On Friday September 25, the PTAB issued its decision on Celgene’s sanctions motions seeking dismissal of five IPRs filed by Kyle Bass and his hedge fund Coalition for Affordable Drugs VI. In June, Celgene filed sanctions motions requesting dismissal of Bass’ petitions in IPR2015-01092, -01096, -01102, -01103, and -01169 alleging that such use of IPR proceedings by a hedge fund served no legitimate interest and constituted an abuse of process. In denying the motions, the Board stated that they “take no position on the merits of short-selling as an investment strategy other than it is legal, and regulated.” (IPR2015-01092, Paper 21 at 3.) The PTAB also held “that Congress did not limit inter partes reviews to parties having a specific competitive interest in the technology covered by the patents.” (Id. at 4.)
In addressing Celgene’s argument that Bass lacked a legitimate interest in challenging the patents, the Board stated “[t]he purpose of the AIA was not limited to just providing a less costly alternative to litigation. Rather, the AIA sought to establish a more efficient and streamlined patent system that improved patent quality, while at the same time limiting unnecessary and counterproductive litigation costs.” (Id. at 4.)
Celgene is not the only party targeted by Bass raising the issue of abuse of process. On July 27, Pharmacyclics filed a sanctions motion in IPR2015-01076 and NPS and Jazz Pharmaceuticals and were asked to provide additional briefing on abuse of process earlier this month in IPR2015-00990 and -01018. While the PTAB has decided thus far not to prohibit the filing of IPR petitions by hedge funds, legislative reform which would do just that has been proposed. In the STRONG Patent Act, standing would be limited to those “sued for infringement of the patent” or “charged with infringement under the patent” and their parties and real parties in interest– much like the current standing for CBM petitions. The Innovation Act of 2015 includes a more targeted prohibition against filings by hedge funds. In particular, this legislation would require petitioners to certify that they do not have a financial interest in seeing the stock of the patent holder decline. Both proposals remain under review.
The PTAB’s decision on sanctions comes after the denial of institution of three (of 32 total) IPRs filed by Bass. On August 24, the Board denied Bass’ two IPRs against Acorda, and on September 2 the petition against Biogen was also denied. Bass filed a request for rehearing in the Acorda petitions on September 23.