The PTAB granted leave on June 9 for the patent owner, Celgene Corporation, to file a motion for sanctions seeking dismissal in several IPRs¹ filed by the Coalition for Affordable Drugs. The Coalition for Affordable Drugs, an organization created by the hedge fund Hayman Credes Master Fund L.P., has filed multiple IPRs against pharmaceutical companies with the publicly announced intention to lower drug prices for everyone by invalidating patent protections that it contends have little value. Kyle Bass, the founder, has also allegedly stated that his new hedge fund bets against companies whose patents it believes are spurious and invests in those that would profit if the patents are invalidated.²
The patent owner requested leave, pursuant to 37 C.F.R. § 42.12, arguing that the Coalition for Affordable Drugs is misusing and abusing the IPR process for the purpose of affecting the value of public companies. Additionally, the patent owner argued that at least one of the Real Parties in Interest improperly threatened to file the IPRs unless Celgene paid money to avoid the filing. The patent owner seeks dismissal of the proceeding and is not asking for sanctions against Petitioner’s counsel. The Board, taking no position on the merits of the motion, granted leave to seek sanctions on the grounds that the briefing will develop a complete record and promote just resolution. The parties are to brief (1) the elements required to prove abuse of process; (2) evidence of intent; and (3) the standard of proof that should apply. The motion will be filed contemporaneously with the patent owner’s Preliminary Response and, if granted, may preclude institution of the proceeding.
There has been some public backlash against use of IPRs to manipulate stock prices or as a threat when demanding payment to prevent the validity challenge. Several Congressional bills are pending and seek to address these uses of IPRs as well as other aspects of patent law. For example, the Senate’s “STRONG Patents Act of 2015,” as currently drafted, would limit standing to file an IPR to those “sued for infringement of the patent or charged with infringement under their patent,” similar to the current standing requirements for CBM proceedings. In contrast, however, a competing Senate Bill, the “PATENT Act,” and the House’s pending “Innovation Act” do not include this standing provision. Without any standing requirement, entities like the Coalition for Affordable Drugs, which has not, itself, been accused of infringing any of the patents and does not manufacture any pharmaceuticals, may use IPRs to challenge patents. The House Bill, however, includes a proposed amendment requiring certification that the petitioner does not own and will not purchase a financial instrument that is designed to hedge against a decrease in the patent owner’s market value.
Some believe that if the Board ultimately grants the forthcoming motion for sanctions, finding that the Coalition for Affordable Drugs has misused or abused the IPR process, then a legislative change requiring standing may ultimately be unnecessary to address this particular problem. But, whatever sanctions the Board could issue may not practically deter this behavior especially because the windfall from manipulating stock prices likely far exceeds the sanction. No doubt cognizant of the piecemeal, slap-on-the-wrist approach of sanctions, the Pharmaceutical Research and Manufacturers of America is separately advocating for a legislative carve-out that would entirely exempt from IPR proceedings any biopharmaceutical patents that would be covered by the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act of 2009. A similar proposal was submitted as an amendment to the House “Innovation Act” by Rep. Mimi Walters but has since been withdrawn.
Perhaps a more effective sanction would be on the attorneys representing those allegedly misusing or abusing the IPR process. According to one of the Patent Office’s rules (37 CFR § 11.18(b)(2)(i), any party (whether a patent practitioner or non-practitioner) presenting a paper to the Office certifies that it is not presenting the paper “for any improper purpose, such as to harass someone or to cause unnecessary delay or needless increase in the cost of any proceeding before the Office.” Various sanctions are available including subjecting the practitioner to disciplinary action. Such sanctions, may quickly deter these types of IPR challenges.
¹ IPR2015-01092 (Patent 6,045,501) IPR2015-01096 (Patent 6,315,720) IPR2015-01102 (Patent 6,315,720) IPR2015-01103 (Patent 6,315,720)