On Friday, Feb. 23, the U.S. Patent Trial and Appeal Board denied a motion from the St. Regis Mohawk Tribe to dump a challenge to patents it acquired from Allergan last year and then leased back to the drugmaker. The tribe bought the patents for Restasis in a move by Allergan to sidestep a challenge by Mylan NV (MYL) - Get Report and others, which plan to bring a generic version of the dry-eye drug to market.
Mylan was joined in its challenge by Akron Inc. and Teva Pharmaceutical Industries Ltd. (TEVA) - Get Report . Allergan believed that by selling its patents to the tribe, it could avoid an inter partes review by the PTAB because the St. Regis Tribe is a sovereign nation and so the review would not apply.
The PTAB, however, ruled that since Allergan sold the six patents to the tribe and then immediately leased them back, it still is the "true owner" and thus denied the appeal. The board also found fault with deal from the standpoint that Congress already impinges on some sovereign tribal rights, and that is a sticking point for the Mohawk.
The drugmaker declined to comment on the board's ruling. The Mohawk Tribe did not immediately respond to a request for comment.
Shares in Allergan, a holding of Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio, on Monday rose 2.3% to $165.76.
"Mylan has always been vocal in its efforts to challenge and break down barriers to access," CEO Heather Bresch said in a statement. "The PTAB's ruling reinforces our belief that Allergan's maneuvers to engage the St. Regis Mohawk Tribe for patent protection were a sham. We will continue to be steadfast in our efforts on both the legal and regulatory fronts to bring a generic version of Restasis to patients as quickly as possible."
Allergan's legal theory has not found much in the way of either popular or legal support. Besides the PTAB rejection, Judge William Bryson of the U.S. Court of Appeals for the Federal Circuit rejected Allergan's original attempt to protect its patents until 2024, saying the new methods of treatment claimed by the Dublin-based drugmaker were obvious in light of the drug's current patents.
Bryson also hammered the company over transferring the patents to the tribe. "What Allergan seeks is 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," he wrote.
Allergan has appealed the ruling for hearing en banc before the entire court.
The transfer of patents also wasn't popular with five Democratic senators, who demanded details about the deal with the tribe last November. Maggie Hassan of New Hampshire, Patty Murray of Washington, Amy Klobuchar of Minnesota, Sherrod Brown of Ohio and Al Franken of Minnesota sent a letter to Allergan asking for documents tied to the agreement.
A month before the senators requested the documents, the House Oversight and Government Reform Committee made a similar request for documents from Allergan.
Allergan has defended both the transaction as well as its strategy. The company began by paying the tribe $14 million to caretake the patents, with annual payments totaling $15 million set going forward. Those payments are a rounding error compared with the $1.5 billion that Restasis adds to Allergan's bottom line on an annual basis.
Despite the setbacks, the denial by the PTOB may not be the last word. The St. Regis Tribe may take the case to federal court, where a win could help the Native American tribe make more patent deals.