Bass associate accuses PTO officials of bias against their pharma patent crusade

Kyle Bass

Hedge funder Kyle Bass and his Coalition for Affordable Drugs has been somewhat successful at using a new type of patent challenge to push review of "questionable" drug patents. But Bass' partner in that effort now says he doesn't trust the Patent & Trademark Office to be impartial in making those decisions.

Erich Spangenberg, in an article at IPWatchdog, says PTO chief Michelle Lee and her staff have favored pharma since Bass announced last year that he and his group would target pharma patents via the inter partes review process.

Citing documents--many of them redacted--obtained through a Freedom of Information Act request, Spangenberg says emails referring to Bass had been exchanged between not only the PTO's general counsel and members of her staff, but also top officials, including Lee, and several judges on the Patent and Trademark Appeals Board, which ultimately decides whether the challenged patents are valid.

For instance, the patent office's chief economist sent a report to a "patent litigation task force" that included "stock market reactions to the Kyle Bass petitions." The report was redacted, so there's no clue to why it was requested to begin with, Spangenberg writes.

PTO chief Michelle Lee

Also, according to the documents, Lee and other PTO officials sat down with the industry association BIO last February, weeks after the coalition announced its campaign. Bass and Spangenberg themselves called and emailed repeatedly to request a similar meeting, and they're still waiting, Spangenberg says. The documents put together for the BIO meeting were all redacted when the PTO handed over the FOIA materials, he said.

"It's an outrage that Ms. Lee is showing incredible bias by granting meetings to the people that are gouging American patients, consumers and taxpayers and denying the same access to the people who are attempting to end this abuse," Spangenberg writes.

"Somehow she was never able to meet with us, despite our repeated attempts and offer to meet anytime, anyplace," he added.

The PTO says other agency officials have met with Bass and other coalition representatives, though not Lee herself. And in a statement to Corporate Counsel, the agency maintained that the PTAB judges base all of their decisions solely on the facts and law as it applies to each particular case. A PTO spokesman told the publication that the agency is "faithfully implementing" the IPR rules outlined in the America Invents Act, "according to law, adhering to the statutory framework and to all rules of evidence and procedure."

As Corporate Counsel notes, the coalition has filed 33 petitions challenging pharma patents so far, and the PTAB has agreed to hold trials on 11 of them. Eleven more were denied and the remaining 11 are pending. There's no guarantee Bass and Spangenberg will win those PTAB trials, but by granting them, the board indicates a "reasonable" likelihood of success.

Some analysts have criticized the coalition for targeting inconsequential patents that aren't likely to change the length of a company's monopoly hold on the market, while profiting from shorting the shares of the same company. In a PTO filing, the coalition has acknowledged that Bass and his group don't have altruistic motives, but maintains that his profit motives "do not change the social value of his activities."

Meanwhile, the biopharma industry has been lobbying to exempt drugs from IPR reviews. BIO and PhRMA have both been active in that effort. Congressional reps popped up with exemption proposals last year. But as the WSJ notes, Rep. Mimi Walters (R-CA) pulled her exemption proposal after a fellow Republican opposed it. And several U.S. senators asked the CBO to estimate how much such an exemption would cost, the WSJ reports, with $1.3 billion being the answer. Private payers aren't crazy about the idea of exempting pharma from IPR, either, and generics makers see the process as another tool in getting their own products to market.

This week, Spangenberg said he and Bass would appeal the FOIA redactions. "[We're] not letting go--ever," he said. "We're not stopping."

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