Last week, the latest chapter in the Kyle Bass IPR saga unfolded, as one of the besieged patent owners filed a motion for sanctions against the petitioner and the hedge funds funding the petitions. The patent owner, Celgene, alleged that filing IPR petitions was part of an extortion attempt, amounting to an abuse of process and improper use of IPR proceedings. It proposed that the PTAB sanction the hedge funds by dismissing the petitions filed against Celgene patents.

In the motion, Celgene explains that the 15 entities formed by Kyle Bass—called the Coalition for Affordable Drugs I-XV—are simply a front for a new strategy: filing IPR petitions in order to profit from resulting decline in the stock prices of the patent owners. It cautions that this strategy, unchecked, will cause the PTAB to be inundated with petitions similarly “misusing IPRs as investment strategies.”

In its arguments for sanctions, Celgene asserts that Congress enacted the AIA with a “specific focus on non-practicing entities” and created IPRs as a “less costly alternative to litigation,” contrary to the purported motives of the hedge funds. It suggests that entities without any litigable patent claim should not be able to file an IPR petition, at least not with such motives. Celgene also asserts that the PTAB has authority to issue sanctions for abuse of process or any other improper use of proceedings.

In response to the PTAB’s instructions that the parties provide the elements and the standard of proof required to establish abuse of process or improper use of proceedings, Celgene proposes use of the elements used by courts and the F.C.C. and the “reasonable likelihood” standard. Specifically, it proposes that abuse of process can be established by the use of a process to achieve a goal for which the process was not designed, while improper use of proceedings requires a broader showing. Celgene argues that the hedge funds’ actions meet both of these requirements, and so the petitions should be dismissed.

A response from the hedge funds is expected soon.