Hedge funds, pharma patents and thorny issues: a word on IPRs following Lialda

This weblog receives lots of email correspondence from readers young and old, savvy and, er, not so savvy. While much of this correspondence is addressed in person, some of it is dealt with by writing or commissioning a blogpost.  Over the past week or two, this Kat has received a number of inquiries from people wanting to know what a hedge fund is, and who or what a Kyle Bass is.  We are thus delighted to be able to place before those good souls an answer from the pen of patent attorney turned academic Sue Ratcliffe, who writes as follows:
Times are strange when hedge fund managers could be seen as the good guys in the struggle by some to stop big pharma (and others such as Martin Shkreli: full story here in the Independent ) using their IP to keep drug prices high. Hedge fund manager Kyle Bass formed the Coalition for Affordable Drugs with the aim to prevent drug companies from getting unjust protection or extending patent in unacceptable ways. According to Business Insider UK: “He is going after companies he believes are egregious examples of evergreening “BS patents” (it took a few moments to realise what was meant by BS, and it wasn't "brilliantly superior" ...). 
In August 2015, Bass failed in his challenge to two patents by Acorda Therapeutics Inc for Ampyra, a drug used to treat multiple sclerosis [noted by theAmeriKat here, while many readers were on holiday]. However in a more recent challenge to US Patent 6773720B1, owned by Cosmo Technologies but licensed to Shire Pharmaceuticals, he has had a degree of success. The patent relates to a controlled release oral pharmaceutical called Lialda which is used in the treatment of Crohn’s disease and ulcerative colitis.  The challenge was based on patentability.  The USPTO Patent Trial and Appeal Board decided he had a reasonable case at trial -- but what was significant was that the USPTO did not accept the patentee’s objection to the challenge by the Coalition on the basis that their petition failed to identify “the real party in-interest” and that litigation was though a proxy. The Board shot this argument down by basically saying that at a general level a party that desires a review is a party with an interest, whoever they are. This is just like the EPO’s view on straw men: if a party can go to the trouble of filing a petition, it must have an interest, whether they does it by itself or through someone else. 
So why is Bass making these challenges? The America Invents Act allows for reviews of poor quality patents by using an Inter Partes Review Procedure (usually referred to as an IPR) and the hedge fund managers have seized an opportunity to use the new relatively low-cost system to their advantage. Reviewing a patent is likely to affect share prices, making companies attractive for the short selling market while stock prices fall. Shire’s price fell after the decision. 
Drug companies have asked the USPTO to stop what they see as an abuse of the review process by hedge fund managers, but this recent decision which broadens the “real party in-interest” definition looks like that will not succeed.  The phenomenon of reverse trolling hedge fund trolls is going to be a tricky issue to handle politically. Lobby groups and technology companies see the advantage of challenging the hold they perceive that large corporations have on controlling markets, especially in the biotech and software areas. These lobby groups often have the ears of the politicians and high drug prices, especially in the US is a thorny issue: see the views of presidential candidate Hillary Clinton
Bass on the other hand may have been reading the Universal Declaration of Human Rights, Article 27(1), and truly believes his challenges are for the benefit of society by lowering drug prices and yet he can still make money. Maybe … 
Hedge funds, pharma patents and thorny issues: a word on IPRs following Lialda Hedge funds, pharma patents and thorny issues: a word on IPRs following Lialda Reviewed by Jeremy on Monday, October 12, 2015 Rating: 5


  1. "The America Invents Act allows for reviews of poor quality patents...."

    So, do I have to prove a patent is of poor quality before the USPTO will review it?

    How am I to destroy the evil pharmaceutical industry with such a burden to overcome? They will stop at nothing to get new treatments for diseases onto the market and then stop us from knocking them up in back street laboratories to distribute to the poor and needy. How are companies like Teva supposed to continue to make vast profits f the are not allowed to copy these products and distribute them for free at their own expense like they all do now?

  2. Jeff_R,

    Would you feel "better" is there was no property rights of any kind for anyone, and we had one massive world-wide government who could act "benevolently" to take from each according to their capability and to give to each according to their need?

    Me, I prefer the Adam Smith Invisible Hand model.

  3. I have just bought a new dictionary. There is a new word I've never heard of before: "sarcasm".

    Also, there is a strange copyright clause stating the dictionary must not be sent to the USA.

  4. Is it ironic, when sarcasm is misunderstood?


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