Kyle Bass is slamming the group blocking his new, big short strategy

Hedge fund manager J. Kyle Bass slammed US Patent & Trademark Office, after it blocked his attempt to challenge a patent held by drugmaker Biogen.

The Patent Trial and Appeal Board, which is part of the USPTO, said on Tuesday that it was denying Bass’ petition to review a patent for a multiple sclerosis drug licensed by Biogen.

“It appears to me, after the Biogen ruling, that Michelle Lee and the US Patent & Trademark Office are running a Kangaroo Court,” Bass told Business Insider in a phone call on Thursday.

Michelle Lee is the head of USPTO, and a former deputy general counsel for Google. During her time at Google, the company played a role in lobbying for the America Invents Act to be passed, the law which permits pretty much anyone to file an IPR challenging a patent.

That’s exactly what Bass did, alongside a bet that Biogen’s stock would fall if it lost the patent protection.

A “Kangaroo Court” is a term for an unofficial or biased judicial proceeding that leads to a harsh punishment.

‘Activist short’ strategy

Since the beginning of the year, Bass has been filing inter partes review (IPR) petitions against numerous drugmakers’ patents, while also betting against their stocks.

It’s all part of an “activist short strategy” that Bass thinks will end what he considers to be “pay for delay” agreements that stop lower-cost generic drug competitors from entering the market.

To do this, he formed the Coalition for Affordable Drugs, and the group has now filed more than two dozen IPR petitions with the USPTO. He even set up a separate investment vehicle at Hayman Capital.

The early results don’t bode well for Bass however. The IPR against Biogen was denied over an issue with something called “prior art” — it’s a pretty difficult concept to grasp, but you can read a great explanation here.

Just last week, two of Bass’ petitions challenging two patents for a multiple sclerosis drug patents held by Acorda Therapeutics were rejected.

US patent attorney Gene Quinn, and publisher of the site IPWatchdog, told Business Insider that the Biogen call was was an “embarrassing” decision.

“It leads to the possibility of arbitrary treatment,” Quinn said. “I think this case with Biogen is a perfect example that the board got so many things fundamentally wrong. This begs to be reviewed.”

The two Acorda IPRs were were tossed out on a technicality. Bass refiled those petitions though.

“The problem is they are going into the weeds to find whatever reason to say no to this guy,” Quinn said.

Quinn said that the PTAB has a reputation for killing patents, and that it is not a patent-friendly board. That made it a surprise that Bass’ IPRs were rejected.

He said: “He’s 0-3. If he winds up going 0-16, we have to sit down and say something is up.”

‘Stick to calling balls and strikes’

Michelle LeeUSPTOMichelle Lee

The rejected IPRs set a worrying precedent for the strategy. What’s perhaps the most troubling for Bass is the USPTO hasn’t heard the merits of any of his arguments.

“Michelle Lee should stick to calling balls and strikes as Congress legislated her to do through the America Invents Act. And she should stop forwarding her political agenda and ignoring the law,” Bass told Business Insider.

A USPTO spokesperson said in response to Bass’ comments that it “does not comment on Patent Trial and Appeal Board (PTAB) cases.”

We sent an email to Lee seeking comment and she didn’t reply in time for publication.

Bass meanwhile is not backing down in his crusade against the pharmaceutical industry. In fact, he’s doubling-down.

Late Wednesday and early this Thursday, he filed four more petitions against patents held by Acorda Therapeutics. Two of them — patents ‘826 and ‘625 — appear to be re-filings for the two that were tossed out initially.

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