PTAB Once Again Denies Real-Party of Interest Challenge
Oct. 26, 2015 (Mimesis Law) — Last week, the PTAB denied another request designed to substantiate that Kyle Bass is misusing the Inter Partes Review system raised by patent owner Pozen, Inc. (POZN). Pozen asked for additional discovery about Bass’s Coalition for Affordable Drugs (CFAD) entity, including the financial position of related parties in Pozen stock, and whether or not any of the investors in CFAD were defendants in Hatch-Waxman cases. The PTAB denied any additional discovery, saying that Pozen’s requests were based on speculations with no substantiation.
This inquiry is notable, as a patent owner that has been sued for patent infringement has only one year to bring an IPR before being time-barred from bringing a challenge. Pozen’s request for discovery is to see if any of CFAD’s investors are actually generic manufacturers that are time barred from bringing a challenge, and using CFAD as an end-around to avoid this limitation. The PTAB has ruled in the past that this is inappropriate, notably in challenges brought by RPX (RPXI) against Virnetx Holding Company (VHC), and by Zoll Lifecore against Phillips Electronics. In the latter case, the PTAB set out a series of factors that can be considered to determine if the petitioner is an RPI, including:
- A financially controlling interest in the petitioner;
- the non-party’s relationship with the petitioner;
- the non-party’s relationship to the petition itself, including the nature and/or degree of involvement in the filing; and
- the nature of the entity filing the petition.
In an unrelated petition brought by CFAD against Shire, the PTAB allowed additional discovery only to the contracts between CFAD and other parties in the case. Specifically, PTAB allowed discovery:
“only as to any agreements, in the possession of Petitioner, relating to the control or ability to control any aspect of the current proceeding by a party not designated as Petitioner or a real party-in-interest in the Petition. Such agreements include those indicating that any person or party (other than Petitioner or designated real parties-in-interest) provided direction to, or had the authority to provide direction to, Petitioner or its counsel in relation to this proceeding, including persons or parties who reviewed, or were given the opportunity to review, papers filed in this proceeding.” (IPR2015-01093 Paper 14).
However, in response to Pozen’s request for additional discovery about the investors in CFAD and whether they included generic pharmaceutical companies in IPR2015-01241 and IPR201501344, the PTAB ruled that such a request must include evidence that “tends to show beyond speculation that something useful would be uncovered were we to grant discovery on that item.” The PTAB ruled that since Pozen had not provided any evidence that CFAD was being controlled by a defendant to litigation that was time barred, so the court denied the request for additional production.
In my opinion, these responses supports the idea that PTAB makes a clear distinction between investors and parties that control the IPR petitions. With the way that CFAD is set up between Bass’s Hayman Fund and Spangenberg’s nXn Partners, I think it will be difficult for pharmaceutical companies to challenge the way that CFAD is using the IPR process. Whether or not CFAD will have much success on the merits of its petitions is still yet to be determined.