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Kyle Bass Explains The 'Patent Trolls' Situation In The Pharma Industry

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Kyle Bass Explains The 'Patent Trolls' Situation In The Pharma Industry
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Benzinga's Option Alert Recap From January 27
  • Benzinga receives exclusive access to previews of the upcoming weeks’ Wall Street Week.
  • This Sunday’s episode will feature Kyle Bass, founder and principal of Hayman Capital Management.
  • Bass, who manages $1.7 billion in assets, went into several topics including his ongoing pharmaceutical patent battles and the state of the energy market.

Over the course of 2015, Bass filed more than 35 lawsuits – and won about half of them – against what he calls “patent trolls.”

His strategy: dispute a patent and short the involved company’s stock.

At one point in the show, co-host Anthony Scaramucci asked about the issue.

What Are ‘Patent Trolls’?

Patent Trolls are people (or companies) that seek to make extra profits by hoarding and attempting to enforce patents substantially beyond their actual value or intended purpose.

These people (or entities) “buy intellectual property that is not even being used sometimes,” Bass explicated. Other times, by disclosing small changes in things like dosage, patents can be extended, and their holders can keep a “monopoly that is government-backed,” he continued.

Related Link: Kyle Bass On U.S. Oil Production: Going From Glut To Deficit, "The World's Not Ready"

Some of the companies that he believed to be Patent Trolls, and against which he filed lawsuits, included Celgene Corporation (NASDAQ: CELG), Horizon Pharma PLC (NASDAQ: HZNP), Acorda Therapeutics Inc (NASDAQ: ACOR), Shire PLC (ADR) (NASDAQ: SHPG) and Jazz Pharmaceuticals plc - Ordinary Shares (NASDAQ: JAZZ).

Parallel To The Housing Market

At one point in the interview, Bass went on to compare this battle to what he did with the housing market:

"We were playing fantasy football, right? We were putting on contracts that were bets on existing bonds that other CDO managers are willing to take the bets on, so its professional-professional.

"In this case in the drugs, when I win everybody wins. The only person that loses are the shareholders and the management teams of the companies that I'm challenging."

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

Image Credit: Public Domain

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