After filing over thirty petitions for Inter Partes Review of Orange Book-listed patents for various drugs, Kyle Bass and his Coalition for Affordable Drugs finally have made it over the first hurdle. The USPTO Patent Trial and Appeal Board (PTAB) decided to institute IPR proceedings against U.S. Patent No. 6,773,720, which is listed in Orange Book for Lialda®. This is bad news for Shire, since this is the only Orange Book-listed patent for Lialda®, and also bad news for pharmaceutical companies who hoped Kyle Bass would get discouraged and stop his campaign against pharmaceutical patents.

The Lialda® Patent At Issue

Lialda® is a delayed-release tablet for oral administration of 5-amino-salicylic acid for the treatment of ulcerative colitis. Claim 1 of U.S. Patent 6,773,720 recites:

1. Controlled-release oral pharmaceutical compositions containing as an active ingredient 5-amino-salicylic acid, comprising:
a) an inner lipophilic matrix consisting of substances selected from the group consisting of unsaturated and/or hydrogenated fatty acid, salts, esters or amides thereof, fatty acid mono-, di- or triglycerids, waxes, ceramides, and cholesterol derivatives with melting points below 90°C, and wherein the active ingredient is dispersed both in said the lipophilic matrix and in the hydrophilic matrix;
b) an outer hydrophilic matrix wherein the lipophilic matrix is dispersed, and said outer hydrophilic matrix consists of compounds selected from the group consisting of polymers or copolymers of acrylic or methacrylic acid, alkylvinyl polymers, hydroxyalkyl celluloses, carboxyalkyl celluloses, polysaccharides, dextrins, pectins, starches and derivatives, alginic acid, and natural or synthetic gums;
c) optionally other excipients;
wherein the active ingredient is present in an amount of 80 to 95% by weight of the total composition, and wherein the active ingredient is dispersed both in the lipophilic matrix and in the hydrophilic matrix.

The Real Parties-In-Interest

The petition was filed in the name of the Coalition For Affordable Drugs II LLC (“CFAD II”), and named that entity along with the following as real parties-in-interest:

Hayman Credes Master Fund, L.P.
Hayman Orange Fund SPC – Portfolio A
Hayman Capital Master Fund, L.P.
Hayman Capital Management, L.P.
Hayman Offshore Management, Inc.
Hayman Investments, L.L.C.
nXn Partners, LLC
IP Navigation Group, LLC
J. Kyle Bass
Erich Spangenberg

The Patent Owner challenged the IPR petition for failing to list all real parties-in-interest, asserting that (i) all CFAD “sister” companies should have been named and (ii) all individual investors should have been named. As to both points, the PTAB found insufficient evidence that any sister companies or unnamed individual investors “funded or otherwise paid for expenses associated with the Petition, or that a sister entity in its own capacity (or via its legal counsel) controlled or participated in the filing of the Petition in this case.” Thus, the PTAB found no defect in the identification of the real parties-in-interest.

The Grounds Of Institution

The PTAB decision to institute the Lialda patent IPR is based on its finding that the IPR petition established a reasonable likelihood the petitioner would prevail on its assertion that claims 1–4 of the ‘720 patent would have been obvious over European Patent Application 0 375 063 (“Groenendaal”) and U.S. Patent No. 3,965,256 (“Leslie”) (issued in 1976!).

By statute, the PTAB has until October 2016 to render its final decision. According to the initial scheduling order, an oral hearing (if requested) will be conducted in June 2016.

Impact On Pending ANDA Litigation

The PTAB decision identifies four pending district court proceedings involving the ‘720 patent, and it appears that a fifth was filed after the IPR petition:

  • Shire Development LLC v. Amneal Pharmaceuticals, LLC, 1-15cv-02865 (D. N.J.) (April 22, 2015)
  • Shire Development LLC v. Mylan Pharms., Inc., FLMD-8-12-cv-01190 (M.D. Fla.) (filed May 25, 2012)
  • Shire Development LLC v. Watson Pharms., Inc., FLSD-0-12-60862 (S.D. Fla.) (filed May 8, 2012)
  • Shire Development LLC v. Osmotical Pharm. Corp., GAND-1-12-cv- 00904 (N.D. Ga.) (filed March 16, 2012)
  • Shire Development LLC v. Cadila Healthcare Ltd., DED-1-10-cv-00581 (D. Del.) (filed July 7, 2010)

These all appear to be ANDA cases, filed by Shire after the defendants sought FDA approval of generic versions of Lialda®. While it is not unusual for an IPR to be filed while district court litigation is pending (indeed, most IPRs to date have involved patents in parallel litigation proceedings), what is unusual here is that the real parties-in-interest in the IPR petition are not involved in the pending cases.

While the courts may not stay their proceedings in view of this IPR, it is likely that the IPR will be decided before many of these cases go to trial. If the patent is invalidated by the PTAB, Kyle Bass may claim that he achieved his goal of facilitating earlier generic drug market entry, but even the ANDA defendants may not appreciate his interference in the ANDA framework.

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