By Scott A. McKeown
| June 18, 2015

Hedge Fund IPR Scheme Unraveling

Last week, the USPTO's Patent Trial & Appeal Board (PTAB) authorized a Motion for Sanctions in four IPR proceedings filed by the now infamous Kyle Bass & friends. The motion for sanctions will be based on an alleged abuse of process by Bass & Co. for pursuing four IPR proceedings relating to Celgene patents 6,315,720 and 6,045,501. 37 C.F.R. § 42.12(a)(6) The sanction sought is termination of the proceedings. 42.12(b)(8). (motion here)

The motion authorization, while clearly not an ultimate decision as to the propriety of sanctions is a clear harbinger of things to come. First, as busy as the Board is, any request for additional work is strongly indicative of far more than a passing interest in the topic. Second, the authorization in these cases comes by way of expanded panel. Finally, such motions are exceedingly rare (like less than 1% of cases, rare).  If shares in Hayman Capital were publically traded— like its IPR targets— shares would be significantly down trending on this news. The game is over.

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By Scott A. McKeown
| June 17, 2015

First Reversal of PTAB in IPR

Yesterday, in Microsoft Corp v. Proxyconn Inc. (here), the Court of Appeals for the Federal Circuit (CAFC) reversed an Inter Partes Review (IPR) determination USPTO's Patent Trial & Appeal Board— a first.  (The decision also affirmed-in-part, vacated-in-part, and remanded-in part) The Court found that the Board's construction of several key terms to be unreasonably broad. The IPR is now remanded for further Board proceedings on a narrowed construction.  In this sense, apart from historical significance, the decision is unremarkable.

As to IPR specific issues, the Court brushed aside another challenge to the use of the Broadest Reasonable Interpretation (BRI) standard in IPR, citing its recent Cuozzo decision. Perhaps of most interest in this decision is the commentary of the Court in affirming aspects of the PTAB's much maligned amendment practices.

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By Scott A. McKeown
| June 16, 2015

New PTAB Pilot to Allow Flexibility in Appeal Priority

Starting Friday, June 19th, the PTAB will begin a new pilot program to allow appellants with multiple ex parte appeals pending before the Board to expedite review of one appeal in return for withdrawing another appeal. The stated purpose of the Expedited Patent Appeal Pilot is to allow appellants with multiple ex parte appeals (i.e., large patent filers) pending to have greater control over the priority with which their appeals are decided and reduce the backlog of appeals pending before the Board.  

The backlog of ex parte appeals has remained relatively constant (in the mid 20,000 range) for several years.  This backlog, coupled with much longer delays in appeal briefing cycles, effectively delays Board decision's on ex parte appeals (outside of reexamination appeals that are accorded special dispatch) for three years, or longer. While I can't imagine independent inventors will be thrilled with a program that allows large filers a slightly faster path to a Board decision, the hope here is that if enough participate, the backlog will shrink, benefiting all appellants. As the PTO clearly realizes, the backlog is driven by many large, U.S. patent filers that appeal as a matter of course. 

Appellants wishing to participate in the pilot program

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By Scott A. McKeown
| June 12, 2015

Bio/Pharma's Favorite Target Serves a Critical Role

Both Houses of Congress now have bills moving to their respective floors on further patent reform thanks in large part to Kyle Bass. Of course Congress had been toying with the idea of further reform long before everyone's favorite boogeyman came along. But now, thanks to Mr. Bass, Congress has a story to sell otherwise mind numbing legislation to the masses. Keep in mind that America Invents Act (AIA) wasn't about patents, but job creation. Remember that? The new patent reform story, at least for the significant Bio/Pharma lobby, is this: Hedge funds are devaluing drug patents to the point that and there may not be any future, ground breaking medications —unless Congress comes to the rescue. Silly, yes, but effective for advancing otherwise stagnant legislative agendas?...you betcha.

The fact of the matter is Kyle Bass has been a boon to Bio/Pharma lobbyists. His stunts (and that's exactly what they are) allow the debate to turn away from patent quality to one of simple gamesmanship. Everyone can rally around a perceived abuse of legal process, especially when perpetrated by a vilified outsider. But the changes contemplated in the name of stopping Mr. Bass go well beyond that which is necessary. 

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By Scott A. McKeown
| June 4, 2015

Patent Act Rewritten to Appease Bio/Pharma Lobby

In a surprising change of course, the Senate bill known as the 'The Patent Act" (S.1137) has morphed into a PTAB reform bill. The initial version of the Bill hardly touched the patentability trials of the USPTO's Patent Trial & Appeal Board (PTAB). A competing bill, known as the "Strong Act," — on the other hand— proposed gutting these highly effective patent challenge mechanisms.  After the Manager's Amendment to the Patent Act on Tuesday (here), at least with respect to the PTAB, both bills now propose significant alterations to the PTAB's patent challenge mechanisms.

As a reminder, the impetus behind the AIA of 2011 was to thwart abusive litigation fueled by weak patents. It was argued pre-AIA that patents were issuing from the USPTO of overly broad scope and on questionable technology. These patents were then used as tools by extortionists (patent trolls) to extract large settlements from the domestic tech industry. This cottage industry was spawned from an over abundance of such patents. And, since defeating these patents in a district court was quite difficult (due to the deferential treatment of U.S. patents) and expensive, settlement was the only option. The AIA provided relief from these practices by introducing a low-cost, expedited "opposition" to such patents at the PTAB known as Inter Partes Review (IPR) and Post-Grant Review (PGR). That is, the PTAB challenge proceedings of the AIA were designed to weed out weak patents, quickly and cost effectively. These proceedings have been very effective to the delight of some of America's largest tech companies (i.e., serial defendants).  

Since enactment of the AIA, however, many have realized that when presented with appropriate evidence, the PTAB does not discriminate.  It is not just weak troll patents that are being cancelled, and this has a bunch of folks, especially the Bio/Pharma lobby, up in arms.

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