The Saga Continues Kyle Bass and Partner File Personal Altruistic Challenges to Drug Pa...
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`The Saga Continues: Kyle Bass and
`Partner File Personal, 'Altruistic'
`Challenges to Drug Patents
`
`Lisa Shuchman, Corporate Counsel
`
`December 1, 2015
`
`Last week Kyle Bass and Erich Spangenberg, who have upset the pharmaceutical industry
`by filing more than 30 challenges to issued pharmaceutical patents at the U.S. Patent and
`Trademark Office, filed two more petitions to invalidate patents owned by two separate
`pharmaceutical companies. Only this time, the petitions were filed by Bass and
`Spangenberg as individuals and not by the Coalition for Affordable Drugs, the organization
`they created earlier this year to challenge pharma patents.
`
`Why the change?
`
`“These are—to borrow a phrase from my good friends at Jones Day and Celgene—truly
`altruistic filings,” said Spangenberg, using the same language included in briefs filed by
`another pharma patent holder alleging that the coalition’s motives were not altruistic, as had
`been claimed, but were a “pretext” to benefit Bass’ investments.
`
`Bass, a hedge fund manager who made a fortune when he anticipated the mortgage crisis in
`2008, has taken on some of the world’s biggest drugmakers by challenging the validity of
`their patents through the inter partes review process created by Congress to invalidate weak
`patents. The pharmaceutical industry tried to stop him, arguing that his motives were
`specious, as he would profit by short-selling shares he owns in those companies. But the
`PTO’s Patent Trial and Appeal Board sided with Bass, who did not deny he might profit from
`a resulting change in stock price but called it a “truthful irrelevancy.” A panel of judges ruled
`that “profit is at the heart of nearly every patent and nearly every inter partes review.”
`
`In the most recent patent challenges, Bass and Spangenberg aren’t giving drug companies
`a chance to argue that the petitions are driven by questionable motives. They are putting
`their own money behind their claims that the PTO has for too long allowed weak patents to
`be issued and that the drug companies will do whatever they can to extend the life of their
`patents using a strategy known as “evergreening,” costing taxpayers and patients billions of
`dollars.
`
`http://www.corpcounsel.com/printerfriendly/id=1202743748187
`
`3/10/2016
`
`Fresenius Ex. 2022
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254
`
`

`
`The Saga Continues Kyle Bass and Partner File Personal Altruistic Challenges to Drug Pa...
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`Page 2 of 3
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`The first petition filed last week, for example, covers the drug Suprenza, a weight-reduction
`drug. The patent is not for the chemical makeup of the drug itself but for its “speckled”
`appearance, which the patent owner claims enables doctors and patients to easily identify
`the tablet and distinguish it from other medications. This description may make the patent an
`easy target for invalidity if Bass and Spangenberg can show that there is no novelty
`involved. In their petition, they argue that “speckles comprising colored granules of water-
`soluble sugar” were known and obvious when the patent was issued.
`
`Bass and Spangenberg cannot profit directly from invalidating this patent because it is
`owned by Alpex Pharma and is licensed to Citius Pharmaceuticals LLC, neither of which is
`listed on any major stock market index. In fact, the petition specifies that neither Bass nor
`Spangenberg owns any stock in Alpex or Citius. Since they cannot trade in shares of the
`company, the patent owner cannot argue that the petition should be denied because the
`petitioners stand to gain personally from invalidating the patent.
`
`The second petition seeks to invalidate a patent owned by Fresenius, a large, well-
`capitalized pharmaceutical company. This patent covers Propofol, an anesthetic sold under
`the name Diprivan that is frequently used in surgery and has been around for decades. But
`again, the existing patent is not for the chemical compound of the drug but instead covers
`the rubber stopper used in its container. When Fresenius received approval for the stopper,
`it was able to extend its patent on the drug for 12 more years.
`
`“It is an embarrassment that the U.S. Patent Office has let a patent issue where the claimed
`novelty is a siliconized rubber stopper,” Spangenberg said.
`
`Others evidently agreed and some drug companies took steps to invalidate the patent under
`specific laws designed for the pharmaceutical industry. Several generic drug makers
`challenged the patent with Abbreviated New Drug Applications (ANDAs), which prompted
`Hatch-Waxman lawsuits. But those cases all settled. In addition, Dr. Reddy’s, an India-
`based pharmaceutical company, filed an IPR seeking to invalidate the patent. But that, too,
`ended in a settlement.
`
`“Fresenius has settled every IPR and ANDA litigation because they know this patent is
`invalid and they are forced to pay off challengers to avoid a decision on the merits,”
`Spangenberg said.
`
`Bass and Spangenberg have said they will not settle any of their IPRs. In addition, their
`petition to invalidate the Fresenius patent states that neither Spangenberg nor Bass hold
`any Fresenius securities, indicating they will not profit from a change in the company’s stock
`price.
`
`Clearly, Bass and Spangenberg hope with these latest filings to bring attention to patents
`that, at least on the surface, seem questionable. But they may have other motives for filing
`these petitions as individuals rather than as part of the coalition they created for this
`purpose. The coalition has so far seen mixed results, with the PTAB denying institution of
`several of the IPRs they filed. Spangenberg and Bass seem to have decided to file these
`petitions as individuals to see whether the PTAB will treat petitions differently when they do
`not come from a hedge fund.
`
`http://www.corpcounsel.com/printerfriendly/id=1202743748187
`
`3/10/2016
`
`Fresenius Ex. 2022
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254
`
`

`
`The Saga Continues Kyle Bass and Partner File Personal Altruistic Challenges to Drug Pa...
`
`Page 3 of 3
`
`“Without the noise about our lack of altruism raised by branded drug companies … we are
`curious if the PTAB will do its job,” Spangenberg said.
`
`Contact Lisa Shuchman at lshuchman@alm.com.
`
`Copyright 2016. ALM Media Properties, LLC. All rights reserved.
`
`http://www.corpcounsel.com/printerfriendly/id=1202743748187
`
`3/10/2016
`
`Fresenius Ex. 2022
`Bass et al. v. Fresenius Kabi USA, IPR2016-00254