The America Invents Act (AIA) created a proceeding called Inter Partes Review (IPR) to challenge the validity of an issued patent at the United States Patent and Trademark Office. A petitioner may file an IPR petition to request to cancel one or more claims of an issued patent on the grounds of anticipation and/or obviousness based on patents or printed publications. Administrative Patent Law Judges in the Patent Trial and Appeal Board (PTAB) adjudicate IPR petitions, and these proceedings are intended to be similar to validity challenges that would ordinarily take place in the federal district courts.

While entities being sued for patent infringement in the federal district courts are most often those who file IPRs, there has been a rise in uninterested parties filing IPRs to repackage the same prior art used in a validity challenge in the federal district court and present it at the PTAB where the odds are more favorable. The uninterested party may benefit in filing such an IPR when it identifies a high value damage award in which the prior art presented appears strong, and there are no pending challenges. The IPR is filed with the same prior art, and the uninterested party then approaches the patent holder to attempt to extract a quick settlement before the PTAB institutes the IPR proceeding.

However, the newest (and perhaps more troubling) development is hedge funds taking on key drug patents of the pharmaceutical industry by filing IPR petitions. While the hedge funds, such as Hayman Capital Management, L.P., identify seemingly noble goals for filing IPR petitions of lowering drug prices for Medicare and for everyone by seeking to eliminate patents that allegedly just change the dosage or the way that a drug is packaged, the effect may be to degrade financial markets to the hedge fund’s benefit. This could be viewed as exploiting the IPR process that was never intended to be used as hedge funds are employing it. The PTAB has not yet ruled on some of these recent IPR petitions, and it is possible that the PTAB may use its discretion to deny such petitions because the law enables anyone to file an IPR petition, but institution of an IPR proceeding is a matter of discretion. If these IPR petitions are granted, it also remains to be seen whether the challenges will ultimately be successful.

It will be interesting to see how things develop and whether (and if so, what) actions will be taken to address what many are calling the “reverse patent-troll” problem. For now, the hedge funds appear to be hedging their bets with the PTAB, perhaps with a great financial windfall.

For more information on this topic, please visit our Patent Protection service page.

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