This is not a good sign for Kyle Bass' new big short strategy

Texan hedge fund manager J. Kyle Bass, the founder of Dallas-based Hayman Capital, has been dealt a blow in his war against the pharmaceutical industry.

The Patent Trial and Appeal Board (PTAB) on Monday denied two inter partes review (IPR) petitions filed by Bass against Acorda Therapeutics.

Acorda's attorney Gerald Flattmann, a partner at law firm Paul Hastings, was "extremely gratified" by the patent office's decision.

"It further validates the strength of Acorda patent portfolio protecting Ampyra," he said in a statement.

Acorda's share price surged in the hours after the market closed. The stock traded up more than 29% in the late session.

Bass has been going after a number of pharmaceutical companies and their "BS patents." It's all part of an "activist short strategy" that Bass thinks will stop so-called "pay for delay" agreements that prevent lower-cost generic drug competitors from entering the market.

He has formed the Coalition for Affordable Drugs (CFAD), and the group has now filed 18 IPR petitions with the US Patent and Trademark Office challenging the validity of some drugmakers' patents while also betting against the company's stocks.

On February 10, Bass filed the IPR challenging the Acorda's patent for Ampyra-a treatment that helps improve walking in Multiple Sclerosis patients. Then, on February 27, Bass filed another against the company's patent on "Sustained Release Aminopyridine Composition." Acorda's share price tumbled in the weeks that followed.

The denial of the two IPR petitions sets a worrying precedent for Bass. He has also targeted patents held by Biogen, Jazz Pharmaceuticals, Shire, and Celgene.

Celgene, which Bass has filed five IPRs against, recently filed a motion with the USPTO for sanctions on a claim of "abuse of process" by the Coalition for Affordable Drugs.

Bass' CFAD said in a response that even if the fund makes money, its actions serve a greater social good by potentially saving American consumers significant amounts of money. The response said:

"CFAD's IPRs are part of its investment strategy, and it will only succeed by invalidating patents, which would serve the socially valuable purpose of reducing drug prices artificially priced above the socially optimum level. And even if, despite its best efforts, it does not profit - each petition that knocks down a barrier to generic entry benefits the public.

"It should be axiomatic that people do not undertake socially valuable activity for free - not Celgene, not generics, not shareholders, and not investment funds. Low drug prices will not simply materialize. They must be brought about by agents who will invest significant capital and do the hard work of identifying and challenging weak patents."

Bass declined to comment.