The Coalition for Affordable Drugs, the group led by billionaire J. Kyle Bass’s hedge fund Hayman Capital Management, and IP Navigation Group founder and owner Erich Spangenberg, won institution of two petitions challenging a drug patent of Shire Plc.

The ruling by the Patent Trial and Appeal Board in IPR2015-0090 and IPR2015-01093 involved U.S. Patent No, 7,056,886 B2, developed by NPS Pharmaceuticals, which was later acquired by Shire, and is a treatment for short bowel syndrome.

The ruling was written by Administrative Patent Judges Lora Green, Jacqueline Wright Bonilla and Sheridan Snedden.

These are second and third IPR petitions filed by Bass and Spangenberg’s coalition to be instituted by the PTAB, versus three that were rejected. Bass and Spangenberg previously won institution of an IPR challenging the validity of the patent behind the drug Lialda, a treatment for Crohn’s disease also owned by Shire.

The PTAB declined to institute petitions filed by the coalition to invalidate a patent for the narcolepsy drug Xyrem, which is owned by Jazz Pharmaceuticals. The PTAB also declined to institute IPRs filed Biogen Idec and Acorda Therapeutics.

The coalition’s petition cited prior art — including two patents by Drucker, Osterburg and Kornfelt — the panel found persuasive.

“The information set forth in the petition is sufficient to establish that buffered pharmaceutical formulations of GLP-2 analogs were known and that Osterburg and Kornfelt suggests that the use of Lhistidine in combination with an excipient such as mannitol or sucrose in protein formulations was a predictable variation within the technical grasp of a person of ordinary skill in the art done for the purposes of protein stabilization.

As such the panel said it concluded that petitioner has established a reasonable likelihood of prevailing on its assertion that claims 1−27, 33−35, 38, and 45 are unpatentable as obvious.

In addition, the panel said it concluded that petitioner has established a reasonable likelihood of prevailing on its assertion that claims 31, 32, and 44 are unpatentable as obvious.

The panel also was unpersuaded by NPS’s arguments that the coalition had failed to identify all the real parties of interest and that its petition was an abuse of the IPR process.

“The evidence of record does not support sufficiently a finding that an unnamed party controlled the investment decisions prompting the filing of the present Petition,” the panel said.

“Further, while the expenses associated with the present cases are being paid for by funds contributed by investors (Prelim. Resp. 33), the funding of an inter partes review, absent other indicia of control, is not necessarily sufficient to render a party a real party in interest.

“Here, for example, Patent Owner has not shown sufficiently that an unnamed party co-authored the present petition or exerted control over its content, or could exert any control over any aspect of the current case, in particular.

“Finally, patent owner argues that ‘hedge fund investors often can negotiate their individual rights as conditions to their investment.’ We granted patent owner’s request for additional discovery on this issue, requiring petitioner to identify any agreements affecting control of this proceeding. No such agreements were identified.

The panel said that based on the particular facts of this case, in view of the evidence before us, it was not persuaded that patent owner has provided sufficient rebuttal evidence to show that the present petition fails to satisfy the requirement of § 312(a)(2) to identify all real parties in interest.

In addition, the panel said that while it does not take a position on short selling as an investment practice it remains legal. Moreover, the panel said IPRs provide for legitimate patentability challenges and serve a strong public interest in removing weak patents.

“Here, patent owner does not allege that petitioner filed a non meritorious patentability challenge that amounts to abuse…we find the petition raises challenges having a reasonable likelihood of prevailing. Accordingly, based on the record before us, we decline to deny the petition for abuse of process under our rules.”

Spangenberg described the PTAB decision as “great news” in an email.

“At a simple level, patents are a government granted monopoly. The PTAB today has taken the first step to eliminate an improperly granted government monopoly. Shire and NPS have used this improperly granted monopoly to price Gattex at over $300,000 per year. This imposes a tremendous illegitimate cost on patients and taxpayers.

“I have no problem where a true innovator—and we have found most patents in the pharma space are truly innovative—gets a patent and charges whatever they can. These innovators deserve the benefit of profiting for the huge risks they have taken. I have a huge problem where the only “innovator" is the lawyer making up specious arguments to a massively overworked patent examiner and the result is a bad patent. There is no question that bad patents equal higher drug prices. Very credible outside experts have estimated that the cost imposed on patients and taxpayers as a result of bad patents to be hundreds of billions of dollars.

“I totally get it that many of the PTAB judges come from large firms and as former patent examiners, who for years have been steeped in the bizarre practice of evergreening by branded pharmaceutical companies. It is good to see that some at the PTAB also get it that there is nothing special about pharma patents and that bad pharma patents deserve no higher level of deference than any other type of patent.”

-— To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or dan@thepatentinvestor.com