In its recent decision, an expanded panel of the PTAB denied Patent Owner Celgene’s motion for sanctions against Petitioner “Coalition for Affordable Drugs VI, LLC,” and thereby refused to provide Patent Owners with a basis to halt the IPR challenges currently brought by hedge fund entities against the pharmaceutical industry. Celgene had sought dismissal of several petitions.
Kyle Bass, the head of Hayman Capital Management LP, has filed multiple IPR petitions through various companies bearing the name “Coalition for Affordable Drugs,” in order to seek cancellation of pharmaceutical patents. Both constituents claim the moral high ground. Bass told the WSJ that the patents of “a small minority of drug companies” maintain an “anti-competitive, high-price monopoly to the detriment of Americans suffering from illness.” BIO CEO Jim Greenwood countered that the hedge fund challenges “not only damage the value of companies working on cure — but hurts those sick and suffering patients and their families who are eager for cures.”
In denying Celgene’s motion, the Board noted that Celgene did not allege that the IPR petition was a “non-meritorious patentability challenge” and determined that Celgene had not met the evidentiary burden to prove an abuse of process by the Petitioner.
The Board addressed (a) profit motive, (b) lack of competitive interest, and (c) the purpose of the America Invents Act. Regarding the profit motive, the Board took “no position of the merits of short-selling as an investment strategy other than it is legal, and regulated.” To address Petitioner’s alleged lack of competitive interest, the Board observed that “profit is at the heart of nearly every patent and nearly every inter partes review.” Noting that the AIA did not require Article III standing to file an IPR petition, the Board held “Congress did not limit inter partes reviews to parties having a specific competitive interest in the technology covered by the patents.”
Significantly, the Board clarified “[t]he purpose of the AIA was not limited to just providing a less costly alternative to litigation. Rather, the AIA sought to establish a more efficient and streamlined patent system that improved patent quality, while at the same time limiting unnecessary and counterproductive litigation costs. The AIA was designed to encourage the filing of meritorious patentability challenges, by any person who is not the patent owner, in an effort to further improve patent quality.”
In its Opposition to the Celgene’s Motion, the Petitioner raised several points that the Board did not directly address in arriving at its decision. For example, both parties disputed whether a finding of sanctions was based on the merits of the petition, i.e., whether it was “objectively baseless,” or on the motive for filing it, i.e., as “part of a pattern or practice of harassment.” The Board also did not consider whether the AIA statutes allow the Board to impose sanctions for the mere filing of a petition prior to institution. Resolution of those issues will wait for another day.