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Allergan transfers patents to Native American tribe to quash a legal challenge

Written by Diane Archer

Drug companies seem always to be coming up with new ways to drive profits. This time, according to Katie Thomas at the New York Times, it’s a quasi patent sale-leaseback agreement, in which Allergan transfers its patents to a Native American tribe to quash a legal challenge by generic manufacturer Teva Pharmaceuticals.

Rather than risk losing patent protection for its eye drug, Restasis, Allergan transferred its six patents to a Native American tribe. Teva’s patent challenge may not be viable against the tribe, which will claim sovereign immunity. Allergan says it will pay the Mohawk tribe $13.75 million for holding the Restasis patents. It hopes that the claim of sovereign immunity will be grounds for the judge to dismiss the lawsuit challenging the patents.

Of course, Allergan needs the patents to continue to manufacture the drugs. So, it is paying the tribe an additional $15 million a year in royalties to lease the patents back to it for the lives of the patents. The question is whether this scheme will work and, if so, whether other drug companies will follow suit to protect their patents from legal challenges.

In addition to Teva’s patent challenge before the Patent Trial and Appeal Board, there is a federal court challenge in Texas. If Allergan loses that lawsuit, its deal with the Mohawk tribe will not matter, and its patents will be invalidated.

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