Bass’s First IPR Decision Rendered – Victory for Patent Owner, Shire Lpc

By Tom Engellenner
If Kyle Bass’s Coalition for Affordable Drugs Series II hedge fund was hoping to reap a windfall from short positions in Shire Plc’s stock this week, it was dealt a major setback by a Patent Trial and Appeal Board (PTAB) decision to uphold Shire’s patent on its colitis drug, Lialda®.  In a final written decision on U.S. Patent 6,773,720 (IPR2015-00988, Oct. 5, 2016), the PTAB found that Bass’s group had failed to meet its burden of proof that the challenged claims were obvious over the prior art.

According to the PTAB panel, “[a]t best for Petitioner, the record before us indicates a close call, but certainly not a strong case, regarding a showing of obviousness by the preponderance of evidence based on our analysis of the prior art. To the extent that it is a close call, it is noteworthy that the burden of persuasion is on Petitioner.”  Final decision,. p. 23.

The patent in issue was directed to controlled release formulations of an active ingredient, 5-amino salicylic acid (5-ASA) having an inner matrix chosen from a list of lipophilic materials and an outer matrix of certain hydrophilic materials.  Bass’s group relied on two references for its obviousness argument: Groenendall, which taught that 5-ASA could be delivered in a controlled release manner and Leslie, which taught the use of combined lipophilic and hydrophilic matrices – but not the specific lipophilic compositions listed in the patent’s claim.

The PTAB decision also concluded that even if Lelslie taught a lipophilic matric as recited in the Shire patent’s principal claim, it would not have been obvious to combine the references given the myriad of controlled release formulations:

Petitioner does not explain adequately, however, why one “would have been motivated to look to Leslie” in particular to “improve” the 5-ASA compositions disclosed in Groenendaal when one takes into account the crowded art of controlled release formulations generally.

Shire’s stock closed on Wednesday, October 5th essentially unchanged from the beginning of the week.  Liadla® sales reportedly generated over $600 million last year (about 11 percent of Shire’s total revenue).  The lack of any boost in Shire’s stock price may reflect the bigger battlefield over this drug.  Shire is concurrently fighting several generic drug companies, including Teva, Mylan and Zydus in federal court patent infringement litigations based on the ‘720 patent.

The decision this week is the first final written decision to be handed down by the PTAB on the numerous petitions filed by Bass’s so-called Coalitions for Affordable Drugs (Series I-XI).  These hedge funds had filed 33 petitions in 2015, and 18 were accepted for review.  Decisions are also expected this month on two blood cancer treatment patents owned by Celgene Corp – and a decision on another Bass group petition (against U.S. Patent No. 7,056,886, for Shire’s Gattex, a treatment for short bowel syndrome) should be rendered by Oct. 23, 2016

Bass Continues Fishing; Pharma Seeks Sanctuary

By Tom Engellenner
It’s time for an update on Kyle Bass’s efforts to rid America of the pharmaceutical patents that support high priced drugs.  Between February and September 2015, at least eleven investment funds organized by J. Kyle Bass and Erich Spangenberg (the Coalitions for Affordable Drugs Series I – XI) filed nearly three dozen different petitions for review of patents held by various drug companies.  The petitions were designed to take advantage of the new inter partes review (IPR) proceedings established under the America Invents Act (AIA) in 2012.

Speculation has been rampant as to how Bass’s investors will benefit.   Most people think that the funds have been shorting (or will short) the shares of the publicly traded pharmaceutical companies that own the patents; wait for the stock values to tumble and then cover their short positions by buying the stocks at a hefty discount caused by their patent challenges.  Others suggest that the funds will invest in generic drug manufacturers that will be able to compete once the drug patents are eliminated.

In the fall of 2015, Bass and Spangenberg appear to have switched gears and began filing petitions in their own names rather than in the names of the various Coalitions for Affordable Drugs (CAD) funds.  Whether this represents an actual change in the funding of the IPR challenges or just a legal nicety (i.e. a conclusion that the underlying CADs need not be named under USPTO rules) is not clear.

The hopes of the pharmaceutical industry that these petitions would be quickly dismissed out of hand have been dashed by the Patent Office.  Despite initial setbacks for the CADs early last year, over half of the petitions (18 out of 33) have now been found to present a reasonable likelihood of success.  In each of these instances, a trial is underway to determine whether the patent is invalid.  Given the high statistical likelihood (over ninety percent) that patents challenged under the AIA are ultimately found at least partially invalid once a trial is completed, the pharmaceutical companies have reason to be worried. Continue reading “Bass Continues Fishing; Pharma Seeks Sanctuary”

Hedge Fund Troll Undetered by Initial Setbacks

By Tom Engellenner
Kyle Bass and his hedge funds, the Coalitions for Affordable Drugs LLC, have failed in several of their initial attempts to knock out drug patents. (See our prior article detailing the first seven hedge funds formed by Bass to challenge various pharmaceutic companies.) In two decisions handed down late last month, the Patent Trial and Appeal Board (PTAB) of the US Patent Office refused to initiate trials on two petitions filed by Bass to challenge two patents on Acorda Therapeutics Inc.’s multiple sclerosis drug Ampyra. Then on September 2, 2015 another one of the Bass Funds, the Coalition for Affordable Drugs (Series V), was also dealt a setback in its effort to invalidate Biogen’s patents on another multiple sclerosis drug, Tecfidera.

However, in each instance, the PTAB reached decisions on the merits of the hedge fund’s petitions. The fact that the PTAB considered the petitions and did not exercise its discretion to reject them outright based on the fund’s primary goal of depressing stock prices, was all the encouragement Bass needed.   During the last week in August and the first week in September, the Bass funds filed nine more challenges to pharmaceutical patents, bringing the total number to 32 invalidity petitions by eleven different funds.

In the case of the initial challenges to Acorda’s patents, the PTAB found that the Bass fund had failed to prove that two posters presented at a conference were “printed publications” due to insufficient evidence on how long the posters were presented, on the expertise of those who may have seen the posters, or the likelihood that one could have copied the poster material. The Board concluded, “we are not persuaded that petitioner has made a threshold showing that the posters were sufficiently publicly accessible to qualify as a ‘printed publication.’”

Despite this holding, the Bass fund has apparently decided to “double down” on the Acorda bet, filing another petition against each of the previously challenged Acorda patents on September 2nd as well as new petitions against two other Acorda patents covering the Ampyra drug on September 3rd.

Continue reading “Hedge Fund Troll Undetered by Initial Setbacks”