- Reuters/ Rick Wilking
Texas hedge fund manager J. Kyle Bass’ big short strategy lives on.
The founder of Hayman Capital Management just scored a victory in his war against the pharmaceutical industry and what he has called their “BS patents.”
Bass has been filing petitions with the US Patent and Trademark Office, challenging drugmakers’ patents while shorting their stocks. Some of the drugmakers responded by filing for sanctions and describing that strategy as an abuse of process.
The Patent Trial and Appeal Board, part of the PTO, said in a notice Friday that an economic motive is not “an abuse of process”:
Profit is at the heart of nearly every patent and nearly every inter partes review. As such, an economic motive for challenging a patent claim does not itself raise abuse of process issues. We take no position on the merits of short-selling as an investment strategy other than it is legal, and regulated.
This means Bass can continue to challenge drugmakers’ patents.
Bass created the Coalition for Affordable Drugs earlier this year, and the group has now filed 36inter partes review petitions with the PTO, challenging the validity of some drugmakers’ patents while also betting against the company’s stocks.
Some of his targets, including pharma giant Celgene, have filed motions with the PTO for sanctions on a claim of “abuse of process” by Bass, claiming he is driven by an economic motive. He has filed five IPRsagainstCelgene’sdrug patents.
It’s all part of an “activist short strategy” that Bass thinks will end what he considers to be “pay for delay” agreements that stop lower-cost generic drug competitors from entering the market.
Bass has fully admitted a profit motive. He has also pointed out that the drug companies are also in the business of making money when they fight to keep their patents longer and therefore to keep their drug prices high.
What’s more, on top of Bass making money for his fund and investors, if he is successful, his actions could save American consumers significant amounts of money.
But right now, the strategy isn’t playing out in Bass’ favor. He has had petitions for two drugs tossed out before a trial could be held. He has said that he’s going to “fight” and that he’s “not a quitter.”
Bass’ partner in this effort, Erich Spangenberg, put out the follow statement on Friday night:
The six member panel’s decision is obviously correct as the law is crystal clear that “any person other than the owner” can file an IPR and makes no mention of motivation, altruism or any of the other ruses raised by Celgene and Jones Day. I find it ironic that Jones Day argued that the CFAD petitions are a waste of PTAB resources – I agree that someone here was wasting PTAB resources and the perfunctory nature of the PTAB’s decision makes abundantly clear who that was in this case.
Now that this tomfoolery is behind us, my hope is that the PTAB will get to the merits and [call] balls and strikes.
As the events of this past week demonstrate, with politicians, consumer groups, traditional and social media and every day Americans talking about high drug prices and things that need to be done to reign them in, there is one US agency-the US patent office– that can finally standup and end the obscene evergreening practices engaged in by the likes of Celgene that imposes unfair penalties on patients and taxpayers. The PTAB institution rate on pharma IPRs is approximately 46% and far lower than the 75% plus rate for other technology areas. While pharma makes these specious arguments about things like the “unpredictable arts” and protecting investment, Pharma patents are entitled to no greater deference than any other patents in any other technology area. If Congress wants to give 30 plus year monopolies to pharma companies, they are free to do so-this is not the proper role of the US patent office and the PTAB.
Here’s the filing: