Kyle Bass and his hedge funds, the Coalitions for Affordable Drugs LLC, have failed in several of their initial attempts to knock out drug patents. (See our prior article detailing the first seven hedge funds formed by Bass to challenge various pharmaceutic companies.) In two decisions handed down late last month, the Patent Trial and Appeal Board (PTAB) of the US Patent Office refused to initiate trials on two petitions filed by Bass to challenge two patents on Acorda Therapeutics Inc.’s multiple sclerosis drug Ampyra. Then on September 2, 2015 another one of the Bass Funds, the Coalition for Affordable Drugs (Series V), was also dealt a setback in its effort to invalidate Biogen’s patents on another multiple sclerosis drug, Tecfidera.

However, in each instance, the PTAB reached decisions on the merits of the hedge fund’s petitions. The fact that the PTAB considered the petitions and did not exercise its discretion to reject them outright based on the fund’s primary goal of depressing stock prices, was all the encouragement Bass needed.   During the last week in August and the first week in September, the Bass funds filed nine more challenges to pharmaceutical patents, bringing the total number to 32 invalidity petitions by eleven different funds.

In the case of the initial challenges to Acorda’s patents, the PTAB found that the Bass fund had failed to prove that two posters presented at a conference were “printed publications” due to insufficient evidence on how long the posters were presented, on the expertise of those who may have seen the posters, or the likelihood that one could have copied the poster material. The Board concluded, “we are not persuaded that petitioner has made a threshold showing that the posters were sufficiently publicly accessible to qualify as a ‘printed publication.’”

Despite this holding, the Bass fund has apparently decided to “double down” on the Acorda bet, filing another petition against each of the previously challenged Acorda patents on September 2nd as well as new petitions against two other Acorda patents covering the Ampyra drug on September 3rd.


Continue Reading Hedge Fund Troll Undetered by Initial Setbacks

Note: This article is adapted from a longer guest post on Forbes.com last week. To view the Forbes article click here.

Inter partes review (IPR) is a process established by Congress to permit defendants in patent infringement suits to quickly and inexpensively challenge patents asserted against them in an administrative trial at the U.S. Patent Office – and this process has proved to a potent weapon for patent challengers. In the roughly three-years that inter partes review has been available, over 80 percent of the trials have found patent claims to be invalid. Some in Congress are now questioning whether the IPR rules are perhaps skewed too far in favor of the challengers.

At the time the new patent law was enacted in 2012, it was assumed that the IPR process would be used primarily against so-called “patent trolls” rather than the holders of life science patents. And it is safe to say that no one in Congress intended this process to be an opportunity for Wall Street to get into the pharmaceutical patent-busting business. But the law of unintended consequences seems to have come into play.

Over the past five months, Kyle Bass, the manager of the Texas-based Hayman Capital Management, has launched at least seven new hedge funds for investors to challenge patents on FDA approved drugs. The funds, named the “Coalition for Affordable Drugs” (Series I – VII), have launched at least 16 challenges to patents owned by Acorda Therapeutics, Shire, Jazz Pharmaceuticals, Pharmacyclics, Celgene, Biogen and Pozen.

The scheme seems too simple to be true: short the stock of a publicly traded pharmaceutical company, file an IPR with the Patent Trial and Appeal Board (PTAB) that sends the stock price tumbling and then cover your short position by buying the stock at a hefty discount caused by the patent challenge.


Continue Reading Bass Goes Fishing: Troubles Ahead for Pharma?