Hedge funds and their affiliates are now free to heckle patent owners with IPR petitions, regardless of their admitted “profit motive.” On September 25, 2015, an expanded six-judge panel of the PTAB denied Celgene’s Motion for Sanctions against the Coalition For Affordable Drugs (CFAD).  Celgene had requested dismissal of five IPR petitions filed by CFAD because the petitions represent a misuse of inter partes reviews as an investment strategy and were “an ongoing abuse of the inter partes review process that will be an unwarranted burden on the Board, and innovators like Patent Owner.” CFAD v. Celgene Corp., IPR2015-01092, -01096, -01102, -01103, and -01169 (Paper No. 20, September 25, 2015). Celgene requested dismissal, even if the validity challenges are legitimate, because the underlying reasons for seeking review were “illegitimate” and driven entirely by an admitted “profit motive.”

In other IPR proceedings with motions for sanctions pending, CFAD v NPS Pharmaceuticals, IPR2015-00990 and -01093, the PTAB asked for further briefing on several questions, including the standing requirement, the extent to which the business objective of the petitioner should be considered, the intent of Congress, and the resulting social costs and benefits of a decision to consider the merits of the petitions vs. dismissing the petitions for abuse of process. Discussed in previous blog posts: PTAB Requests Further Briefing on Petition for Sanctions Against Hedge Fund Coalition and Is the Coalition for Affordable Drugs Abusing the IPR Process?

In coming to its decision on the Celgene motion, the PTAB considered legislative history indicating that the AIA was designed to encourage the filing of meritorious patentability challenges to improve patent quality.  The PTAB also noted that the AIA specifically permits petitioners without standing to file IPRs, contrasting the statute’s requirement for CBMs, under which a party or privy must have been charged with patent infringement.

Ultimately, the PTAB denied the motion, stating: “Profit is at the heart of nearly every patent and nearly every inter partes review.  As such, an economic motive for challenging a patent claim does not itself raise abuse of process issues.  We take no position on the merits of short-selling as an investment strategy other than it is legal, and regulated.”