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.
Continue Reading Bass Continues Fishing; Pharma Seeks Sanctuary