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Drug makers attack patent challenges

Biogen, others say hedge fund is no white knight, abuses law

WASHINGTON — Drug makers with patents being challenged by Kyle Bass are striking back, accusing the hedge fund manager of abusing a government review process designed to weed out useless patents.

Celgene Corp. and Pharmacyclics Inc. are asking the Patent and Trademark Office to dismiss efforts to invalidate their patents by Bass’s Coalition for Affordable Drugs, saying it’s an “abuse of process.”

Biogen Inc., meanwhile, is demanding more information about the funds Bass controls to prove his main goal is to manipulate stock prices for profit.

The patent reviews, created in 2011 in a change to US patent law, don’t limit who can file. As a result, Bass and other third parties — some funded by tech companies often sued over patents — have filed petitions questioning the validity of some patents.


Celgene says that Bass’s partner Erich Spangenberg, founder of IP Navigation Group, a patent-licensing firm, initially sought to extract a settlement from the company in return for not filing a petition challenging patents on its blood cancer treatment, Thalomid. When Celgene declined to pay, Spangenberg became a consultant to Bass and they “concocted a new scheme to profit from affecting companies’ stock prices,” according to Celgene’s filing.

Bass, founder and principal of Hayman Capital Management, has said that drug makers use invalid patents to protect billions of dollars of sales from generic-drug competition. Without the patents, he has said, Americans would get quicker access to low-cost versions of life-saving treatments.

Pharmacyclics on Monday got patent office clearance to ask that the petition over its cancer drug Imbruvica be dismissed, as a sanction for “improper use of the proceeding.”

Bass and Spangenberg did not immediately respond to requests for comment. In a July 3 filing with the agency in the Biogen case, Bass said there’s nothing wrong with shorting stock and no evidence that he’s trying to manipulate any stock prices.


The “unsupported accusations seem designed to harass petitioner and score points in the court of public opinion,” Hayman Capital said.

Under the law, the “underlying motivations for filing are simply not relevant,” Bass said in its filing.

The Hayman Credes Fund, which began raising money in January, is listed as one of the “real parties of interest” in the patent challenges filed by the Coalition for Affordable Drugs. The fund, which has about $295 million in assets, was formed to invest in and bet against drug stocks, according to a filing with the Securities and Exchange Commission.

Drug makers aim to prevent the Patent Trial and Appeal Board from ruling their patents are apt to be invalid and ordering an in-depth review.

The panel is expected to issue its first finding in August, in one of several cases brought by Bass against drug makers — this one challenging patents for Acorda Therapeutics Inc.’s multiple sclerosis drug Ampyra.

Celgene, in its filing, said that if the board allows the strategy to continue, “it will be inundated with similar petitions, and no public company that relies on patents to protect its innovations will be safe from threats or unnecessary petitions from for-profit organizations” misusing the process as part of an investment strategy.

The drug and biotechnology industries, angered over the petitions filed by Bass, are pushing Congress to exempt them from such patent reviews.

Debates over such changes have thrown a wrench into proposed legislation backed by Silicon Valley to curb nuisance patent suits.


In an April 14 letter to Congress, Bass said his plan was to challenge the “small number of monopolistic drug franchises that have gone unchecked.”