Cut bait

Why Congress may reform the inter partes review process on patents

The specter of Kyle Bass using postgrant patent review procedures to manipulate stock prices has spotlighted an obscure corner of intellectual property law, and stirred up a backlash that could prompt Congress to institute reforms.

Bass, founder and chief investment officer of hedge fund Hayman Capital Management L.P., has been using the inter partes review (IPR) process to challenge drug patents that he says should not have been granted and have allowed drug companies to exercise "abusive patent monopolies."

IPR is part of a streamlined postgrant patent review system created in the 2011 America Invents Act to use prior art and arguments about obviousness to invalidate patents that were improperly granted.

Bass' strategy seems to be to pose a threat credible enough to spook investors, and potentially to profit from shorting the target company's stock. If that is his goal, he has succeeded with only one of his eight targets so far: Acorda Therapeutics Inc.

It is too early to determine whether Bass will manage to eliminate or attenuate monopolies on any drugs. The U.S. Patent and Trademark Office hasn't decided whether it will accept any of his petitions, and it will take up to a year for a decision if a petition is accepted.

The biopharmaceutical industry is telling lawmakers and the public that the use of the IPR process to attack drug patents could inflict deep damage, threatening its ability to bring biomedical innovations to patients.

However, patent attorneys

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