In a recent decision on yet another inter parties review petition brought by billionaire hedge-fund manager Kyle Bass through one of his Coalition for Affordable Drugs entities, the PTAB denied institution of an IPR against Biogen International GmbH (IPR2015-01086 at Paper 18, October 27, 2015). The Board found that the Petitioner failed to establish a reasonable likelihood of prevailing on its invalidity claims and also dismissed a pending motion for additional discovery submitted by Biogen as moot given the dismissal of the action.
Interestingly, the pending motion for additional discovery was related to abuse of process and improper use of proceedings claims by Biogen. The motion sought discovery of two offering documents for the Hayman Credes Master Fund, L.P. and the Hayman Orange Fund SPC-Portfolio A, two of the real parties-in-interest who financed the petition. Biogen asserted that the two documents “will show the hedge funds’ mandates, and therefore will give more detailed information about their purpose, which is to take short positions on companies in the pharmaceutical sector, such as Biogen.” (Paper 9 at p. 4). Biogen argued that this information would support the abuse of process and improper use claims by showing “that the IPRs are being used in an attempt to secure some collateral advantage not properly included in IPR proceedings.” (Id.). As a result of the Board’s dismissal of the motion as moot, Biogen appears to have been precluded from pursuing these claims as a result of the dismissal of the petition.
In its decision, the Board failed to address whether sanctions would be appropriate against the Petitioner although dismissal of the action is one of a number of sanctions available under 37 C.F.R. § 42.12, which also includes attorneys’ fees as a possible sanction. In another recent decision, issued after Biogen’s motion, with respect to sanctions for abuse of process in a number of IPRs involving Bass and Celgene Corporation, the Board concluded that “[t]he purpose of the AIA was not limited to just providing a less costly alternative to litigation” and that “[t]he AIA was designed to encourage the filing of meritorious patentability challenges.” (IPR2015-01092 at Paper 18). The Board also declined to address the motivation for bringing the IPR, stating “[w]e take no position on the merits of short-selling as an investment strategy other than it is legal, and regulated.” (Id.). However, the Board did not foreclose the possibility of sanctions for non-meritorious challenges brought via IPR, pointing out “Patent Owner does not allege that Petitioner filed a non-meritorious patentability challenge.” (Id.).
The implications of these recent decisions leaves it unclear whether a failed IPR petition by a hedge fund seeking to short a stock can lead to sanctions for abuse of process or improper use of proceedings. While sanctions do not seem to be unavailable for non-meritorious IPR challenges, it is unclear what conduct in filing the petition is sufficient to constitute abuse of process and whether the PTAB will allow patent owners to pursue claims for abuse of process and improper use where an IPR petition is denied and the alleged motivation for filing the petition is to short a stock. Thus, for hedge funds and other parties who may wish to short a stock, at this time there seems to be little disincentive to file an IPR even where the arguments are “weak” while patent owners may be faced with not only the costs of defending against the IPR petition and any financial impact the filing has on the patent owner’s stock price.
The cases are Coalition for Affordable Drugs V LLC v. Biogen Int’l GmbH, case number IPR2015-01086 and Coalition for Affordable Drugs VI, LLC v. Celgene Corp., case numbers IPR2015-01092, IPR2015-01096, IPR2015-01102, IPR2015-01103, IPR2015-01169, before the Patent Trial and Appeal Board.