In 2012, the America Invents Act (AIA) created new Patent Office procedures for challenging the validity of issued US patents. These procedures have become widely used as a quicker, cheaper alternative to challenge the validity of patents, when compared to litigation. On January 7, 2015, US hedge fund manager Kyle Bass, famous for predicting the subprime mortgage crisis in 2008, announced that he has developed plans to take on some of the world’s largest drug producers by challenging the patents that protect their top branded pharmaceutical products using the above-mentioned Patent Office validity challenges.

Potential targets should begin preparations now in order to maximize their chances for success, should they become involved in these new, fast-moving AIA patent procedures.

Bass, the founder of Dallas-based Hayman Capital Management, LP stated that drug firms have held onto patents in questionable ways and that he plans to take around 15 pharmaceutical firms into AIA validity challenges. He claims that the companies he plans to challenge have a combined market capitalization of US$450 billion and that if he succeeds his investments will benefit and medicine prices in the US will be significantly reduced.

Bass did not name any specific targets and declined to elaborate on how he plans to make financial gain from the patent challenges. He also declined to give any details about his investment positions.

The AIA procedures have become increasingly popular for parties wishing to challenge the validity of issued US patents because of the relatively low cost and shorter time frame (12 months from institution) of the procedures when compared with district court litigation. The AIA procedures also apply both a lower standard of proof for challenging validity (i.e., preponderance of the evidence versus clear and convincing evidence at a US district court); and a different patent claim construction approach (broadest reasonable interpretation versus the more narrow construction approach followed by district courts based on intrinsic evidence).