Kyle Bass to PTAB: Greed is Good

Posted by Post-Grant Group on Aug 17, 2015

As we recently noted, patent owner Celgene moved for sanctions against Kyle Bass and his hedge funds, arguing that the funds are engaged in extortion and that they are abusing the IPR process. On August 11, 2015, the hedge funds responded with a full-throated defense of their practices (IPR2015-01103 Paper 15).

The hedge funds begin their opposition by proudly embracing their desire to turn a profit, as the public at large benefits, too, they argue. Commenting broadly on America’s capitalist framework, the funds state that “[t]he U.S. economy is based largely on the notion that individual self-interest, properly directed, benefits society writ large.” They note that “at the heart of nearly every patent and nearly every IPR, the motivation is profit,” and therefore “[h]aving an economic motive for petitioning [for an IPR] simply does not turn the petition into an abuse of process.” The hedge funds even turn the criticism back on Celgene: “Celgene’s patent-conferred monopoly results in Revlimid prices that exceed $580 per pill—creating costs in excess of $200,000 per patient per year. . . . Celgene is not giving Revlimid or its profits away.”

The hedge funds then turn to the patent owner’s substantive arguments, responding that:

  • In enacting the AIA, Congress broadly authorized challengers, including hedge funds that short-sell the patent owner’s stock, to petition for IPR.
  • Instituting a legal proceeding with an ulterior profit motive cannot establish abuse of process. The hedge funds are protected by Noerr-Pennington immunity, protecting those who petition the government, because the patent owner has failed to establish that one of a few exceptions to that immunity applies. To strip the petitioners of Noerr-Pennington immunity, the patent owner must demonstrate that the petition is both “objectively baseless” and “brought with specific intent to further wrongful conduct,” the hedge funds argue.
  • A sanction of refusing to institute an IPR exceeds the authority granted to the PTAB by Congress. This argument turns on prior Federal Circuit interpretation of the term “proceeding,” to mean what happens after a decision to institute an IPR. The hedge funds argue that sanctions are only available to remedy improper use of a “proceeding[[,]]” so the PTAB has no authority to dismiss the petitions before institution.

We await the next volley in this dispute.

Topics: Kyle Bass, Patent Owners

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