U.S. court rejects Allergan bid to shield patents through tribe deal

(Reuters) - A U.S. appeals court on Friday rejected a novel strategy adopted by drug company Allergan PLC to shield patents from review by an administrative court by transferring them to a Native American tribe.

The Allergan logo is seen in this photo illustration November 23, 2015. REUTERS/Thomas White/Illustration/File Photo

The U.S. Court of Appeals for the Federal Circuit said a tribunal run by the U.S. Patent and Trademark Office has authority to review the validity of patents covering Allergan’s dry eye drug Restasis.

Allergan spokeswoman Amy Rose declined to comment.

Restasis last year generated $1.5 billion in revenue for Allergan.

In 2016 generic drug company Mylan NV , seeking to sell its own lower-cost version of Restasis, asked the Patent Trial and Appeal Board to invalidate the Allergan patents on the grounds that they described obvious ideas.

Allergan in September 2017 transferred the patents to New York’s Saint Regis Mohawk Tribe, claiming the tribe’s sovereign status meant the patents were immune from administrative review.

The tribe took legal ownership of the patents and licensed them back to Allergan in exchange for ongoing payments.

Allergan said it was protecting itself from the patent court, which it said is a flawed and biased forum. The company said it did not object to the validity of its patents being reviewed by federal judges.

U.S. lawmakers from both political parties called Allergan’s deal with the tribe a sham, saying it could be used by the pharmaceutical industry to prevent sales of lower-cost generic drugs.

In February the patent tribunal rejected Allergan’s maneuver, saying tribunal sovereign immunity does not apply to its patent review proceedings.

The Federal Circuit affirmed that holding in Friday’s decision.

Brendan White, a spokesman for the Saint Regis Mohawk Tribe, said the tribe disagreed with the ruling.

“The Tribe is reviewing the decision and consulting with our attorneys,” White said.

In October a federal judge in Texas invalidated the Restasis patents instead of waiting for the patent board to rule, rendering Allergan’s move largely meaningless.

Mylan and Teva Pharmaceutical Industries Ltd have sought approval from U.S. regulators to sells generic versions of Restasis.

Reporting by Jan Wolfe; Editing by Phil Berlowitz and Marguerita Choy