Allergan Sues Over Investment Firm's IPR Patent Challenge, Alleges Extortion

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By John T. Aquino

June 25 — Allergan has sued Ferrum Ferro Capital LLC to fight the latter's Patent and Trademark Office petition challenging Allergan's glaucoma treatment patent.

Allergan's June 19 suit in a California federal court claims that the petition by FFC, an investment firm, at the PTO represents attempted extortion, malicious prosecution and unfair competition.

Such petitions have drawn the ire of members of the life sciences community, who argue Congress did not intend the PTO review procedure created under the America Invents Act to be used that way.

Members of Congress have entered the fray as well, including provisions intended to limit post-grant opposition abuses in proposed patent reform legislation.

Allergan Calls Filing ‘Baseless.'

Allergan said in its complaint filed in the U.S. District Court for the Central District of California that FFC's inter partes review (IPR) filing was “objectively baseless” and that it was filed “for the express purpose of monetizing the petition, including by attempting to extort compensation from Allergan.”

After filing the lawsuit, Allergan submitted a preliminary response to FFC's IPR to the PTO's Patent Trial and Appeal Board on June 22, indicating that the IPR was based on an erroneous construction of the claim at issue and that the petition itself is “an abuse of the IPR process.”

Allergan's lawsuit was assigned on June 23 to the Patent Pilot Program, a nationwide federal district court program that assigns selected cases to patent-dedicated judges.

Focus Said Still on PTAB

Attorneys contacted by Bloomberg BNA said the focus of attention concerning investment-related IPRs is likely to remain on the PTAB process, rather than shifting to federal court.

Carl Gulbrandsen, managing director of the Wisconsin Alumni Research Foundation in Madison, Wis., told Bloomberg BNA in a June 25 phone interview that the patent law permits any party to file an IPR, for good reason or bad. “The reason behind the filing is what the complaint appears to be arguing, and I'm not sure that the district court is going to want to address that when the PTAB can judge FFC's challenge on its own on the merits in a relatively short period of time,” Gulbrandsen said.

“Still, it's an interesting lawsuit,” he said, “and it illustrates the unintended consequences of what Congress has done with post-patent reviews, just like when the advocacy group Consumer Watchdog challenged WARF's embryonic stem cell patent and lost on the issue of standing,” Gulbrandsen said. “I doubt Congress ever intended that advocacy groups and hedge funds should be able to utilize the post patent review process,” he said.

IPR Said Justified

According to its complaint, Allergan is the holder of approved new drug application (NDA) No. 21-398 for brimonidine tartrate/timolol maleate ophthalmic solution sold under the Combigan trademark to treat glaucoma and ocular hypertension. NDA No. 21-398 is associated with at least six patents: U.S. Patent Nos. 7,030,149, 7,320,976, 7,642,258, 8,133,890, 8,354,409 and 8,748,425.

Allergan noted that the validity of the claim at issue of the '149 patent was unsuccessfully challenged by generic competitors in the U.S. District Court for the Eastern District of Texas in 2011, and the district court's judgment was affirmed by the U.S. Court of Appeals for the Federal Circuit in 2013.

In its IPR petition, which was filed March 9, FFC argued that claim 4 of the '149 patent should be found invalid because of the different legal standard used in a PTO proceeding as opposed to that of a federal court. FFC identified itself in its petition as “a privately-held venture focused on innovation, the strategic deployment of capital toward socially beneficial ends and related investment strategies.”

The FFC petition mirrored that of Kyle Bass, a prominent hedge fund manager who on Feb. 10 challenged the validity of Acorda Therapeutics' patent for a multiple sclerosis treatment in an IPR petition.

Steve Maebius of Foley & Lardner LLP told Bloomberg BNA in a June 25 e-mail that neither FFC's nor any other investment-related IPR petition has been accepted yet by the PTAB. “Companies will be watching closely at the end of August to see whether the PTAB will institute IPR based upon the first hedge fund petition filed by Kyle Bass against Acorda. A decision to institute IPR in that proceeding may spur more filings.”

‘Fictitious' ANDA Alleged

In its district court complaint, Allergan said FFC's principal place of business is a mail drop box in Wilmington, Del., and that, while it alleges to have created a a generic formulation of Allergan's Combigan, it has no facilities to create anything.

Allergan alleged that FFC falsely gave itself more than an investment-related interest in challenging the '149 patent in its PTO petition, by claiming to have created a “fictitious generic brimonidine tartrate/timolol maleate ophthalmic solution [named] ‘Combivious,' apparently as some kind of play on the words ‘COMBIGAN' and ‘obvious.' ”

FFC's petition is based on the same argument that claim 4 of the '149 patent is invalid for obviousness that was unsuccessfully argued by Allergan's competitors before the Eastern District of Texas and the Federal Circuit, Allergan said.

Asserts Attempted Extortion

According to Allergan, FFC in a March 9 letter attempted to ramp up the pressure by indicating that the FFC IPR will provide incentive to Allergan's competitors to file their own IPR proceedings.

Allergan alleged that FFC tried to extract compensation by stating in its letter that FFC “firmly believes that a company such as Allergan should be given a single opportunity to support FFC’s core social and investment interests before other time-barred producers are able to file for joinder in the '149 Patent IPR, and before FFC files additional IPR petitions against the Combigan patents and proceeds with a Paragraph III filing. As such, FFC is amenable to discussing an immediate and confidential settlement with Allergan.”

Allergan's complaint asserted counts of attempted civil extortion under Calif. Penal Code §518, unfair competition under Calif. Business & Professions Code §17200 and malicious prosecution under California common law. The company said that as a result of FFC's alleged malicious prosecution, Allergan “has suffered disruption to its business, loss of productivity, loss of business goodwill, substantial litigation expense, additional operational expense and other damages in an amount to be proven at trial, but in any event in excess of $100,000.”

Allergan asked the court for a preliminary order preventing FFC from pursuing the “objectively baseless” IPR petition, a permanent order preventing FFC from engaging in any activity similar to that described in the lawsuit, restitutionary damages and reasonable attorneys' fees.

Allergan is based in Irvine, Calif.

The complaint was filed by Fish & Richardson's offices in Los Angeles; San Diego; Redwood City, Calif.; Dallas; and Wilmington, Del.

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bna.com

Complaint at http://www.bloomberglaw.com/public/document/Allergan_Inc_et_al_v_Ferrum_Ferro_Capital_LLC_et_al_Docket_No_815.

Allergan's IPR preliminary response at http://op.bna.com/hl.nsf/r?Open=jaqo-9xtjf9.