A Tale of Restasis: Misadventures of Sovereign Immunity

Allergan’s “Restasis®” is a branded ophthalmic cyclosporine emulsion, for the treatment of chronic dry eye, with annual sales of nearly $1.5 billion. Original patent covering the Restasis formulation (US 5,474,979), was set to expire in 2014. In an attempt to protect its Restasis franchise, Allergan filed more patents, covering the “specific formulation and the method of use”. The additional patents got granted, delaying the generic entry till 2024.

Paragraph IV: One of the popular approach adopted by generic manufacturers for early generic entry is to certify that any listed, relevant patent is invalid or will not be infringed by the manufacture, sale or use of the drug described in Abbreviated New Drug Application (ANDA). This method, i.e., using “Paragraph IV” filing is a technical infringement of existing patents and leads to litigation.

Inter partes review (IPR): Another method is invalidation of patents through Patent Trial and Appeal Board (PTAB), which offers economically viable and highly effective opportunity for competitors. Inter partes review (IPR) proceedings are filed with the United States Patent and Trademark Office (USPTO) and heard by PTAB as an alternative to or in conjunction with traditional patent litigation in the U.S. Court of Appeals for the Federal Circuit. Therefore, patent owners may have to defend their patents both at PTAB and in federal court. If the patent can be removed by invalidation, the competitor can easily copy the drug and get FDA approval via ANDA.

Generic Restasis: In 2015, Mylan, a global generic and specialty pharmaceuticals company, filed an ANDA with the FDA in order to manufacture and sell a generic version of Restasis and challenged the Restasis patents as invalid. Allergan sued Mylan in the Eastern District of Texas for infringement of the Restasis patents based on their filings of ANDA.

On June 2106, Mylan filed six inter parte review (IPR) challenges with PTAB, describing Restasis patents as obvious and hence non-patentable, following which PTAB in December 2016, granted Mylan’s petitions for IPR, finding it reasonably likely that Allergan’s patents were invalid. Subsequently, Teva and Akorn filed similar petitions. Even though, PTAB has a statutory deadline of exactly one year to complete the IPR, PTAB extended its deadline from December 2017 to April 2018. A consolidated oral hearing was scheduled on September 15, 2017.

Allergan’s manoeuver: Prior to the district court ruling, in September 2017, one week before the date scheduled for oral hearing in the IPR, an interesting transaction took place. Allergan responded to the threats from generic competition by announcing a controversial deal assigning their patents to New York State’s Saint Regis Mohawk Tribe. The Tribe, after the ownership change, updated PTAB and filed a motion to terminate the IPR proceedings for the Restasis® patents invoking tribal Sovereign Immunity.

Sovereign immunity: It refers to the doctrine that the government cannot be sued without its consent.  The concept of sovereign immunity stems from British common law, banning lawsuits against the king. Tribal sovereign immunity is a common-law privilege that is subject to regulation by Congress and not covered under the Eleventh Amendment of the U.S. Constitution. The immunity applies in federal or state court without regard to the relief sought or the nature of the controversy. The principle of sovereign immunity applied to Inter partes review, gives sovereign entities legal immunity to administrative patent challenges in front of the PTAB.

The deal: Allergan paid the tribe $13.75 million, with the promise of $15 million in annual royalties as long as the patents remained valid. The transaction included the full transfer of ownership of the Patents (U.S. Patent Nos. 8,629,111; 8,633,162; 8,642,556; 8,648,048; 8,685,930; and 9,248,191) to the Tribe and Allergan’s retention of an exclusive license to the Patents.

Allergan’s tactic was to claim the Tribe’s Sovereign Immunity and shield the Restasis patents from review by USPTO and ultimately from competitors. The license agreement expressly stated that the Tribe “…..will and shall assert its sovereign immunity in any contested PTO proceeding, including in the IPR Proceedings”. The Tribe, after the ownership change, filed a motion to terminate the pending IPR proceedings using the defense of sovereign immunity. The unusual deal, first of its kind in the pharmaceutical industry, invited criticism from all domains. Allergan defended by saying it entered into the deal with tribe to avoid “double jeopardy” of having its patents challenged in both federal court and through administrative review.

Court Litigation: On October 16, 2017, after trial in August the Texas federal court Judge Bryson invalidated four out of six Restasis patents because they described methods of treatment that were obvious in light of earlier patents granted to the company. This decision came before the PTAB ruling, rendering Allergan’s move of Sovereign immunity largely meaningless. The judge severely criticized Allergan’s deal with the tribe, in an attempt to escape validity challenges in IPR proceedings. In a thorough 135-page judgement, the court found that Allergan had secured these Patents “by way of a presentation that was more advocacy than science.”

The invalidation grounds: The earlier patents of Allegan (US 5,474,979), with expiry in 2014, disclosed a composition with 0.1% cyclosporine. This composition was proven to be safe and effective in Phase III FDA testing, but Allergan did not apply for final approval of this formulation. The additional patents, as part of evergreening, disclosed a composition with 0.05% cyclosporine, which also cleared FDA testing and is the actual formulation used in Restasis. The later patents were initially objected to but later on granted by the USPTO, based on the expert testimonies provided by Allergan, highlighting the “unexpected and surprise” findings. In Phase 2 trials, a 0.1% cyclosporine formulation outperformed the 0.05% cyclosporine formulation, which was eventually approved by the U.S. (FDA) in the new drug application (NDA) submitted for Restasis. The efficacy of the 0.05% cyclosporine formulation in Phase 3, outperforming the 0.1% formulation results from Phase 2, was quoted as “unexpected and surprise” finding by Allergan’s research employees.

Judge Bryson found that a person skilled in the art, reviewing the Phase 2 results published by Allergan wouldn’t conclude that the 0.1% cyclosporin formulation was more effective than the 0.05% cyclosporine formulation at the conclusion of Phase 2 trials. The FDA’s medical review of the Phase 3 trials indicated that the 0.05% cyclosporine formulation resulted in statistically significant higher responder rates. Statistically significant didn’t equal unexpected according to Judge Bryson. He concluded that the FDA’s primary objective in its analysis was to determine whether the 0.05% cyclosporine formulation was effective against a castor oil only vehicle and not to determine the efficacy of the 0.05% against 0.1% formulation. The so called unexpected results were found to be foreseeable based on the early cyclosporine studies as the Restasis formulation has statistically the same efficacy as one of the prior art examples.

PTAB decision: On February 23, 2018, PTAB issued a decision denying the Tribe’s motion to terminate Mylan’s patent challenge regarding the Restasis patents. PTAB found that even if tribal sovereign immunity did apply, the IPR proceeding could continue with or without the Tribe’s participation because Allergan retained ownership interest in the challenged patents. The exclusive licenses sold back to Allergan were so significant that the tribe was essentially giving the ownership back.

Federal Circuit affirmation: Following the decision of PTAB, Allergan and the tribe filed an appeal brief at the Court of Appeals for the Federal Circuit in April 2018, arguing that it was entitled to sovereign immunity from administrative proceedings. In November 2018, the United States Court of Appeals for the Federal Circuit issued a Rule 36 judgement affirming the judgment of the Eastern District of Texas that patent claims covering Allergan’s Restasis dry eye treatment were invalid under 35 U.S.C. § 103 grounds for obviousness. Federal Circuit Appellate Rule 36 authorizes the Court in certain circumstances to “enter a judgment of affirmance without opinion”. Rule 36 decision is a proper procedural tool to use when there are no genuine issues of law and that a written opinion would not further the cumulative body of law. For Allergan, Rule 36 affirmation was a final fatal blow to the Restasis patents.

Conclusion: This case is a perfect example of ingenuity in finding the loopholes in the system to keep patents valid and enforceable to ward off the competition by any means. If this strategy was successful, it could have had serious consequences on the patent legal framework and would have set precedence for pharmaceutical companies to partner with other sovereign entities and circumvent the law, thereby delaying the entry of generics. However, rulings of PTAB and Federal Court denying the benefits of Sovereign Immunity to Allergan effectively closed a loophole in the law that could have opened the floodgate for such sham deals.

Author: Dr. Gurmeet Kaur Nanda, Principle Associate – Patents at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at Gurmeet@iiprd.com.


[1] King L. Wong, Indian Tribal Sovereign Immunity Asserted in an IPR, BIOLOQUITUR, (Sep 25, 2017), https://www.lexology.com/library/detail.aspx?g=8646562b-50af-4668-ae72-2df6e814b69a.

[2] Josh Landau, Inter Partes Review: Five Years, Over $2 Billion Saved, PATENT PROGRESS, (Sep 14, 2017), https://www.patentprogress.org/2017/09/14/inter-partes-review-saves-over-2-billion.

[3] 35 U.S.C. § 316(a)(11) (2016)

[4] Allergan, Inc. v. Teva Pharms. USA, Inc., No. 2:15-cv-1455-WCB, 2017 WL 4619790, at *4(E.D. Tex. Oct. 16, 2017).

[5] Allergan, Allergan and Saint Regis Mohawk Tribe Announce Agreements Regarding RESTASIS® Patents, (Sep 8, 2017), https://www.allergan.com/news/ news/thomson-reuters/allergan-and-saintregis-mohawk-tribe-announce-agr.

[6] Jan Wolfe and Michael Erman, S. judge in Texas invalidates Allergan patents on Restasis, REUTERS, (Oct 16, 2017), https://www.reuters.com/article/us-allergan-patents/u-s-judge-intexas-invalidates-allergan-patents-on-restasis-idUSKBN1CL2KE.

[7] Gene Quinn & Steve Brachmann, Blockbuster Restasis Patent Goes Down at Federal Circuit a Victim of Rule 36, IPWATCHDOG, (Nov 15, 2018), https://www.ipwatchdog.com/2018/11/15/blockbuster-restasis-patent-federal-circuit-victim-rule-36/id=103309/.


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