Bass Goes Fishing: Troubles Ahead for Pharma?

By Tom Engellenner
Note: This article is adapted from a longer guest post on Forbes.com last week. To view the Forbes article click here.

Inter partes review (IPR) is a process established by Congress to permit defendants in patent infringement suits to quickly and inexpensively challenge patents asserted against them in an administrative trial at the U.S. Patent Office – and this process has proved to a potent weapon for patent challengers. In the roughly three-years that inter partes review has been available, over 80 percent of the trials have found patent claims to be invalid. Some in Congress are now questioning whether the IPR rules are perhaps skewed too far in favor of the challengers.

At the time the new patent law was enacted in 2012, it was assumed that the IPR process would be used primarily against so-called “patent trolls” rather than the holders of life science patents. And it is safe to say that no one in Congress intended this process to be an opportunity for Wall Street to get into the pharmaceutical patent-busting business. But the law of unintended consequences seems to have come into play.

Over the past five months, Kyle Bass, the manager of the Texas-based Hayman Capital Management, has launched at least seven new hedge funds for investors to challenge patents on FDA approved drugs. The funds, named the “Coalition for Affordable Drugs” (Series I – VII), have launched at least 16 challenges to patents owned by Acorda Therapeutics, Shire, Jazz Pharmaceuticals, Pharmacyclics, Celgene, Biogen and Pozen.

The scheme seems too simple to be true: short the stock of a publicly traded pharmaceutical company, file an IPR with the Patent Trial and Appeal Board (PTAB) that sends the stock price tumbling and then cover your short position by buying the stock at a hefty discount caused by the patent challenge.

Continue reading “Bass Goes Fishing: Troubles Ahead for Pharma?”

PTAB’s Broadest Reasonable Interpretation Rule Survives Another Challenge (Barely)

By Tom Engellenner
The Court of Appeals for the Federal Circuit denied Cuozzo Speed Technology LLC’s petition for en banc rehearing of a February panel decision affirming the PTAB’s use the so-called broadest reasonable interpretation (BRI) standard in claim construction.

The decision to refuse en banc rehearing was a 6-5 decision with Chief Judge Prost and Judges Newman, Moore, O’Malley and Reyna dissenting.  Interestingly, only four Federal Circuit Judges (Dyk, Lourie, Chen and Hughes) joined in a concurring opinion explicitly approving of the BRI standard.  The other  two judges (Wallach and Taranto), while voting to deny rehearing, chose not to join either side’s opinion.

The decision (with the concurring and dissenting opinions) can be found here:   Cuozzo-En-Banc-Denied

Post-Grant Challenges In Life Sciences: A Midyear Assessment

By Raymond A. Miller and N. Nicole Stakleff
The America Invents Act established inter partes review and post-grant reviews mechanisms to challenge the validity of issued United States patents. These procedures were created to improve patent quality, and were introduced in part because of perceived abusive enforcement by nonpracticing entities in the consumer electronics space. As with most legislative changes, the consequences of these post-grant challenge mechanisms may not be fully appreciated until long after the law has been enacted. What can be appreciated at this early stage, however, is that the delicate balance between innovators, generics, biosimilars and competitors established by the 25-year framework of Hatch-Waxman and the more recent Affordable Care Act has been impacted by post-grant challenges in the life science space.

IPRs have recently been in the spotlight as the life sciences industry has begun to use these proceedings to challenge the validity of issued patents covering lucrative therapeutics. Media attention intensified when hedge funds began filing IPRs against patents covering a number of branded pharmaceutical and biologic products. These IPRs allegedly aim to “lower drug prices for everyone,”[1] but in some instances, they have resulted in falling stock prices for the branded drug company, potential gains for those “shorting” the stock, splashy headlines in the media, and anxiety throughout the industry. Is this all “much ado about nothing”? Continue reading “Post-Grant Challenges In Life Sciences: A Midyear Assessment”