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.

The companies affected include Biogen, which must defend at least one patent on its Tecfidere® drug, recently approved by the FDA for treatment of multiple sclerosis; Aegerion Pharmaceutics, which must defend two patents on its Juxtapid® cholesterol-control drug; Acorda Therapeutics, which must defend four patents on its Ampyra® MS drug; Celgene, which must defend four patents on its drug Revlimid® for the treatment of multiple myeloma; and Pozen, Inc., which must defend a patent on its Vimovo® drug for pain or inflammation.

In an effort to put an end to these proceedings, the pharmaceutical industry began lobbying Congress late last year for a legislative fix that would exempt all drug patents from inter partes review proceedings before the new Patent Trial and Appeal Board (PTAB). However, this proposal for an industry-specific carve-out seems to have gathered little to no support on the Hill. Even more modest proposals to impose some sort of standing requirement on IPR petitioners are unlikely to get any traction in this election year session of Congress.

In an odd twist, Mr. Spangenberg has gone public with his own squabble with Patent Office Director, Michelle Lee, who he alleges has refused to provide proper responses to his Freedom of Information Act (FOIA) requests for internal documents and e-mails relating to the CAD-funded patent challenges. According to Spangenberg, all he has gotten so far is 600 pages of heavily redacted e-mails. “What we want to know is ‘what’s [USPTO Director] Michelle Lee hiding and why?’”