Allergan Fights Back, Files Complaint Against Venture Fund That Filed IPR Petition

By Donald Zuhn --

Last month, Allergan, Inc. and Allergan Sales, LLC filed suit against Ferrum Ferro Capital, LLC and Kevin Barnes ("FFC") in the U.S. District Court for the Central District of California, alleging that FFC attempted to extort Allergan by misusing the Inter Partes Review ("IPR") process established under the Leahy-Smith America Invents Act, and that FFC's misuse of the patent system constituted attempted civil extortion and malicious prosecution under California law and also violated California's Unfair Competition Law.  The dispute concerns an IPR petition that FFC filed on March 9, 2015 challenging the validity of Allergan's U.S. Patent No. 7,030,149.  In particular, FFC's IPR petition asserts that the '149 patent is obvious in view of four references.  The '149 patent is one of at least six patents protecting Allergan's COMBIGAN®, a combination of brimonidine and timolol for topical ophthalmic use in treating patients suffering from glaucoma and/or ocular hypertension.

In its complaint, Allergan notes that "[t]he development of COMBIGAN® required the investment of tens of millions of dollars by Allergan and thousands of hours in research and development."  Allergan also notes that it is the holder of an approved New Drug Application for brimonidine tartrate/timolol maleate ophthalmic solution 0.2%/0.5%, sold under the COMBIGAN® trademark, and that numerous generic companies had filed Abbreviated New Drug Applications seeking approval to market generic versions of COMBIGAN®.  In response, Allergan filed suit against the ANDA filers, eventually prevailing in the U.S. District Court for the Eastern District of Texas, which rejected the generic companies' validity challenge to the '149 patent (the generic companies had asserted that the '149 patent was obvious in view of the same four references FFC asserted in its IPR petition).  The Federal Circuit subsequently affirmed (see "Allergan, Inc. v. Sandoz Inc. (Fed. Cir. 2013)") and then denied a petition for rehearing and rehearing en banc.  The Supreme Court later denied certiorari.

Allergan's complaint alleges that FFC is a privately held venture fund having no principal place of business and maintaining a mail drop box in Wilmington, DE (the complaint includes a photo of the mail drop box location; at right).  The complaint also alleges that named Defendant Kevin Barnes is one of FFC's founders.

According to Allergan's complaint, FFC's website is "a shell, with no information available on it about any of FFC's supposed activities," and is almost identical to the website of another venture fund owned by Mr. Barnes, Hyacinth Sloop Capital, LLC.  The complaint alleges that FFC:

• "has no facilities in which to conduct research and development to create a generic formulation of Allergan's COMBIGAN®, or any other pharmaceutical drug";
• "has not financed any research and development activities to create a generic formulation of Allergan's COMBIGAN®, or any other pharmaceutical drug";
• "has hired no scientists or other personnel capable of performing any research and development activities to create a generic formulation of Allergan’s COMBIGAN®, or any other pharmaceutical drug"; and
• "has hired no regulatory or other personnel necessary to prepare, submit and prosecute an ANDA application for any generic drug with the FDA."

Allergan's complaint states that FFC sent a letter to Allergan on March 9, 2015 "falsely represent[ing] to Allergan that FFC was prepared to 'seek [Federal Food and Drug Administration ('FDA')] approval via a Paragraph III ANDA filing to produce and market a generic brimonidine tartrate/timolol maleate ophthalmic solution with [an unnamed] Contract Manufacturing Partner ('CMP'),'" which Allergan alleges was "clearly a sham."  FFC also included its IPR petition with its March 9 letter.  According to Allergan:

FFC attempt[ed] to extract compensation from Allergan by stating [in the March 9 letter] that it "firmly believes that a company such as Allergan should be given a single opportunity to support FFC's core social and investment interests before other time-barred producers are able to file for joinder in the '149 Patent IPR, and before FFC files additional IPR petitions against the COMBIGAN® patents and proceeds with a Paragraph III filing.  As such, FFC is amenable to discussing an immediate and confidential settlement with Allergan."

Alleging that FFC "did not have and still do[es] not have a reasonable basis for filing the IPR petition against the '149 patent based on the same prior art and the same grounds that were already rejected by the U.S. District Court and the Federal Circuit," Allergan asserts that FFC's conduct constitutes attempted civil extortion under the California Penal Code.  Allergan also alleges that FFC's conduct in "[p]reparing a false 'proposed FDA filing,'" falsely representing that it was "prepared to 'seek FDA approval via a Paragraph III ANDA filing,'" "[f]iling an objectively baseless IPR petition of the unlawful purpose of extorting Allergan," and "[a]ttempting to intimidate Allergan into settling quickly" constitutes unfair, unlawful and/or fraudulent business acts or practices under the California Business and Professions Code.  Finally, Allergan alleges that FFC's conduct in filing the IPR petition constitutes malicious prosecution under California law.

Defendants have until August 10 to Answer Allergan's complaint.  Patent Docs will report on further developments in the case.

Comments

[Paul F. Morgan]

This demonstrates a point made earlier, that there are several good legal ways to stop any misuse of post grant proceedings for stock price manipulations [including PTAB, FTC and SEC actions] that do NOT require a draconian "throwing the baby out with the bathwater." That is, using this issue to justify giving politically unrealistic total immunity from any post grant invalidity challenges to any and all pharmaceutical or other medical-related patents.

[EG]

"This demonstrates a point made earlier, that there are several good legal ways to stop any misuse of post grant proceedings for stock price manipulations [including PTAB, FTC and SEC actions] that do NOT require a draconian "throwing the baby out with the bathwater."

Paul,

The same could also be said of the AIA (Abominable Inane Act), as well as the currently pending legislation (disingenuously called the Innovation and PATENT Acts) to address the overblown so-called "patent troll" problem.

[James Demers]

This particular case doesn't look like a stock price manipulation scheme - and there's no allegation that it was.

The problem with price manipulation is that because the stock market's reaction is nearly instantaneous, there's no way for the authorities to intervene. One has to make the scheme unattractive by forcing the surrender of all profits - and then some - and by making that outcome a virtual certainty.