Kyle Bass, founder of hedge fund Hayman Capital Management, has added two Shire PLC drugs to his list of pharma patent targets. An organization tied to Bass has challenged the patents in an inter partes review proceeding in the United States Patent Office. This procedure was recently made available under the America Invents Act (AIA).
Hayman Capital apparently profits from such challenges by selling short the stock of the challenged company. It is reported that Acorda Therapeutics stock fell almost 10 percent on news of his challenge to the biotech company’s Ampyra drug, a treatment for multiple sclerosis.
An inter partes patent challenge in the United States Patent Office is less expensive than conventional Federal Court proceedings. However, discovery is limited and the decision by the Patent Trial and Appeal Board (appealable to the Federal Circuit) creates an estoppel against a Defendant’s later challenge to the patent in a Court Proceeding, with respect to any defense made or which could have been made.
The instantaneous profit available to a short seller obviously makes the AIA inter partes approach attractive. However, the drawbacks to the inter partes challenge probably render this approach more interesting to generic pharmaceutical companies with limited budgets, who would rather spend less and be prepared to accept whatever the outcome, than perhaps enhance their chances of success by pursuing a full district court proceeding at greater expense. Further, the non-infringement case still remains to be decided in the courts, even if the AIA proceeding upholds patent validity.