op-ed in The Wall Street Journal is equally silent. 

What are those consequences?  If immunity can be rented, it would not only impact the pharmaceutical industry, or the patent community, it could reach into the entire civil judicial system.  All civil liability could theoretically be avoided by quickly purchasing immunity.  Indeed, Allergan purchased immunity in the eleventh hour of the IPRs, not long before the case even commenced.  If immunity could be purchased whenever, and Tribes compete with each other for supplying immunity, then civil liability would not be measured against actual exposure, or even the cost of litigation, but would rather boil down to the market price for immunity.  That would undermine a reliable judicial system that enforces contracts and recognizes liability in tort.  The consequences would be moral hazards, both inside and outside of business.  While it might be alarmist to suggest the civil judicial system would collapse, even the impact of immunity on patent litigation itself is worth considering before blessing such a disruptive strategy.

The Tribe’s Reply brief suggests that it entered into a transaction with Allergan because it “seeks to strengthen the U.S. patent system.”  (PTAB Case IPR2016-01127, Paper 93 at 13).  While we can debate whether that is a noble cause, there are established pathways for effecting a change in the law.  But neither Allergan nor the Tribe are purporting to actually try to change the law.  They are simply seeking to evade it.  And their chosen strategy could have significant ramifications far outside of IPRs, patents and pharma.  Ramifications for which they have now been called out for being conspicuously silent on.  That silence is noteable in itself.