Kyle Bass and the Coalition for Affordable Drugs have scored a big win in the multiple IPRs they filed to invalidate Celgene Corp.’s patents and ultimately profit by shorting its stock. The Board has ruled against imposing the sanctions Celgene requested against Bass for improper purpose and/or abuse of process, clearing the way for all of the IPRs to proceed. The reasons advanced in the ruling may open up the IPR process to entities well beyond those that have traditionally used procedures at the Patent Office to invalidate patents.
In making its ruling, the Board discussed Bass’ motivation for profit, his lack of a competitive interest against Celgene, and the purpose of the America Invents Act. Regarding Bass’ motivation, the Board stated, "Profit is at the heart of nearly every patent and nearly every inter partes review.” It went on to say that short-selling is legal and such an economic motive is proper. It also mentioned that the inter partes review process does not require that the entity bringing the petition have a “specific competitive interest in the technology." Thus, there is no requirement that Bass or the Coalition for Affordable Drugs actually compete with Celgene in any form or fashion in order to file IPRs against it.
Most significantly, the Board stated that the AIA was intended to "establish a more efficient and streamlined patent system that improved patent quality” and that any person may file a “meritorious” patent challenge. Therefore, since Celgene did not argue that the petitions were without merit, the Board had no reason to sanction Bass by dismissing the petitions.
Now the Board will address these petitions on their merits as opposed to simply dealing with this “tomfoolery”—as Bass’ partner in this effort, Erich Spangenberg, called it.
Dealing with the petitions on the merits does not mean that they will ultimately lead to invalidating the challenged patent. [To read about the Board's previous rulings against Bass, click here and here]. However, the Board’s reasoning points the way for others with creative ideas to use the IPR process for profit – and this is unlikely the last we hear of Kyle Bass or others with similar business models.