The Markman Note: Acorda Strikes Back at Bass
June 9, 2015 (Mimesis Law) — Investors have been watching the IPR exploits of Kyle Bass & Co. – and we have discussed the potential investing catalysts created by Bass in detail – over the past months, as he attempts to bulldoze his way to profit through the filing of patent review petitions with the USPTO. For the first time, however, one of Bass’ targets has been able to able to lodge a response. In fact, it was Bass’ first target, Acorda (ACOR), that responded last week, urging the PTAB to toss Bass’ petition.
The arguments raised by Acorda, and the order in which they raised them, were interesting. As an initial matter, Acorda argued that Bass’ IPR should be thrown out because Bass’ entire disclosed strategy of “shorting while IPR’ing” was an abuse of the IPR process and a tax on the PTAB’s limited resources. Leading with this argument was an interesting choice. If the PTAB bites, then there would be significant ramifications for Bass’ other filed IPR’s, since they would also likely be considered improper sui generis. If the argument fails, then the PTAB will be giving a powerful endorsement – not necessarily to Bass’ tactics – but to the idea that IPR’s are available to any third-party, subject to the special rules in place for when a party is in litigation against the patent owner. Investors, and not only Bass’ investors, will be very interested in seeing whether Acorda’s arguments get any traction at all with the PTAB, making the upcoming institution decision on this IPR even more important.
In addition to the “procedural” argument, Acorda also made some specific arguments directed to the prior art and arguments used by Bass to argue invalidity. There is no doubt that the PTAB will engage with these arguments on the merits, as it decides whether or not to institute this particular IPR. Investors will be interested in monitoring this IPR for institution, in addition to continuing to monitor other IPR responses filed by Bass’ targets. Over time, we should get a clear idea of what arguments, if any, will be effective in slowing down Bass’ assault on the pharmaceutical industry
Recent Patent Litigation-Influenced Moves
POZEN (POZN) & HORIZON PHARMA (HZNP)
Another week, another Bass IPR. This one was accompanied by words of explanation and exhortation from Bass himself, as he took the opportunity to explain the purported abuse by Horizon (with Pozen as a beneficiary, since Vimovo contributes nearly all the company’s revenue) through its campaign of price raises since taking over Vimovo distribution. While painting his targets as the bad guys is helpful for Bass in the courtroom of public opinion, the actual merits of the petition are likely to be what results in a finding for or against his position in the PTAB. But it is compelling stuff when a single activist takes a public stand against an entire industry, and uses an unorthodox tool to inflict some potential financial pain to their corporate assets as an accompaniment to his barbed rhetoric.
It is also interesting to note the parallels between this IPR and the one Bass filed that indirectly implicated Forward Pharma – a topic we have previously addressed in detail. Here too, the perhaps more vulnerable party is not the drug supplier, but the company that owns the patent interests themselves – and depends on a revenue stream from the actual sales of the drug. It is telling that Pozen took a hit since the filing of the IPR, proving once again that investors need to be wary of “one trick pony” pharma companies whose livelihoods depend on patent royalties. Considering the bullseye being painted on those companies by Bass, and especially when he actually lets an IPR arrow fly at one of them.
UNWIRED PLANET (UPIP)
The bad news continued for Unwired Planet and its investors as a negative summary judgment ruling in a patent case against Apple caused the company to concede the case pending appeal. Companies losing patent cases, especially against sophisticated defendants like Apple, is not really news. What makes this situation interesting, for those other than suffering UPIP investors, is UPIP management’s post-decision statements, where they lamented the negative climate for US patent holders trying to win in litigation. While also calling attention to UPIP’s (in a move similar to those taken by other patent enforcement entities) decision to focus ongoing enforcement efforts in Europe. Whether that strategy ultimately pays off for investors remains to be seen, and will have ramifications up and down the publicly-traded patent assertion entity “sector”.
For now, add UPIP to the list of such companies who have tried and failed to secure a big win against a well-heeled target. Perhaps the Federal Circuit will ride to their rescue, but the length and uncertainty of that process may give investors a case of saddle sores. In the meantime. Apple’s defense team can take pride in denying another patent damages aspirant their hoped-for payday.
The Week(s) Ahead — Expected Events
Marathon (MARA) upcoming Del. trial involving Schrader and Bridgestone – 6/1
Issue no. 10 of our weekly look at the intersection of investing and intellectual property is in the books! Hopefully you have had a chance to catch our “Markman Minute” videos (available at www.mimesislaw.com/intellectual-property) for a deeper look at some of the biggest current patent stories of interest to investors. Finally, we want your feedback and suggestions, so feel free to send it along to email@example.com or to @markmanadvisors on Twitter. You can also visit our website at www.markmanadvisors.com. Questions from the readership are always welcome as well; we will try to get you answers in future issues of the Markman Note.
Disclosures and Disclaimers:
Nothing in this material is intended to constitute legal or investment advice of any kind, nor is any of this material based on any non-public information of any kind. In addition to my work at Markman Advisors, I am also a name partner at a NYC-based intellectual property litigation boutique firm, Kroub Silbersher & Kolmykov PLLC (www.kskiplaw.com). Markman Advisors is affiliated with a Houston-based investment management firm, Perdix Capital Management, which may have existing or potential positions relating to situations discussed in this material. Markman Advisors also provides consulting services to buy-side investors, including hedge funds and family offices, that may also have or enter into positions relating to situations discussed in this material.