Telephonic Hearing - September 11, 2017
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` U N I T E D S T A T E S P A T E N T A N D T R A D E M A R K O F F I C E
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` B E F O R E T H E P A T E N T T R I A L A N D A P P E A L B O A R D
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` C A S E I P R 2 0 1 6 - 0 1 1 2 7
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` P a t e n t N o . 8 . 6 8 5 , 9 3 0 B 2
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`M Y L A N P H A R M A C E U T I C A L S , I N C . , )
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`T E V A P H A R M A C E U T I C A L S U S A , )
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`I N C . , a n d A K O R N , I N C . , )
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`P e t i t i o n e r s )
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`v s . )
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`A L L E R G A N , I N C . , P a t e n t O w n e r )
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` T E L E P H O N I C H E A R I N G
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` S e p t e m b e r 1 1 , 2 0 1 7
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`R e p o r t e d b y : S h a u n a F o r e m a n , C S R
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`MYLAN PHARMACEUTICALS V. ALLERGAN
`IPR2016-01128
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`
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` U N I T E D S T A T E S P A T E N T A N D T R A D E M A R K O F F I C E
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` B E F O R E T H E P A T E N T T R I A L A N D A P P E A L B O A R D
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` C A S E I P R 2 0 1 6 - 0 1 1 2 7
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` P a t e n t N o . 8 . 6 8 5 , 9 3 0 B 2
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`M Y L A N P H A R M A C E U T I C A L S , I N C . , )
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`T E V A P H A R M A C E U T I C A L S U S A , )
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`I N C . , a n d A K O R N , I N C . , )
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`P e t i t i o n e r s )
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`v s . )
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`A L L E R G A N , I N C . , P a t e n t O w n e r )
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` T E L E P H O N I C H E A R I N G
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` S e p t e m b e r 1 1 , 2 0 1 7
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`R e p o r t e d b y : S h a u n a F o r e m a n , C S R
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`MYLAN PHARMACEUTICALS V. ALLERGAN
`IPR2016-01128
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`Telephonic Hearing - September 11, 2017
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` PROCEEDINGS
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` THE COURT: Who is on the call
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`representing petitioner?
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` MR. TORCZON: Thank you, Your Honor.
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`This is Richard Torczon. I am appearing on behalf of
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`Mylan, and with me on the line is I believe Steve
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`Parmelee and Jad Mills and Wendy Devine.
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` THE COURT: Mr. Torczon,
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`T-O-R-C-Z-O-N? And you will be speaking today on
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`behalf of petitioner?
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` MR. TORCZON: Yes, Your Honor.
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` THE COURT: And who do we have on the
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`call for Allergan?
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` MS. WHELAN: Your Honor, this is
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`Dorothy Whelan, and I'm joined by Michael Kane. We
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`represent Allergan.
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` THE COURT: And who would be speaking
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`for Allergan?
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` MS. WHELAN: No one will be speaking
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`for Allergan, but Michael Shore will be speaking on
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`the sovereign immunity issue -- the tribe's issue.
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` THE COURT: And who is representing
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`the tribe?
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` MR. SHORE: Michael Shore, S-H-O-R-E,
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`and with me -- in the room with me are Chris Evans
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`Telephonic Hearing - September 11, 2017
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`and Jessica (inaudible).
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` THE COURT: And I understand that we
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`have a pro hac vice motion and just want to confirm
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`that no one is going -- no one objects to Mr. Shore
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`speaking today on today's conference call.
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` MR. TORCZON: You Honor, this is
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`Richard Torczon on behalf of Mylan. We have already
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`indicated to -- to the tribe that we do not oppose
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`their pro hac vice entry.
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` THE COURT: Okay. Thank you. Thank
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`you. I hear we have a court reporter. Who --
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` MR. CHAN: Your Honor, this is Alfonso
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`Chan. I'm also on the call on behalf of the tribe.
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` THE COURT: Thank you. And is there
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`anybody else on the call?
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` MR. SPEIER: Your Honor, this is Gary
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`Speier on behalf of Teva.
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` MR. DEWANSIK: Your Honor, this is
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`Mike Dzwonczyk on behalf of Akorn.
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` THE COURT: And anyone else?
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` MS. GRAY: Your Honor, this is Marissa
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`Young-Gray (phonetic) on behalf of Teva.
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` THE COURT: Okay. I'll keep asking
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`until I get a silence. Anybody else?
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` MR. TORCZON: Your Honor, this is
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`Telephonic Hearing - September 11, 2017
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`Richard Torczon. If counsel are all done, you should
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`be aware that there are actually two court reporters
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`on the call. Each side has requested to have a court
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`reporter present.
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` THE COURT: Okay. Thank you for that
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`information. And if you could, both parties file
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`their -- their transcript following this call.
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` Okay. I think with that, we'll begin.
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`Mr. Shore, would you like to begin?
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` MR. SHORE: Yes, Your Honor. I'm
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`going to take the phone off speaker so that this part
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`of the call will be easier for the court reporters
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`to -- to hear. I want to make sure there's no
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`feedback or anything.
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` Thank you for taking the call today,
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`Your Honor. For the record, my name is Michael
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`Shore. I represent St. Regis Mohawk Tribe. I do not
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`represent Allergan, and I do not speak for Allergan
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`on this call. I only speak behalf of the St. Regis
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`Mohawk Tribe.
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` Patent owner St. Regis Mohawk Tribe,
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`which I'm going to refer to as "the tribe" for the
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`remainder of my discussion today for the purposes of
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`the court reporter, hereby makes a special appearance
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`before this board to protect its sovereignty. No
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`immunity is waived by the tribe's counsel
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`participating in this call or in any briefing that
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`might follow regarding the tribe's assertion of its
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`sovereign immunity.
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` First, the tribe requests that the
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`board immediately enter an order staying all
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`proceedings in all IPRs before the board that might
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`in any way adversely affect the tribe's rights in
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`U.S. Patent Numbers 8,685,930, 8,629,111, 8,624,556,
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`866 -- 633,162, 8,648,048, 9,248,191. And for the
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`purposes of the court reporters, for the remainder of
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`my discussion today the '930 patent, the '111 patent,
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`the '556 patent, the '162 patent, the '048 patent,
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`and the '191 patent will be collectively referred to
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`as the patents-at-issue.
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` The stay -- the stay should remain in
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`place pending resolution of the tribe's sovereign
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`immunity challenge to the board's jurisdiction to
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`proceed with the IPRs.
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` The tribe is a federally-recognized
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`sovereign American Indian tribe. It has acquired all
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`the patents-at-issue. This is established by the
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`Assignment, which is Exhibit 2086 in the court's
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`record and the Updated Mandatory Notice, which was
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`Paper Number 63 in IPR2016-01127.
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` The tribe, as a sovereign government,
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`is not amenable to suit unless it expressly consents
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`or Congress abrogates its immunity. Neither of these
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`exceptions apply here, as will be more fully briefed
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`in the tribe's forthcoming Motion to Dismiss.
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` The stay is required, Your Honor, not
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`discretionary, because "sovereign immunity by nature
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`is jurisdictional," so it must be addressed before
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`the board may proceed to the merits. Sovereign
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`immunity goes to the issue of the court's power to
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`hear the case and, therefore, it must be decided as
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`an antecedent issue to the merits of the case.
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`Absent jurisdiction, the board cannot proceed to the
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`merits. It would frankly be unprecedented for the
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`board to deny the tribe the right to seek a dismissal
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`before conducting the hearing on the merits.
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` The -- every other instance in which a
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`sovereign has applied to the Patent Trial and Appeal
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`Board to seek a dismissal prior to a hearing on the
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`merits has been granted. And we can give you
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`multiple examples of that, and I believe some of them
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`are already in the record as Exhibits 2094 -- or will
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`be in the record as Exhibits 2094, 2095, and 2096
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`when filed.
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` The tribe's sovereign immunity is not
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`merely a liability defense. It's an immunity from
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`suit that would be effectively be lost if IPRs are
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`permitted to go to trial.
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` To respect the tribe's sovereign
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`immunity as required by binding Supreme Court
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`precedent, the court must stay this proceeding
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`pending a final determination of the tribe's
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`assertion of its immunity.
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` Should the board disregard binding
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`precedent and attempt to force the tribe to
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`participate in this process before ruling on the
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`applicability of the its immunity, the tribe has a
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`right to an appellate review.
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` The tribe does not and will not waive
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`its sovereign immunity to the IPRs proceeding against
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`the patents-in-suit.
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` Therefore, if the board allows the
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`September 15, 2017 hearing to proceed, the tribe's
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`immunity would be effectively abrogated in violation
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`of federal law. The better course is to stay the
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`current proceedings, preserve the status quo, and
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`continue the hearing until after the board has had
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`the opportunity to fully consider the tribe's
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`assertion of sovereign immunity and, if the board
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`acts adversely, await a decision on the application
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`of the tribe's immunity at the Federal Circuit, as
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`the tribe would pursue its rights to immediate appeal
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`under the collateral order doctrine.
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` I would also note that the one-year
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`statutory deadline to complete the IPRs, which
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`expires on December 8, 2017, could be extended under
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`37 C.F.R. Section 41.100(c) for either good cause or
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`joinder of new parties. The need to allow the tribe
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`to assert its sovereign immunity clearly qualifies as
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`good cause, and the addition of the tribe as a
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`newly-joined party and the late addition of Teva and
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`Akorn would also support an extension of the
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`deadlines.
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` The tribe requests 15 days to prepare
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`and file its motion to dismiss the IPRs. And
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`understanding that petitioners do not likely have a
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`great deal of experience in briefing Indian sovereign
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`immunity and may need time to line up additional
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`counsel with experience in that area, the tribe is
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`willing to voluntarily provide the petitioners 60
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`days from the day we file our motion to file a
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`response, or more time if they request it. And the
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`tribe would ask -- then ask for 15 days after their
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`filing to file a reply brief.
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` So unless the board has any other
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`Telephonic Hearing - September 11, 2017
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`questions for me, I believe that I've stated the
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`tribe's position. I understand this call is normally
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`not the place to argue case law, but I have at my
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`disposal citations and cases that back every factual
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`and legal statement I've made. If the board would
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`like a reference to anything now in this call, I can
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`provide it to you.
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` The St. Regis Mohawk Tribe would like
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`to thank you for taking our call today, and I look
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`forward to working with the board to resolving all of
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`these issues before us.
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` THE COURT: Okay. Thank you,
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`Mr. Shore. I think we understand the nature of your
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`request. I'll go ahead and allow Mr. Torczon to
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`respond.
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` MR. TORCZON: Thank you, Your Honor.
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`This is Richard Torczon from Mylan. As an initial
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`matter, I would like to address our objections to the
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`call. The board, in setting the call on Friday, said
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`we could do that today. I would also like to discuss
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`the moving of the hearing date and then, finally,
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`suggest that there's little reason to believe that
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`there would be success on the merits as a further
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`assurance for not moving the -- the date.
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` The objections to the call, there was
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`Telephonic Hearing - September 11, 2017
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`no meet and confer. This is a concern for several
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`reasons. In this case, particularly at this
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`juncture, we're seeing a lot of push on the -- the
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`petitioners and on the board to act hastily. In this
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`particular case because the -- there was no meet and
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`confer and Mylan at least was unable to determine a
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`timely availability for the call, one of our key
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`attorneys is not available today.
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` This is not the first time Allergan
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`has failed to do a meet and confer in this
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`proceeding. At least once before a reply was
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`authorized under similar circumstances, and we just
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`would like to note our objection to these procedural
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`irregularities. Let me clarify. There was a meet
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`and confer this morning, but I mean a meet and confer
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`before the call was set.
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` The second point of objection is that
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`we were given less than one business day to prepare
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`for this. The tribe has known about this issue since
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`April. They have been telling the media that. And
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`so, there really is no basis for a hurry in this
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`case. They have had plenty of time to consider what
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`they're doing. They've waited until the last
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`possible moment. The only construction that can go
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`with that is intentional prejudice to the petitioner.
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`And, therefore, we ask that you not consider their
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`belatedness a good reason for haste on Mylan's part
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`or on the board's part.
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` We also understand that this call is
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`just about whether you're going to authorize a motion
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`to delay the hearing and authorize a motion to
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`dismiss. Again, we've had so little time to prepare
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`to address the merit, we're really not prepared at
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`this juncture to address the substance of all of
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`those facts.
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` Having gone through the objections, I
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`would like to address the hearing date. As the board
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`knows, it is under a one-year clock to decide this.
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`That means that the decision is going to be due in
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`early December. While opposing counsel has noted
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`that there are bases for extending, this case is not
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`one of those cases that justifies such an extension.
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`The briefing has all been timely. The briefing has
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`all been complete. The only thing that awaits is the
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`hearing and the decision on the merits. Once again,
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`Allergan's decision to delay this until the last
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`possible moment is not good cause for anything.
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` Secondly, the board is supposed to
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`take into account in its proceedings the efficient
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`administration, the office, and the ability of the
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`Telephonic Hearing - September 11, 2017
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`office to timely complete its proceeding, both of
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`which clearly apply in this circumstance. The same
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`provision of the Statute 316(b) also requires the
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`board to take into account the economy and the
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`integrity of the patent system, both of which are
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`strongly implicated in this case.
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` The motion should not be authorized,
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`the motion to dismiss. But if it is, it should
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`proceeded in parallel, not to the exclusion of
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`consideration of the -- the merits. We have been
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`told that there's no precedent for delay. Quite to
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`the contrary, on the closest authority to this case
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`there is precedent for briefing after when the
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`immunity issue is raised at the very last moment.
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`That's the Neocort versus Maryland decision,
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`IPR2016-002008, Paper 28.
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` We have been told in this proceeding
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`or in this call that the -- that if the board doesn't
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`stay, there's an immediate appeal. We know that
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`that's not true. The first time we heard about this
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`was -- was about an hour ago from opposing counsel
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`during the meet and confer. They cited the
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`collateral order doctrine. Just cursory research
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`into that shows that that doctrine, which is actually
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`Statute 28 U.S.C. 1291, only applies to district
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`court proceedings and it's applied very, very
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`stringently even in those proceedings.
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` There's nothing that they have cited
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`that suggests that it applies in an administrative
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`context. There's nothing to suggest that it
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`overrules the finality doctrine that applies under
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`the APA. And in any case, we know from IPR specific
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`case law that there's no interrogatory appeal.
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`So -- so that's completely a misplaced assumption on
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`opposing counsel's part.
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` There's already been delay in this
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`case. We -- we've already set the hearing back, and
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`that's going to further prejudice the board's ability
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`to get a decision out in a timely fashion. We expect
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`that any motion that gets authorized will require
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`substantial briefing and fact production from both
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`sides.
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` Due to Allergan's last-minute raising
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`of this issue, we would expect to have time
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`commiserate to the month-long preparation they've had
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`to address this issue to fully explore the facts and
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`legal issues involved. Any opposition that would be
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`due from us should await Allergan's -- or rather the
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`tribe's action in the district court. While the
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`tribe is insisting that the board act immediately
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`affecting its -- its immunity in this case, they have
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`told that -- the district court in a letter on Friday
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`that they would make an appearance in due course.
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` This is clearly an effort by them to
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`play the court and the board's jurisdiction off each
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`other because they know that the minute they make an
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`appearance in the district court there will be yet
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`another waiver argument.
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` Mylan shouldn't -- shouldn't have to
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`file any opposition until they have acted in the
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`district court. Anything else would be allowing them
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`to manipulate both the board and the court's
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`jurisdiction.
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` Any delay in considering the merits in
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`this case, prejudices Mylan. Mylan has already
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`expended substantial resources in this case,
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`including since April when a lot of the discovery and
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`briefing has occurred. It's expended substantial
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`resources before Friday when this issue was first
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`raised preparing for the hearing. It also has
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`business interests that -- that have involved
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`substantial investment toward launching a product
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`that now would be delayed.
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` The tribe's media reported royalty for
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`delay works out to about $41,000 a day. That's just
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`the tribe's fraction of the royalties involved here.
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`So -- so they have a substantial interest in dragging
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`this out as long as possible. We really need to get
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`to the merits. The public deserves that. The
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`integrity of the patent system deserves that.
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` Our delay in making the request waives
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`any equity it has on this. Allergan has controlled
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`the timing. It has timed things to maximum the
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`prejudice of the board of Mylan. There's no
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`prejudice to Allergan. Allergan can appear for the
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`oral argument or not at its discretion. If it does
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`appear, it won't waive its rights any more than it
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`already has. So -- so that argument is specious.
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` If -- if Allergan remains, the tribe
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`can be dismissed and the proceeding can continue
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`without it. There's actually precedent from the
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`board -- again, the most on-point precedent in the
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`case of Reactive Services versus Toyota in which the
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`state entity was dismissed and the proceeding
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`continued with the other interested parties.
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` On the likelihood of -- of their -- of
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`the motion to succeed on the merits, I would like to
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`point out that we haven't cited any authority that's
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`directly on point to this situation. Counsel has
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`just told us that there are a lot of cases out there,
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`but we know for a fact that there's not a single IPR
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`tribal immunity case. They would like us draw
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`analogies to the 11th Amendment. The board is
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`probably very familiar with the 11th Amendment and
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`knows that it does not apply to tribes. If there's
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`any doubt, there's multiple Supreme Court cases that
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`state that.
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` Instead, tribal immunity is a
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`common-law privilege. It doesn't control any
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`Congressionally-mandated scheme. There's ample
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`Supreme Court and Appeals Court authority for that.
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` So -- so they are essentially asking
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`you to use federal common-law to overcome a statutory
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`scheme that Congress has created.
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` There are also plenty -- there's a lot
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`of reasons for concern that -- that this transaction
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`is a sham transaction. In this case, the tribe did
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`not purchase the intellectual property. Instead,
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`they were paid to take it, plus promised a
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`$15 million a year royalty stream on top of the $13
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`and a half million that they were paid to take it.
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` There are extensive cases in a lending
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`fraud context where federal courts are permitting
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`extensive briefing and discovery into these kinds of
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`sham transactions, and at least in one case
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`there's -- federal prosecution is being pursued on
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`racketeering charges in these sort of circumstances.
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` So facially this transaction is a
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`sham. There's no reason to believe that it will lead
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`to any success. But in any case, there's an
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`unequivocal waiver here. Mylan expects to have a lot
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`of arguments on merit, but you should have confidence
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`that this motion can't succeed because they have
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`clearly sought out this forum. Mylan did not drag
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`them into this forum. Akorn did not drag them into
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`this forum. Teva did not drag them into the forum,
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`and even the board did not drag them into this forum.
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`Rather, by their own admissions to the press -- the
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`press releases, they have -- the tribe has said that
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`they have sought this out as an opportunity that they
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`are marketing to patentees, that this is basically a
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`protection scheme that they have put forth. They
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`have been looking at this with the advice of counsel.
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`They are marketing it to people. They are
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`specifically targeting the Patent Trial and Appeal
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`Board. They are going to patentees who they think
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`have weak patents and at risk of cancellation, and
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`they are offering this protective service. They are
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`explicit selling immunity.
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` So this is not -- this is totally
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`non-analogous to any of the 11th Amendment cases even
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`if those sorts of cases apply because in all of those
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`cases, the state entity was the pre-existing owner of
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`the intellectual property. In all of those cases, it
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`was the state entity that had been dragged into the
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`proceeding against its will. The tribe here has not
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`been dragged into this proceeding against its will.
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`It has deliberately by its own admission targeted
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`these proceedings for exactly this kind of
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`revenue-generating opportunity.
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` So there's -- there can be no question
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`that there's waiver under these circumstances. If
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`waiver has any meaning in any context, the tribe has
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`waived it.
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` I also point out that there's a
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`statutory waiver under 35 U.S. 8.261. When you
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`accept a patent, you accept it with strings attached.
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`Congress did not create unlimited property. Under
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`261, which is the only one that addresses any kind of
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`property rights under the patent code, Congress
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`actually expressly reserves that any ownership is
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`taken subject to the provisions of the patent code.
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`One of those provisions is amenability to IPRs. So
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`the tribe when went into this with eyes open. They
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`are stuck with it. They have waived it statutorily.
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`They have waived it equitably.
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` Finally, I would like to point out
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`that the director of the PTO has policy guidance and
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`management supervision duties under 35 U.S.D.
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`3(a)2(a). Sovereignty is clearly a policy issue.
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`Destroying IPRs with sham transactions is a policy
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`pattern. The head of Allergan has said that this is
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`going to open the floodgates. The tribe has said
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`that they already have an unidentified non-pharma
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`tech patent owner who -- who they are extending this
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`protection service to.
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` So this is just the tip of the
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`iceberg. The effects of this would be to -- if
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`granted, if the motion were granted, would be to deny
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`the director of the power to institute. So this is
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`an attack on director power -- we understand that the
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`board has taken a position that you cannot request an
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`expanded panel. However, SOP1 actually in
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`Section 3(c) says that a party can suggest it. And I
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`strongly suggest -- Mylan strongly suggests that if
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`the board decides to authorize this motion that it do
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`so in a manner that allows the director to play the
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`director's policy role and speak on how the
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`director's institution powers would be used in this
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`context.
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`Telephonic Hearing - September 11, 2017
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` MR. SHORE: Your Honor, this is
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`Michael Shore. If I may quickly respond -- and I
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`apologize. I'm sure that my opponent was speaking
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`with relatively little preparation, so I'll forgive
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`him for his lack of understanding of tribal immunity.
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`But --
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` THE COURT: Mr. Torczon, are you
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`finished?
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` MR. TORCZON: I -- I am, Your Honor.
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`I'm -- I'm willing to -- to hear what Mr. Shore says.
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`I would like an opportunity to respond, though.
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` MR. SHORE: First, tribal sovereignty
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`is broader, not narrower (inaudible), and it is
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`clearly established in the case law that a sovereign
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`immunity does not waive its sovereign immunity
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`through the acts of (inaudible) to a corporation.
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`It's either not entitled sovereign immunity or that
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`it has waived sovereign immunity. There's a whole
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`slew of cases on that.
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` Sovereign -- sovereign immunity
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`attaches as part of the asset. It doesn't matter
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`where the asset is or how the asset is positioned
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`before the acquisition. I think the Seminole case on
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`that came out of Puerto Rico out of the First
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`Circuit, but that case has followed many, many times.
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`But that is not an issue.
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` Second, some of the statements he made
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`were just wrong. This -- this transaction has not
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`been contemplated since April. Allergan and St.
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`Regis Mohawk Tribe did not ever talk to one another
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`until August, and the deal was consummated on Friday.
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`And within two hours of the deal being consummated,
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`paperwork was filed. So this is not just something
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`that anyone is sitting on their hands about at all.
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` There is -- there is no waiver by
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`appearance in district court. And I can kind of
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`speak with authority on this because on behalf of the
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`University of Texas in the Texas Board of Regents
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`versus Texas case I actually won on that issue in the
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`Federal Circuit that if you file in one forum that
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`doesn't mean that you waive as to any other forum.
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`As a matter of fact, the law is you only waive as to
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`the forum where you file compulsory (inaudible). For
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`state sovereign immunity -- actually, tribal
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`sovereign immunity only allows counterclaims for
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`recoupment.
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` So his understanding of tribal law is
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`wrong. His understanding of the facts are wrong.
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`His understanding of the law generally here is wrong.
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`But -- but what it really comes down to, Your Honor,
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`is I think he has articulated very well that he needs
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`to do a lot of research, the board needs --
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` THE COURT: All right, Mr. Shore. I
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`think I understand your position. Let me ask a
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`couple questions.
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` Ms. Whelan, are you withdrawing from
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`this case?
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` MS. WHELAN: I'm sorry, Your Honor?
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` THE COURT: Are you withdrawing as
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`counsel from this case?
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` MS. WHELAN: No, we are not.
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` THE COURT: So will you be prepared on
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`Friday to attend the hearing?
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` MS. WHELAN: If the hearing proceeds,
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`we will be prepared to attend the hearing.
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` THE COURT: And will you be
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`representing the patent owner?
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` MS. WHELAN: We will only be
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`representing Allergan.
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` THE COURT: And -- but not as patent
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`owner?
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` MS. WHELAN: Correct.
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` THE COURT: Okay. Thank you.
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` MR. TORCZON: Your Honor, this is
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`Richard Torczon. If I may address just that point.
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` Just as a matter of formality, the
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`updated notice on Friday was defective and -- and
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`confusing. It does leave -- leave open the question
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`of who's got a power of attorney for whom and who is
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`speaking from whom -- for whom.
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` The board has a rule in place that
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`does allow for a represent patient by a part owner or
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`somebody with a partial interest in the case that's
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`42.9(b). It sets forth a process for doing that.
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`And just as a matter of formality, I will note that
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`that process has not been observed here.
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` MR. SHORE: Your Honor, I've got
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`another, I think, relatively important point to make.
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`The earlier complaints about conferencing and noted
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`and things like that, the court should be aware that
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`prior to any conference today, Mylan had already sent
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`a letter to the district court judge saying that
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`Mylan will vigorously oppose the transparent delay
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`tactic before the Patent Trial and Appeal Board.
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`They had already done their research. They had
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`already made --
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` THE COURT: Sure. We have our own
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`procedures here, and Mr. Torczon is absolutely
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`correct that before any call to the board the parties
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`are to confer and to at least discuss the issue
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`amongst themselves.
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` MR. SHORE: And we tried. We
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`contacted them on Friday, on Saturday. They refused
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`to conference with us until this morning.
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` MR. TORCZON: Your Honor, if I may,
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`they put in their request before they contacted on us
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`Friday. In fact, I believe the first action was
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`press releases, then they contacted the board, then
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`they contacted us. And at close of business on
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`Friday, they wanted to know whether we could meet and
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`confer in response to your order telling them to do
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`that. We are -- conferred with them less than one
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`business day which is, I think, very good time.
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` THE COURT: Your objection is
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`understood, Mr. Torczon. I -- I have a question for
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`y
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