Innovate or Else: Kyle Bass Strikes Again and Challenges Shire Patents - Pharmalot - WSJ Page 1 of 2
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`Innovate or Else: Kyle Bass Strikes Again and
`Challenges Shire Patents
`ByEd Silverman
`
`
`
`Kyle Bass
`
`Bloomberg News
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`Three months ago, Kyle Bass warned the pharmaceutical industry that he would challenge and,
`ultimately, invalidate some of their patents. And once again, he is making good on his word.
`
`Yesterday, he filed challenges against patents for two Shire drugs -— the Lialda medicine for ulcerative
`colitis and the Gattex treatment for short bowel syndrome. The move comes just a few weeks after he
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`challenged a patent that Acorda Therapeutics holds on its Ampyra multiple sclerosis drug.
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`In his view, some drug makers and biotechs hold specific patents that do not represent an innovation and,
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`instead, are designed to fend off competition. By challenging the patents, he argues that drug prices can
`be lowered.
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`"A small minority of drug companies are abusing the patent system to sustain invalid patents that contain
`no meaningful innovations but serve to maintain their anti-competitive, high-price monopoly to the
`detriment of Americans suffering from illness," according to a statement sent to us by Hayman Capital
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`Management, the fund that Bass founded.
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`A Shire spokeswoman writes us that the drug maker is “aware of the two petitions that were filed, and will
`vigorously defend any proceedings that may be instituted at the US. Patent and Trademark Office. Shire
`is confident that the validity of our patents will be upheld.”
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`His filings are part of a new wave of patent challenges that emerged in the wake of a provision of the
`America invents Act that went into effect in September 2012. Known as Inter Partes Review, the
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`procedure has made it easier and faster to file a patent challenge.
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`IPR2015-01093
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`Innovate or Else: Kyle Bass Strikes Again and Challenges Shire Patents - Pharmalot - WSJ Page 2 of 2
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`On average, an IPR can cost about $300,000 and take up to 18 months, while conventional litigation
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`needed to invalidate a patent may cost $3 million or more and take years, according to Matthew Cutler,
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`an attorney at Harness Dickey, who specializes in intellectual property and runs a Website that tracks IPR
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`filings with the U.S. Patent & Trademark Office.
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`“An IPR filing is a much more cost effective and efficient way to challenge a patent,” he says. Of the 2,536
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`challenges filed since the law passed in 2012, 383 were filed against chemical and biotechnology patent
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`holders. And Cutler notes that 87% of IPR filings challenging pharmaceutical patent claims have, so far,
`been successful.
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`For its part, the BIO trade group has denounced the tactic. In a statement issued when Bass filed his first
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`patent challenge two months ago, BlO ceo Jim Greenwood argued that “Congress never intended for the
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`patent challenge system to be utilized by those attempting to profit from the confusion the current system
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`creates. Such efforts not only damage the value of companies working on cures — but hurts those sick
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`and suffering patients and their families who are eager for cures.”
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`Often, Cutler says an IPR challenge is filed by a drug maker in order to invalidate another company's
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`patents and would othen/vise block its entrance to a particular market. Companies, he explains, are
`saying "let’s go on the offensive even before we enter a market and [try] to invalidate a patent [in order] to
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`gain access to a market." This allows a drug maker to avoid the cost of patent litigation in court.
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`However, experts say lPR challenges may also be filed by someone shorting a stock, because the news
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`about a challenge on a big-selling drug can rattle investors. On the day Bass filed his first challenge
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`against an Acorda patent, the biotech’s shares dropped 9.6%. The stock dropped 4.8% when he filed his
`second challenge to an Acorda patent. A Hayman spokesperson did not respond to questions about
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`what, if any, kind of investment the firm holds in either Acorda or Shire.
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