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Allergan’s patent shield – The (Native) American dream?

Published on 17/10/17 at 11:25am


In an unprecedented move, leading global pharmaceutical company Allergan appears to have handed its Orange Book-listed US patents covering its blockbuster dry eye drug Restasis to the Native American St. Regis Mohawk Tribe in Northern New York.  

The Tribe has granted exclusive licenses in the patents back to Allergan.  The deal will provide the Tribe, which has a population of around 13,000, with $13.75 million up-front and annual royalties of up to $15 million, (crucially, in this case) provided the patents remain valid.

Allergan may have made the move in an attempt to evade challenges from competitors at the Patent Trial and Appeal Board (PTAB) – an administrative court created in 2011 that can cancel patents – in a somewhat controversial, post-issuance review process called "inter partes review" (IPR).

IPRs against the Allergan patents were launched on behalf of generics companies Mylan, Teva, and Akorn Pharmaceuticals. They were expected to reach a result this December. 

Although the deal creates what may seem like a significant yearly dent in Allergan’s accounts, annual sales of Restasis stand at approximately $1.5 billion – second only to Allergan’s biggest-selling, wrinkle treatment product, Botox – and are expected to increase.  With the patents covering Restasis not due to expire until 2024, this multi-million dollar outlay in exchange for extra protection could turn out to be a shrewd piece of business by Allergan’s decision makers.

Inter partes reviews

IPRs were authorised by the 2011 America Invents Act and have arguably revolutionised the way and regularity in which patents are challenged in the USA.  While invalidating a patent via litigation in federal court typically costs millions of dollars, invalidating a patent through the IPR process costs the challenger the relative bargain of a few hundred thousand dollars.  This is similar to the European post-grant opposition process.

The Tribe is, in theory, able to file a motion to dismiss the ongoing IPRs against the granted Restasis patents on account of its “sovereign immunity” status. 

IPRs were designed to improve the US patent system, and quickly and efficiently settle patent validity disputes on novelty and obviousness.  Statistics have shown that fewer IPR petitions are brought against biotech and pharma patents, and there is a lower rate of invalidation of these compared to all technical fields combined, but Allergan have seemingly gone on the defensive early doors. 

However, it is important to note that, while (again, in theory) the Tribe is able to dismiss the ongoing IPRs against the Restasis® patents, they cannot completely shield the patents from any review.  This deal does not affect the ongoing litigation in the federal court in Texas – a key defence of the controversial deal that Allergan has reiterated in response to the huge media attention garnered.

Sovereign Immunity

Sovereign immunity is a legal doctrine and an inherent authority that predates the founding of American republicanism by the Founding Fathers in the 18th century.  It stems from the simple idea that one cannot sue a monarch, such as the Queen of England, in a court of law.  While enacted with the intention of applying directly to US states, indigenous tribes enjoy the same protection (unless they waive their immunity, or Congress abrogates it through clear and unequivocal legislative action).

Tribal immunity has been under the spotlight in other (non-IP) court cases.  On 25 April 2017, the US Supreme Court found unanimously in Lewis v. Clarke that tribal commercial activity wasn't necessarily immune.  Specifically, the Court ruled that tribal sovereign immunity does not apply to employees who are sued in their individual capacities (i.e. those who happen to work for tribes). This applies even if the alleged wrongdoing occurs while the employee is acting within the course and scope of employment, and even when the tribe has agreed to indemnification.  Stated differently, only employees who are sued in their official capacities as agents of the tribe remain immune.  

This, therefore, begs the question of whether these new boundaries of tribal sovereign immunity drawn by the Supreme Court affect the scope and extent of the St. Regis Mohawk Tribe’s indemnification agreement with Allergan.


Not surprisingly, the news about the deal has generated a huge amount of interest in the Tribe and other entities which are able to provide the same type of patent protection.  Although state-owned university patents are also known to be immune to IPRs under the concept of sovereign immunity, this is the first type of agreement that has employed a Native American tribe in an attempt to shield a company’s patents.

For the time being, this type of deal seems most relevant to the life sciences industry where companies of all sizes are disproportionately exposed to the IPR process. This is because they have drug products, and billions of dollars in revenue, that are supported by only a handful of patents.

If the arrangement succeeds in evading IPRs, it will pose questions such as:

  • Has it set a precedent?
  • Will others look to mimic it?  
  • Could this lead to fewer generics entering the market?  
  • Will "patent trolls" be the next targets for these tribes?  
  • While patents are presently not completely impermeable to all patent attacks, could a different deal, involving different parties, adopting a different position, expand the scope of sovereign immunity against federal court actions?

More importantly, rather than whether or not this arrangement will successfully allow Allergan to avoid IPRs against the Restasis patents, the arguments are centring around whether or not it should.  Teva, one of the challengers, described the move as "a new and unusual way for a company to try to delay access to high quality and affordable generic alternatives", while US Senator Sherrod Brown said simply that Allergan's transfer "rips off consumers" and cannot “become the new normal”.

Most recently, the judge in the federal court litigation in Texas has asked Allergan to prove that its controversial transfer of patents was more than a “sham”, also asking them to explain what the “good and valuable consideration” was when assigning the patents to the Tribe, including any payments made by the tribe for “such considerations”.  Providing further headaches for Allergan, Senator Claire McCaskill also recently released a draft bill aimed at putting an abrupt end to tribal immunity in PTAB reviews.

There are no such loopholes allowing for this type of protection in the UK or Europe.  It will be interesting to see what comments or actions, if any, are made about this tactic by the US regulatory agencies.

This piece was written by Kristina Cornish, a partner at Kilburn & Strode, and Gavin Wai, a technical assistant at Kilburn & Strode.

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