Hedge Funds Exploit Patent Laws To Push Down Biotechs

In a move no one could have seen coming, hedge funds have devised a strategy to turn a few rules on their heads in order to drive down stocks they’re shorting. Thanks to a changes in patent laws implemented in 2012, hedge funds can now challenge patents for the bargain price of just $23,000 (which effectively means deep pocketed fund managers can have as many reviewed as they want) in a process that is now far more efficient than it once was. As Bloomberg explains, those who drafted the new laws could not have foreseen that the system would one day be exploited by evil money managers and after all, Congress was trying to do the right thing for the country by stifling innovation:
A patent office review costs $23,000 to file, and the whole process is a fraction of the millions of dollars in legal fees a challenger would spend in a civil suit. Congress created the process in 2012 as part of a sweeping overhaul of the U. S. patent system, designed to counteract what was seen as an overabundance of patents being awarded. That makes sense. When too many people are inventing things, one way to stop such nonsense is to make suing inventors cost far less than it used to. And while the new process – which basically just involves a review by a judge – is being used five times more than anyone anticipated, Bloomberg notes that fortunately, the chances that a challenge will be considered is actually quite low at ‘only’ 70%:
The mere filing of a petition is no guarantee the patent office will invalidate a patent owner’s rights to an invention, or even consider the case. In the past three months, the agency has agreed to hear only 70 percent of the petitions it’s received…

This post was published at Zero Hedge on 03/21/2015.