Patent Owners to Bass: Something Smells Fishy

Posted by Ed Walsh on Jun 12, 2015

Hedge fund manager Kyle Bass has thrown the pharmaceutical industry into turmoil by using the IPR process to challenge patents covering drugs with literally billions of dollars in annual sales. Now, the patent owners are firing back, seeking to have his challenges thrown out as an abuse of process. The patent owners may be getting some traction—or at least a PTAB panel that is willing to listen to their concerns, as shown by a recent grant of permission to make a motion to dismiss the IPRs (see, for example, IPR2015-01092, paper 7).

These petitions have been filed in the name of the Coalition For Affordable Drugs (among others), ostensibly serving the public interest of removing patents that improperly block generic competition and inflate drug prices. But, as reported in The Wall Street Journal and other media sources, there may be other motives at work. Mr. Bass, and the hedge fund that he manages, has bet against the stock of the companies that own these patents. There are rumors of more aggressive efforts to gain personal financial benefit from these IPR proceedings and threats to file the petitions that led to these—and other—IPRs.

The gist of the drug companies’ complaint is not yet revealed in public filings. However, it is clear from the public record that they made enough specific allegations of improper action to persuade the PTAB to receive a motion to dismiss the IPRs as being filed for improper reasons. That motion is due the last week of July.

Sanctions, including dismissal, in an IPR are expressly authorized by Board rules, but are rarely granted. High-stakes drama is sure to unfold as the drug companies file their motions and attempt to justify their requests for sanctions. These cases bear watching for other reasons, as they are likely to provide clarity on issues applicable in other cases, including what needs to be proved to win sanctions.

Topics: Kyle Bass

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