Bass IPR Petition Against Shire Fails

Written by: Tasha Francis and Rachel Bandli

On October 5, the PTAB ruled against Petitioner Coalition for Affordable Drugs II LLC, an organization formed by hedge fund manager Kyle Bass, holding that the petitioner had not shown by a preponderance of the evidence that claims 1-4 of U.S. Patent No. 6,773,720 ("the '720 patent") are unpatentable for obviousness. The '720 patent claims oral compositions of mesalazine (also known as 5-ASA), an active ingredient that is used to treat Crohn's disease and ulcerative colitis. Cosmo Technologies Ltd owns the '720 patent, and Shire Development LLC is the exclusive licensee. Shire sells the drug Lialda^®, which contains mesalazine as its active ingredient. Lialda^® had sales of almost $700 million in 2015.

In 2015, Bass stated publicly that he intended to target pharmaceutical patents in an attempt to decrease drug prices, although Bass also sought to use the IPR strategy in an attempt to short the stocks of the targeted companies. Since then, Bass filed 35 IPR petitions, 19 of which have been instituted. This was the first final decision issued in one of Bass' challenges. Six of the 21 cases thathave had an oral hearing are still awaiting final decision. Also of note, in one IPR (IPR2016-00245), the patent owner, Alpex Pharma, has indicated that it was not inclined to file a response. This would result in an adverse judgment against the patent owner canceling the contested claims.

The Coalition argued that the '720 patent was a combination of old ideas that were described in two references, a U.S. patent that issued in 1976 ("Leslie") and a European patent application that was published in 1990 ("Groenendaal"). Leslie discloses slow-release oral compositions, and Groenendaal discloses controlled-release oral compositions targeting parts of the intestine. Groenendaal's compositions include 5-ASA. The PTAB found that the Coalition had failed to provide a reason to combine the two references. Particularly, the PTAB rejected the Coalition's argument that a person of ordinary skill in the art would have been motivated to combine the formulation from Leslie with the high dose of 5-ASA from Groenendaal, pointing out that Groenendaal itself already discloses compositions with high 5-ASA content.

But even if one would have been motivated to combine the references, the PTAB determined that "Petitioner does not establish sufficiently that the combination would result in the compositions recited in claim 1." The elapsed time between the prior art references and the filing date of the '720 patent also weighed against the Coalition. The '720 patent was filed in 1999, over twenty years after the first reference issued and almost a decade after the second reference was published. The PTAB stated, "At best for Petitioner, the record before us indicates a close call, but certainly not a strong case, regarding a showing of obviousness." The PTAB noted that the burden of persuasion in an IPR is on the petitioner, not the patent owner. Lialda's commercial success was also mentioned in the decision.

We will continue to monitor the activity on this petition and provide updates and additional commentary. For more background on Bass's IPR filings, please see the following blog posts:

Spangenberg Finds Partner to Target Nucynta^® Patent (January 28, 2016).

Bass' Altruistic IPR Petitions (December 3, 2015).

Kyle Bass Group Gets PTAB to Review 4 Celgene Patents (October 28, 2015).

First Bass IPR Instituted (October 8, 2015).

PTAB Denies Sanctions Against Bass (September 28, 2015).

Kyle Bass' IPRs: Are You Next? (September 8, 2015).

PTAB Denies First Two Bass IPR Petitions (August 25, 2015).

Bass IPR Activity Heats Up in August (August 21, 2015).

Celgene Seeks Sanctions Against Bass (June 11, 2015).

Kyle Bass Files Fifteenth IPR Petition (May 22, 2015).

Non-Practicing Entities as IPR Petitioners in BioPharma (May 5, 2015).