The Kyle Bass pharma challenges; unintended consequences of the IPR procedure to contest patent validity?
In a post on 24 February 2015, the San Diego Union-Tribune noted that the US Supreme Court had declined to hear a case about stem cells (Supreme Court rejects stem cell patent case).
The appealed issue did not relate to the merits of the patent, but rather whether third party challengers to a patent, who had no economic interest in the patent, could appeal to a federal court when the validity of the patent had been upheld. By not hearing the case, the Supreme Court allowed a determination of "no standing" to remain. Thus, third parties who brought a challenge in re-exam (for this case, inter partes re-examination) had no standing to appeal in a situation in which the third parties had no economic interest.
More recently, there has been some discussion of challenges to certain pharma patents brought by hedge fund guru Kyle Bass. Bass is not a competitor of the drug companies in question, just as Consumer Watchdog and the Public Patent Foundation in the stem cell case were not competitors of WARF (whether the scientists in the case were competitors is a more interesting question).
In the realm of the IPR procedure created by the AIA, one potential downside
for actual competitors to bring an IPR is the estoppel provision of the IPR.
The IPR estoppel provision prohibits an IPR
petitioner from asserting any ground
of invalidity the petitioner “raised or reasonably
could have raised” during the IPR, in a subsequent
civil action (or ITC proceeding).
This estoppel provision might serve as a deterrent to some competitors
who would be adversely impacted, in later litigation, by an unfavorable
IPR decision. Ironically, the estoppel provision would not be an impediment
to someone in Bass's shoes, who is not concerned about later litigation.
In this sense, the IPR procedure is more favorable to people in Bass's shoes
than competitors who are looking for a low cost alternative to litigation.
One hypothetical inquiry. Although Consumer Watchdog and the Public Patent Foundation had
no economic interest and no standing for an appeal of an inter partes re-exam result,
would Bass's shorting of pharma stock
comprise an economic interest giving him standing to appeal an adverse IPR decision?
See previous IPBiz post
Hedge funds and patents
Also
http://ipbiz.blogspot.com/2015/04/bass-goes-after-third-drug-company.html
**Separately, merely fyi as to "insider" trading, note
Michael H. Dessent, Weapons to Fight Insider Trading in the 21st Century: A Call for the Repeal of Section 16(b), 33 Akron L. Rev. 481, including
Section 10(b) of the Securities Exchange Act of 1934 provides that, "It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or the mails, or any facility of any national securities exchange -- to use or employ, in connection with the purchase or sale of any security registered on the securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j (1994).
AND
NEW YORK STOCK EXCHANGE LISTED COMPANY MANUAL §§ 202.05 202.06 (The Exchange 1992).
202.05 Timely Disclosure of Material News Developments
A listed company is expected to release quickly to the public any news or information which it might reasonably be expected to materially affect the market for its securities. This is one of the most important and fundamental purposes of the listing agreement which the company enters into with the Exchange.
A listed company should also act promptly to dispel unfounded rumors which result in unusual market activity or price variations.
202.06 Procedure for Public Release of Information
(A) Immediate Release Policy
The normal method of publication of important corporate data is by means of a press release. This may be either by telephone or in written form. Any release of information that could reasonably be expected to have an impact on the market for a company's securities should be given to the wire services and the press For Immediate Release. . . .
(B) Telephone Alert to the Exchange
When the announcement of news of a material event or a statement dealing with a rumor which calls for immediate release is made shortly before the opening or during market hours (presently 9:30 A.M. to 5.00 P.M., New York time), it is recommended that the company's Exchange representative be notified by telephone at least ten minutes prior to release of the announcement to the news media. If the Exchange receives such notification in time, it will be in a position to consider whether, in the opinion of the Exchange, trading in the security should be temporarily halted. A delay in trading after the appearance of the news on the Dow Jones or Reuters news wires provides a period of calm for public evaluation of the announcement. . . . A longer delay in trading may be necessary if there is an unusual influx of orders. The Exchange attempts to keep such interruptions in the continuous auction market to a minimum. However, where events transpire during market hours, the overall importance of fairness to all those participating in the market demands that these procedures be followed.
(C) Release to Newspapers and News Wire Services
**Separately, as to section 16, from 39 Ariz. L. Rev. 1315
--
It is hornbook law that the purpose of section 16 is to keep corporate insiders from trading on the basis of inside information; the statute says almost as much. The problem is that section 16 does not always keep those who possess inside information from trading, and the people it does keep from trading do not always possess inside information. Robert Clark has captured the conventional criticism: "Section 16(b) catches defendants who did not violate the policy decision underlying the rule (here, the decision that trading on inside information is unfair), and it fails to catch other defendants who did violate it."
--
The appealed issue did not relate to the merits of the patent, but rather whether third party challengers to a patent, who had no economic interest in the patent, could appeal to a federal court when the validity of the patent had been upheld. By not hearing the case, the Supreme Court allowed a determination of "no standing" to remain. Thus, third parties who brought a challenge in re-exam (for this case, inter partes re-examination) had no standing to appeal in a situation in which the third parties had no economic interest.
More recently, there has been some discussion of challenges to certain pharma patents brought by hedge fund guru Kyle Bass. Bass is not a competitor of the drug companies in question, just as Consumer Watchdog and the Public Patent Foundation in the stem cell case were not competitors of WARF (whether the scientists in the case were competitors is a more interesting question).
In the realm of the IPR procedure created by the AIA, one potential downside
for actual competitors to bring an IPR is the estoppel provision of the IPR.
The IPR estoppel provision prohibits an IPR
petitioner from asserting any ground
of invalidity the petitioner “raised or reasonably
could have raised” during the IPR, in a subsequent
civil action (or ITC proceeding).
This estoppel provision might serve as a deterrent to some competitors
who would be adversely impacted, in later litigation, by an unfavorable
IPR decision. Ironically, the estoppel provision would not be an impediment
to someone in Bass's shoes, who is not concerned about later litigation.
In this sense, the IPR procedure is more favorable to people in Bass's shoes
than competitors who are looking for a low cost alternative to litigation.
One hypothetical inquiry. Although Consumer Watchdog and the Public Patent Foundation had
no economic interest and no standing for an appeal of an inter partes re-exam result,
would Bass's shorting of pharma stock
comprise an economic interest giving him standing to appeal an adverse IPR decision?
See previous IPBiz post
Hedge funds and patents
Also
http://ipbiz.blogspot.com/2015/04/bass-goes-after-third-drug-company.html
**Separately, merely fyi as to "insider" trading, note
Michael H. Dessent, Weapons to Fight Insider Trading in the 21st Century: A Call for the Repeal of Section 16(b), 33 Akron L. Rev. 481, including
Section 10(b) of the Securities Exchange Act of 1934 provides that, "It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or the mails, or any facility of any national securities exchange -- to use or employ, in connection with the purchase or sale of any security registered on the securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j (1994).
AND
NEW YORK STOCK EXCHANGE LISTED COMPANY MANUAL §§ 202.05 202.06 (The Exchange 1992).
202.05 Timely Disclosure of Material News Developments
A listed company is expected to release quickly to the public any news or information which it might reasonably be expected to materially affect the market for its securities. This is one of the most important and fundamental purposes of the listing agreement which the company enters into with the Exchange.
A listed company should also act promptly to dispel unfounded rumors which result in unusual market activity or price variations.
202.06 Procedure for Public Release of Information
(A) Immediate Release Policy
The normal method of publication of important corporate data is by means of a press release. This may be either by telephone or in written form. Any release of information that could reasonably be expected to have an impact on the market for a company's securities should be given to the wire services and the press For Immediate Release. . . .
(B) Telephone Alert to the Exchange
When the announcement of news of a material event or a statement dealing with a rumor which calls for immediate release is made shortly before the opening or during market hours (presently 9:30 A.M. to 5.00 P.M., New York time), it is recommended that the company's Exchange representative be notified by telephone at least ten minutes prior to release of the announcement to the news media. If the Exchange receives such notification in time, it will be in a position to consider whether, in the opinion of the Exchange, trading in the security should be temporarily halted. A delay in trading after the appearance of the news on the Dow Jones or Reuters news wires provides a period of calm for public evaluation of the announcement. . . . A longer delay in trading may be necessary if there is an unusual influx of orders. The Exchange attempts to keep such interruptions in the continuous auction market to a minimum. However, where events transpire during market hours, the overall importance of fairness to all those participating in the market demands that these procedures be followed.
(C) Release to Newspapers and News Wire Services
**Separately, as to section 16, from 39 Ariz. L. Rev. 1315
--
It is hornbook law that the purpose of section 16 is to keep corporate insiders from trading on the basis of inside information; the statute says almost as much. The problem is that section 16 does not always keep those who possess inside information from trading, and the people it does keep from trading do not always possess inside information. Robert Clark has captured the conventional criticism: "Section 16(b) catches defendants who did not violate the policy decision underlying the rule (here, the decision that trading on inside information is unfair), and it fails to catch other defendants who did violate it."
--
posted by Lawrence B. Ebert at 6:04 AM
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