This does not seem to me like a great advance in intellectual property law: this Bloomberg article says that some large investors are using the patent challenge process for their own purposes:
Taking advantage of new rules created by Congress three years ago, hedge funds have increasingly been filing challenges to pharmaceutical patents. Some may be angling for payouts to drop their claims, while others are shorting the stock, betting that the manufacturers’ shares will plummet.
Activist investor Kyle Bass sent a shudder through the drug industry earlier this year by embarking on a patent-challenging strategy. Now a New York hedge fund, Ferrum Ferro Capital LLC, has made an even more brazen move by seeking to invalidate an Allergan Inc. patent that has already been upheld in court. Neither investment firm has said whether it’s betting against specific stocks.
I’m generally a lot more sympathetic to short-sellers than most people are. I’ve gone short myself at times (although not in recent years), and I think that the markets need people who are attuned to the downside. This, though, seems to be crossing a line. The challenge only costs $23,000 or so under the rules put in place in 2012, though, so it’s a weapon just sitting there ready to be used. And it appears to be getting used about five times as much as the PTO expected. An investment fund didn’t usually have the standing to challenge a patent in court, but now the door is open.
We’ll see how much of a problem this turns out to be. The challenge system was loosened up in order to deal with yet another problem, patent trolling, where people use portfolios of overly-broad issued patents to shake down everyone within reach. And that’s not a productive activity, either, but we may have to aim for a process that doesn’t allow new shakedowns to arise in the place of the old ones.