On August 19th, the USPTO released a new set of proposed rules related to post-grant proceedings before the Patent Trial and Appeal Board (PTAB). Among the many offered rules was the addition of a “Rule 11-type certification” for all papers filed with the PTAB. Such a provision would provide for sanctions for noncompliant practitioners and parties alike. This proposed rule change appears to signal the USPTO’s interest in combating bad-faith arguments and process abuse. But whether the PTAB will be ready to deny institution of IPRs based solely on such arguments is yet to be seen.

More specifically, the USPTO’s release states that the proposed certification is meant “[t]o further attempt to prevent any misuse of the AIA proceedings” and includes language supporting sanctions for noncompliance and the potential for investigation by the Office of Enrollment and Discipline for particularly egregious acts. This proposed rule would be an amendment to 37 C.F.R. § 42.11, and presumably bolster the PTAB’s authority to sanction under 37 C.F.R. § 42.12.

The promulgation of the proposed “Rule 11-type certification” is interesting in light of certain pending IPR institution decisions currently before the Board. In particular, IPR2015-00817, which should have an institution decision no later than August 27, 2015, is the first in a series of petitions filed by the Coalition for Affordable Drugs (CAFD) et al. Hedge fund manager Kyle Bass created the CAFD to lead numerous IPR petitions, challenging the validity of certain patents covering blockbuster pharmaceutical drugs. This petition, as well as the other petitions filed by CAFD, have been raised by patent owners as abuses of process.

Indeed, in IPR2015-01092, an enlarged PTAB panel has recently authorized a motion for sanctions under the existing rules against petitioner CAFD. On Aug. 11th, CAFD filed an opposition to the motion for sanctions. On Aug. 20th, patent owner filed a reply to the CAFD opposition. As of this posting, the PTAB has yet to issue a decision.

Bass, whose unconventional use of IPRs was profiled in the Wall Street Journal in April, has indicated that post-grant proceedings will be used to attack pharmaceutical patents to clear the path for more affordable generic drugs. Indeed, since February 2015, Bass and the CAFD have filed nineteen IPR petitions against sixteen different patents belonging to at least ten different companies. In thirteen of those cases, a preliminary patent owner response has been filed and in each one of those preliminary responses, the patent owner has suggested that the petition was an abuse of process or otherwise inconsistent with the intent of the AIA. Moreover, in five cases, the patent owner has filed a separate motion for sanctions based on abuse of process, and in at least one other case, the PTAB has authorized the patent owner to file such a motion although the patent owner has yet to do so. More details related to the CAFD IPR petitions can be found in the table here.

Should the Board decide that the CAFD petitions are an abuse of process, the Board has discretion under 37 C.F.R. § 42.12(b) to impose sanctions ranging from compensatory expenses to dismissal of the petition. Although Bass’s use of IPRs was probably unanticipated by Congress when drafting the AIA, there are no specific standing requirements in the statute that preclude use of IPR by a hedge fund entity. All eyes will be on the first CAFD decision, which the PTAB is due to make by Aug. 27, so stay tuned.

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