September 14, 2017 / 9:08 PM / 10 months ago

REFILE-Challenge of Allergan tribal patent deal in uncharted legal territory

 (Fixes date in dateline)
    By Jan  Wolfe
    Sept 14 (Reuters) - As generic drug manufacturers are
gearing up to argue that a deal Allergan Plc         made with a
Native American tribe to shield patents from administrative
review is a sham, some experts say the generic companies are in
uncharted legal territory.
    Last week, Allergan announced it would transfer the patent
rights to its Restasis dry-eye treatment to the Saint Regis
Mohawk Tribe, which will license them back to the company in
exchange for ongoing payments.
    Allergan says the tribe's sovereign immunity puts the
patents beyond the authority of the Patent Trial and Appeal
Board, an administrative court created in 2012 that can cancel
    But Richard Torczon, a lawyer for generic drug company Mylan
NV        , said the tribe is abusing the defense of sovereign
immunity, which he said is intended to shield tribes that get
dragged into court without their consent. 
    "The tribe here has not been dragged into this proceeding
against its will," Torczon said during a hearing on Monday
before three judges from the patent board. "It has deliberately
by its own admission targeted these proceedings for exactly this
kind of revenue-generating opportunity," he said, according to a
    Torczon also compared the deal to cases in which payday
lenders have partnered with tribes to get around state laws
barring high interest rates.
    Michael Shore, a lawyer for the St. Regis Mohawk Tribe,
dismissed Torczon's statements in an interview on Wednesday and
said the deal would hold up.
    "Literally nothing the guy said is legally accurate," Shore
said of Torczon. 
    Gregory Ablavsky, a professor of early American legal
history, said there is no direct precedent on which either side
can rely because of the unique nature of the deal. However, he 
said a bankruptcy case involving tribal immunity could support
Mylan's waiver argument. 
    Monday's hearing, which dealt mostly with scheduling issues,
offered a preview of arguments Mylan and two other generic drug
companies, Teva Pharmaceuticals Inc           and Akorn
Pharmaceuticals         , will make against Allergan's deal.
    There is much at stake for generic manufacturers, which
frequently ask the patent board to invalidate patents on
brand-name drugs so they can bring generic versions to market.
If Allergan's groundbreaking deal is upheld and other
pharmaceutical companies follow suit, generic drug companies
will lose access to an attractive forum for challenging
    Allergan has said generic rivals can still bring patent
challenges in federal court, which the company described as a
time-tested and fair process. 
    In addition to arguing that the tribe has waived immunity,
the generic manufacturers plan to rely on cases in which payday
lenders have partnered with tribes to circumvent state laws
barring high interest rates. 
    Some courts have ruled that such lenders were not entitled
to sovereign immunity because they were not arms of the tribe.
    Michael Risch, a professor of patent law at Villanova
University School of Law, said the payday lending disputes are
legally distinct because in this case Allergan actually
transferred its patents to the tribe.
    But Risch said the argument has rhetorical force because
Allergan might balk at being compared to a payday lender.
    "I think this has a decent chance of holding up," he said.
"If it works, it is brilliant."

 (Reporting by Jan  Wolfe; additional reporting by Michael
Erman; editing by Noeleen Walder and Cynthia Osterman)
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