NPS’s Additional Briefing on “Abusive” IPRs

PTAB + IPR

We recently posted about the PTAB asking for additional briefing on whether the two IPRs filed by the Coalition for Affordable Drugs (“Bass Group”) against NPS (which was acquired by Shire, LLC) should be dismissed for abuse of process.  The two IPRs are directed to the same patent, US 7,056,886, but to different claims.

In its Brief in Response to the Board’s Request for Additional Briefing, NPS cited to 37 C.F.R. §42.12 – granting the Board authority to “impose a sanction against a party for misconduct,” including for “abuse of process” or “any other improper use of the proceeding, including actions that harass” – and argued:

  • The Bass Group’s IPR petitions are simply means for market manipulation.
  • The Bass Group materially misrepresented that its IPRs will shorten the ‘886 patent’s exclusivity and will hasten generics when they actually will not. The Bass Group did not tell the public material facts that unchallenged patents and unchallenged ‘886 patent claims would still be enforceable, and that it must win both IPRs to have the ‘886 patent delisted from the Orange Book.

NPS then took each of the PTAB’s issues in turn, responding as follows:

1. The standing requirement for challenging the validity of that patent in an inter partes review under 35 U.S.C. § 311(a):

35 U.S.C. § 311(a) provides that “… a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review ….” Section 316(a)(6) then adds the important qualifier that no person may file an IPR petition for improper purposes. Someone who brings an IPR for an improper purpose cannot have standing.

2. To what extent, if any, the business objective or intent of the Petitioner should be considered in reaching a determination of abuse of process:

111th Cong., 1st Sess. Sen. Rpt. 111-18 May 12, 2009, p. 18 states:

[T]he changes are not to be used as tools for harassment or a means to prevent market entry through repeated litigation and administrative attacks on the validity of a patent. Doing so would frustrate the purpose of the section as providing for quick and cost effective alternatives to litigations…[T]he Committee intends for the USPTO to address potential abuses and current inefficiencies under its expanded procedural authority.

Since the Bass Group misrepresented their business purpose, misrepresentation involves intent, intent is an element of harassment, and harassment is an improper purpose, the intent or business objective of the Petitioner should be considered.

3. The intent of Congress to provide an alternative to litigation and to provide a mechanism to increase patent quality by allowing expedited administrative patent challenges:

A primary AIA purpose was to “limit unnecessary and counterproductive litigation costs.” The PTO stated that “[IPR] proceedings will serve to minimize costs and increase certainty by offering efficient and timely alternatives to litigation as a means of reviewing questions of patent validity.” The Bass Group is a collection of hedge funds and their investors. It does not manufacture, use, offer, sell, or import any infringing products and does not induce or contribute to infringement. It is not using the IPRs as a litigation alternative; nor is there a legitimate “patent quality” purpose. It is not using the patent system to create or innovate inventions, either. Instead, it is using misrepresentations about IPRs, filed as a pretext, to game the stock market. Congress did not intend IPRs to be instruments of market manipulation and misrepresentation.

4. The resulting social costs/benefits associated with a decision to address the merits of the Petitions versus a decision to dismiss the Petitions for abuse of process without reaching the merits of the Petitions:

Expeditious IPR disposition is essential to the AIA. The sanctions here are a threshold issue that will be more quickly and easily dispositive than time-consuming merit resolution of IPRs that are admittedly pretexts for a move on the stock markets.

The Bass Group has not yet responded to NPS’s briefing.  However, the Bass Group has responded to Motions for Sanctions against Pharmacyclics, Inc. in IPR2015-01076, and Celegene Corporation in IPRs 2015-01092, 2015-010962015-01102 and 2015-01103, making the following arguments, among others:

  • At the heart of nearly every patent and nearly every IPR, the motivation is profit (and even the patent owner acquires patents to profit from higher drug prices that patents enable).
  • The Bass Group’s allegedly non-altruistic motive is irrelevant.
  • The Bass Group is statutorily allowed to file IPRs.
  • The Bass Group is helping Congress since Congress created the IPR process to vanquish low quality patents and improve quality.
  • The Board can’t dismiss petitions prior to institution because of sanctions.
  • The Bass Group’s right to file a petition for IPR is strongly reinforced by the First Amendment to the U.S. Constitution and the Supreme Court’s Noerr-Pennington doctrine.

The Bass Group has until September 21, 2015, to reply to NPS’s briefing.  Stay tuned for further developments on this issue.

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