As a follow up on our client alert sent on September 11, 2015,
available here, the Patent Trial and Appeal Board
("PTAB") on September 25, 2015 declined to sanction
Coalition for Affordable Drugs ("CAD"), the petitioner of
thirty-three Inter Partes Review ("IPR")
proceedings challenging the validity of patents owned by various
pharmaceutical companies. One of those companies, Celgene
Corporation, the owner of three patents challenged by CAD in five
IPR proceedings, asked the PTAB to sanction CAD and dismiss the
petitions as an abuse of the IPR process based on CAD's short
selling investment scheme.
In a decision common to all five of the pending IPR's between
CAD and Celgene, the PTAB first rejected Celgene's argument
that CAD's profit motive was an abuse of the IPR process,
noting that nearly every IPR has an economic motive. Next, the PTAB
held that Congress did not limit IPR's to only parties having a
specific competitive interest in the technology of the challenged
patent, therefore the Board did not grant sanctions on this basis.
Finally, the PTAB reasoned that the purpose of the America Invents
Act ("AIA") was to streamline the patent system and
improve patent quality, and the Board did not find CAD's
petitions to be contrary to that purpose.
It should be noted that the PTAB made its decision despite the fact
CAD had previously argued that sanctions were not available until
an IPR was instituted. The PTAB's decision, thus, appears to be
a signal that the PTAB believes it has the authority to rule on
motions for sanctions regarding conduct performed prior to
institution of an IPR.
While the Board's decision is likely a disappointment for
Celgene, CAD seems empowered by the intermediate victory, using it
as a rally call for others to join in the fight against
pharmaceutical patents. Specifically, after the issuance of the
decision, CAD filed its thirty-third IPR against yet another
pharmaceutical company, Biogen MA, Inc. Additionally, Erich
Spangenberg used his blog to encourage the filing of an IPR against
Depomed's patented painkiller Nucynta, stating that his only
interest in the matter was to help lower drug prices. Mr.
Spangenberg said that he would not be able to pay for the IPR
against Depomed as it would make him an interested party, but he
did provide a sixty-three page draft petition for inter partes
review to crowdsource strong arguments for the challenge.
Though the PTAB would not sanction CAD and dismiss its IPR
petitions, CAD still faces an uphill battle before it succeeds in
invalidating the challenged patents. The next hurdle will be
getting the PTAB to institute review, which up to this point in
time has not occurred in any of CAD's IPR petitions.
As a matter of interest, CAD is not the only hedge fund seeking to
invalidate patents through the use of IPR's. In March of this
year, Ferrum Ferro Capital LLC filed an IPR challenging Allergen
Inc.'s patented glaucoma drug, and recently the PTAB declined
to institute the proceedings. Rather than pursuing sanctions at the
PTAB, Allergen filed suit in California federal court accusing
Ferrum Ferro of extortion and malicious prosecution. It is yet to
be seen whether such a strategy will successfully deter hedge funds
from filing IPR's.
Originally published October 05, 2015
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