By Kevin E. Noonan --
In something of an anticlimax, Federal Circuit Judge William Bryson, sitting by designation on the bench of the U.S. District Court for the Eastern District of Texas, granted Allergan's motion to join the St. Regis Mohawk Nation to ANDA litigation as a necessary party, and then found claims of the Orange Book-listed patents asserted in ANDA litigation to be invalid. This decision renders moot the inter partes review proceedings before the Patent Trial and Appeal Board (insofar as the claims at issue before the District Court and the Board were the same). And, of course, it renders a nullity the basis for Allergan's assignment of these patents to the Nation that raised considerable dudgeon amongst Allergan's generic competitors, members of Congress, and some commentators on pharmaceutical patents and sovereign immunity.
Judge Bryson's decision on Allergan's motion was simple:
Accordingly, in order to ensure that any judgment entered in this case will be protected against challenge on the ground that the proper parties were not all joined as plaintiffs, the Court hereby orders the joinder of the Tribe as a co-plaintiff in this action under Federal Rule of Civil Procedure 25(c). In so doing, the Court does not hold that the assignment of the patent rights to the Tribe is valid, but instead proceeds on the ground that the assignment may at some point be held valid, and that joining the Tribe as a party in this action is necessary to ensure that the judgment in this case is not rendered invalid because of the absence of a necessary party.
And entered for solid jurisprudential reasons the Court was at pains to ensure were not misinterpreted as approval:
While it is important to ensure that any judgment in this case will not be subject to challenge based on the omission of a necessary party, the Court is not required to decide whether the assignment of the patent rights from Allergan to the Tribe was valid in order to resolve the question whether to add the Tribe as a co-plaintiff. Instead, the Court will adopt the safer course of joining the Tribe as a co-plaintiff, while leaving the question of the validity of the assignment to be decided in the IPR proceedings, where it is directly presented.
The Order, however, was also loaded with the Court's dim view of Allergan's strategic assignment of its patent rights (which Allergan never attempted to conceal). Nevertheless, the Court made plain its understanding, saying that "it 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" and that "[t]he Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed." This is because the arrangement between Allergan and the Tribe was not a conventional assignment in the Court's view, but rather an agreement permitting Allergan to "rent" the Tribe's sovereign immunity right to be immune from PTAB proceedings. The Court's view of the inequities of this arrangement stems from Allergan's having availed itself of the benefits of the patent system and now seeking "the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents."
Calling this a "ploy," the Court understands that, should this arrangement be countenanced it would permit "any patentee facing IPR proceedings [to] be able to defeat those proceedings by employing the same artifice." And the Court believes that:
[S]overeign 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.
Judge Bryson also suggested that the contract between Allergan and the Tribe should be stricken as being against public policy, a conclusion he does not reach (if only because he has no basis to do so on the issue before him) (although he does analogize the agreement to abusive tax shelters and sham payday loan agreements, citing People ex rel. Owen v. Miami Nation Enterprises, 386 P.3d 357 (Cal. 2016)).
With regard to whether the Tribe has retained sufficient rights to be a necessary party, the Court considered the question "a close one" because those retained rights are of questionable value. Also relevant to the Court's decision is that sovereign immunity does not apply to this ANDA litigation. See, Competitive Techs., Inc. v. Fujitsu Ltd., 374 F.3d 1098, 1102-03 (Fed. Cir. 2004); United States v. Oregon, 657 F.2d 1009, 1014-16 (9th Cir. 1981).
Ultimately, despite his misgivings, Judge Bryson found that the Tribe can be joined as an exercise of the Court's sound discretion without holding the assignment valid, and that defendants have not asserted and indeed would not be prejudiced by his doing so.
Turning to the Court's substantive decision, while finding that defendants' generic product would infringe the Orange Book-listed patents asserted by Allergan, the Court also found these patents to be invalid for obviousness. The primary reference relied upon by the Court, U.S. Patent No. 5,474,979, was Allergan's own predecessor patent that expired in 2014, according to the opinion. This patent specified a 0.1% cyclosporin A formulation, in contrast to the 0.05% formulations that were claimed in the patents-in-suit (which is the concentration of cyclosporine A in RESTASIS®). In a complicated prosecution history reviewed in the opinion, Allergan first conceded and then withdrew its concession that the RESTASIS® formulation would have been obvious over the '979 patent. These patents (U.S. Patent Nos. 8,629,111; 8,633,162; 8,642,556; 8,648,048; 8,685,930, and 9,248,191) were allowed only after applicants submitted evidence of unexpected results, commercial success, and long-felt need, as well as expert declarations supported by experimental evidence.
The Orange Book-listed patents-in-suit (the '111, 048, '930, and '119 patents; Allergan granted the ANDA defendants a covenant not to sue with regard to the '162 and '556 patents), were "intended to protect the Restasis composition and the method of using that composition in treating dry eye and KCS [keratoconjunctivitis sicca] after the expiration of the ['979] patent in 2014" according to the Court's opinion. Allergan asserted 13 of the 157 claims granted in its patents, which included Claims 1, 11, 13, 14, and 23 of the '048 patent; Claim 35 of the '390 patent; Claims 13, 16, 22, 26, and 27 of the '191 patent; and Claims 26 and 27 (which depend from claim 18) of the '111 patent, set forth herein as representative:
18. A topical ophthalmic emulsion for treating an eye of a human, the topical ophthalmic emulsion comprising: cyclosporin A in an amount of about 0.05% by weight; castor oil in an amount of about 1.25% by weight; polysorbate 80 in an amount of about 1.0% by weight; acrylate/C10-30 alkyl acrylate cross-polymer in an amount of about 0.05% by weight; glycerine in an amount of about 2.2% by weight; sodium hydroxide; and water; wherein cyclosporin A is the only peptide present in the topical ophthalmic emulsion.
26. The topical ophthalmic emulsion of claim 18, wherein the topical ophthalmic emulsion is therapeutically effective in treating keratoconjunctivitis sicca.
27. The topical ophthalmic emulsion of claim 18, wherein the topical ophthalmic emulsion is therapeutically effective in increasing tear production.
The issues at trial were obviousness over a combination of references including the '979 patent; anticipation by the '979 patent; obviousness-type double patenting; nonjoinder of inventorship; lack of an enabling disclosure; and non-infringement based on interpretation of the term "crosspolymer." The Court found that the claims were obvious in view of the disclosure of the '979 patent, that the objective indicia of nonobviousness did not rebut the obviousness determination, and that there was sufficient motivation to combine the asserted references to support its obviousness determination. The Court found no anticipation ("[t]hat argument is meritless") and also ruled against defendants on their inventorship, enablement, and obviousness-type double patenting contentions. The opinion, extending to 135 pages, was (not surprisingly) a thorough explication of the issues presented at trial and the court's application of the applicable law to the evidence the parties presented.
While it may be tempting to conclude that the Court's decision rendered futile Allergan's strategy involving assignment to the Mohawk Nation, it should be kept in mind that two of its patents may escape unscathed should the PTAB decide that sovereign immunity prevents inter partes review on those patents from proceeding. As for the other four patents, not all claims were asserted and would have remained at risk (from these defendants or any future ones) without the protections assignment (and the resulting sovereign immunity) is expected to provide. But these defendants can compete with Allergan (subject to the first filer's 180-day exclusivity as the only generic) immediately and the effects of this competition on the royalties the Nation can expect to garner is now much more uncertain than it has been. Whether the Mohawk Nation will benefit financially from assignment of these patents or whether its, and all other Native American tribes', sovereign immunity will be further eroded by Congress intent on reducing drug prices will be the ultimate measure of whether this arrangement was clever or foolhardy.