Can Kyle Bass appeal his IPR loss? Not if Consumer Watchdog is on the prowl

So Kyle Bass and his Coalition for Affordable Drugs have been handed a defeat in their first PTAB final written decision.  See Coalition for Affordable Drugs II LLC v. Cosmo Techs Ltd. (IPR2015-00988, Paper 55).  The merits of the case aside, the biggest question in my mind is: can the Coalition appeal?

On the face of things, the answer appears to be yes.  35 U.S.C. § 319 confers on any party to a final written decision the right to appeal to the Federal Circuit.

But a mere statutory right might not be enough.  In order to get into federal court a party must have Article III standing.  That is, there must be a case or controversy between the parties.  Can it be said that a case or controversy exists between the Coalition and Cosmo?

Again, on the face of things, the answer appears to be yes.  The Coalition challenged the patent in question (No. 6,773,720, which is Orange Book listed for Shire’s LIALDA® mesalamine tablets for ulcerative colitis), and the Patent Owner defended its patent vigorously in an adversarial trial proceeding.  Certainly there was a controversy between the parties.

But let’s reconsider.  There is no question that the Coalition may petition the USPTO for review of the patent and participate in the trial proceeding before the PTAB.  There is no constitutional standing requirement to appear before an administrative agency.  But once a dissatisfied party seeks judicial review of an agency decision in a federal court, even a federal appeals court, “‘the constitutional requirement that it have standing kicks in.'”  Consumer Watchdog v. WARF, 753 F.3d 1258, 1261 (Fed. Cir. 2014) (quoting Sierra Club v. E.P.A., 292 F.3d 895, 899 (D.C.Cir.2002)), cert. denied, 135 S.Ct. 1401 (2015).

And there’s the rub.  The Coalition cannot identify any harm that it has suffered by losing the IPR other than failing to obtain its desired outcome.  It’s not trying to market a LIALDA knockoff, nor has it been sent a cease-and-desist letter or been sued for infringement of the ’720 patent (as far as I know).  If the Coalition fails in the IPR, all it and its real parties-in-interest stand to lose is money that they chose to put at risk in short-selling Shire stock.

That was exactly the kind of problem that led the Federal Circuit to hold in Consumer Watchdog that a public interest group that unsuccessfully challenged a patent via inter partes reexamination (“IPX”) lacked standing to pursue an appeal in federal court, despite statutory authorization to do so.  Id.

An IPR petitioner who is not answerable to the patent owner for infringement would appear to lack Article III standing just like an IPX requester, in accordance with the holding of Consumer Watchdog. The Supreme Court appears also to have signaled its view that parties perfectly eligible to challenge patents through IPR or CBM may nevertheless lack standing to appeal in the absence of recompensable injury.  Cuozzo Speed Techs, LLC v. Lee, 136 S. Ct. 2131, 2143-44 (2016).  Probably the only way out of this problem would be for the no-standing petitioner to achieve joinder with a party having standing and then to backseat-drive the joint appeal.

The road for a petitioner who lacks Article III standing begins and ends at the PTAB.  There may be no rescue from the Death Valley petitioners face in IPR by way of a federal court appeal.  All the more reason IPR is not to be trifled with.

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