A picture can be worth a thousand words. This one illustrates the complex web of actual and potential real parties-in-interest (RPIs) that a pharmaceutical patent owner is attempting to pierce for two IPR petitions recently filed by Coalition For Affordable Drugs II—one of several similarly-named creations of hedge-fund manager Kyle Bass and his Hayman Credes Master Fund. It’s also an example of attacking IPR petitions by seeking discovery of RPIs.          

Attacking IPR petitions regarding RPIs

We’ve earlier discussed attacking IPR petitions for failing to name one or more RPIs, including the corresponding challenges patent owners face and the factors the PTAB considers. But given the estoppel provisions in 35 U.S.C. § 315(e) and the one-year bar imposed by § 315(b), issues regarding RPIs and privity are regularly disputed.

Arguments in Coalition For Affordable Drugs II v. NPS Pharmaceuticals

Patent owner NPS Pharmaceuticals (owned by Shire) is seeking discovery to determine the RPIs for petitions the Coalition has filed in IPRs 2015-00990 and 2015-01093. NPS argues the “spider’s web” of RPIs behind the Coalition’s petitions should be “unraveled” to comply with the statutory requirement to name all RPIs. One of several examples, according to NPS, is there are no public filings disclosing the investors in the Hayman Credes Master Fund (“Credes”) (which wholly owns the Coalition), but public filings suggest Credes is funded by other funds (identified in the illustration above as “Credes Onshore” and “Credes Offshore”). NPS adds that “[c]omplete control or funding of the proceeding is not required for a party to be considered an RPI” (quoting Azure Gaming Macau, Ltd. v. MGT Gaming, Inc., IPR2014-01288, Paper 13, 11 (Feb. 20, 2015)), and the PTAB should give weight here to how the named and unnamed RPIs have “common offices and interrelated ownership/management.” NPS adds it does not suggest a per se rule that investors or managers must always be RPIs, or that corporate distinctions should be disregarded. But here, NPS argues, there are named and unnamed RPIs that are related businesses with nearly identical management and identical headquarters, which shows that unidentified officers, funding and controlling limited partners, and investors are RPIs, and NPS should therefore  be permitted to obtain related discovery.

In response, the Coalition argues that NPS’s fundamental position is that virtually every shareholder and manager in a distinct legal business entity is an RPI, and there is no reason to disregard corporate distinctions between entities. According to the Coalition, NPS has also failed satisfy the first Garmin factor (Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, IPR2012-00001, Paper 26, 6 (Mar. 5, 2013)) (requesting party should already possess information “tending to show beyond speculation that in fact something useful will be uncovered”) because it has not shown that any unnamed entity or person controls either IPR proceeding. The Coalition adds that NPS’s arguments focus on privity, rather than on whether a third party is an RPI, and should therefore be denied.

Policy question

A question thus far unaddressed, but which is a relevant policy question, is how can patent owners determine whether investors who seek IPRs (such as Credes), or any other petitioner, were earlier RPIs or in privity with such parties for earlier IPR petitions directed at the same patent(s)? Unless there is related district-court litigation and accompanying discovery, a patent owner is probably less likely to obtain discovery from a later petitioner in a later IPR about its earlier investments than from a petitioner in an earlier IPR.

 …identifying additional RPIs and third parties in privity mitigates the risk of those parties getting a second bite at the apple in a later IPR.

Conclusion

This dispute underscores the potential value in seeking RPI discovery for petitions brought by entities such as the Coalition. Even if the PTAB ultimately institutes an IPR, identifying additional RPIs and third parties in privity mitigates the risk of those parties getting a second bite at the apple in a later IPR.