Kyle Bass, the founder and principal of Hayman Capital Management, is accused of abusing the government review process intended to reject useless patents.
Celgene and Pharmacyclics requested the U.S. Patent and Trademark Office (USPTO) to reject Kyle Bass’ petition to invalidate their patents citing the reason that the hedge fund manager is abusing its review process.
Kyle Bass through the Coalition for Affordable Drugs is challenging some of the patents of pharmaceutical companies to “lower drug prices for Medicare and everyone.”
In February, the hedge fund manager’s Coalition for Affordable Drugs started filing patent petitions through a process called inter partes review to eliminate major drug patents.The coalition filed 16 petitions including five against Celgene, one of the largest biotechnology companies worldwide.
Celgene stressed in its filing with the Patent Trial and Appeal Board that “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” if it allows Kyle Bass to continue misusing the review process as part of an investment strategy.
Celgene allegations against Kyle Bass
Celgene alleged that the real motive of Kyle Bass and his partners was to make money short-selling the shares of pharmaceutical companies.
The stock prices of pharmaceutical companies declined when the Coalition for Affordable Drugs filed its petition for patent review.
Kyle Bass and his partners’ objective is to “to line their own pockets at the expense of public pharmaceutical companies and their shareholders,” according to Celgene.
Celgene added that Erich Spangenberg, founder of IP Navigation Group, a patent licensing firm, first tried to reach a settlement in exchange for not filing its petition challenging its patent on Thalomid, a treatment for blood cancer.
Celgene declined the settlement offered by Spangenberg. After that, he became a consultant to Kyle Bass. They developed a “new scheme to profit from affecting companies’ stock prices,” alleged Celgene.
On the other hand, Pharmacyclics obtained a clearance from the patent office to file a request for the dismissal of Kyle Bass’s patent review petition for its cancer drug Imbruvica. The pharmaceutical company accused the hedge fund manager of “improper use of the proceeding.”
Kyle Bass said there was nothing wrong with shorting stocks
Kyle Bass argued that there is nothing wrong with shorting stocks, and there is no evidence that he is trying to manipulate any stock price in a July 3 filing related to the Biogen case. He said, “Underlying motivations for filing are simply not relevant.”
Hayman Capital emphasized that the accusations of the pharmaceutical companies were unsupported and “seemed designed to harass petitioner and score a point in the court of public opinions.
The Coalition for Affordable Drugs listed Hayman Credes Fund as one of the “real parties of interest” in the patent review petitions filed with the USPTO. Hayman Capital created the Fund to invest in and bet against the shares of drug companies, according to a regulatory filing with the Securities and Exchange Commission (SEC).