Earlier this year, Kyle Bass announced his intention to use the PTAB as a mechanism to invalidate pharma patents that foster “inflated” drug prices. Since then, Mr. Bass and his coalitions “for affordable drugs” have been widely criticized for misusing PTAB resources to benefit his hedge fund. Mr. Bass claims to have the most altruistic of motives (e.g., keep drug prices down) but his alleged “side bets” on companies that would benefit in the absence of these patents lead some to conclude that his primary motive is otherwise.
The attacks are widespread and come from his targets (i.e., patent holders), trade associations, lobbying groups, legislators and the like. The accusations include everything from extortion to abuse of process. Many demand that the PTAB not only deny his petitions, but impose severe sanctions in an exercise of discretionary power. Bass denies that a profit motive should have any bearing on petition decisions (or sanctions) and contends that profit is at the heart of all petitions filed with the PTAB.
Thirty three petitions later, Bass is 0 for 3 in PTAB decisions on the merits. But the cloud of his most recent “loss” may have the silver lining he’s been waiting for. In recent decisions regarding several IPRs , the PTAB denied the petitions on the merits, but agreed with Bass that “profit as at the heart of nearly every patent and nearly every IPR.” More importantly, the PTAB conceded that “an economic motive for challenging a patent claim does not itself raise abuse of process issues.” For Bass, this means that at least thirty more of his pending petitions will likely be decided on the merits (of the patents), not on his alleged motives or tactics. And the threat of any sanctions from the PTAB is substantially diminished.
For the time being, it does not appear that PTAB intends to address the perceived problems created by Bass. The PTAB does not seem willing to scrutinize the motives behind a given petition and will not discriminate against Bass for his atypical approach or use of the AIA.
Will Congress help?
Current legislation pending in the House appears to be aimed squarely at Bass and any copycats. For example, Innovation Act, H.R. 9 would require petitioners to certify that any interested parties have not and will not hedge against a decrease in the market value of the patent owner. Others have asked to align IPRs with CBMs to require an accusation of infringement before an IPR petition can be filed. Still others have sought to exclude certain pharma patents altogether from PTAB Trials.
Any help from Congress is likely to be hard fought and slow to materialize. So stay tuned…
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