Every few years, a patent case comes around that captures the attention of retail investors. For those unfamiliar with the concept of a retail investor, the term is used to distinguish those playing the stock market with their personal capital from the professionals managing money on behalf of others, otherwise known as institutional capital. In the popular conception, a retail investor is usually depicted as someone using their retirement money (outside of a 401k or mutual fund) or other personal savings to buy stocks, usually in the hopes of scoring an outsized return — or at least a better return than what buying a index fund or some sort of other safe investment promises. Compared to investment professionals, retail investors are often derided for taking unnecessary risks with money they can usually ill-afford to lose, seduced by the siren song of a particular stock’s potential to generate a large return on their investment. Every so often, there is a patent litigation that promises to materially impact the fortunes of a publicly traded company — a potential binary result that can attract the attention of retail investors chasing a big winner.

In the early half of last decade, a number of publicly traded patent-holding companies attracted a lot of investor interest — on the strength of their patent litigation prospects in cases involving well-heeled defendants. While institutional investors also participated, the wild swings in share price brought upon by the changing fortunes of those companies in their respective patent litigations were often driven by retail investors. In the typical scenario, a thinly traded patent-holding company would have a case on file against a large defendant where the damages potential was significant relative to the company’s market capitalization. When even the smallest incremental victory was announced in the case for the patent holder, there would be an immediate bounce up in the share price. Likewise, when there was negative news from the case, there would often be a significant turn to the downside almost immediately. Even though such investing was not for the faint of heart — and the overall success rate for those companies was not the greatest — there were definitely those who made a killing riding the patent enforcement wave, often by getting out of the investment as soon as there was a spike in the share price on some favorable news.

In addition to those exemplar lottery-ticket enforcement situations where patent litigation and retail  investor interests intersect, there is another scenario where the potential for retail investors to either make or lose a lot of money in a short while due to patent litigation is found. Namely, pharmaceutical cases, especially where patents protecting monopoly revenues on a branded drug are being challenged by one or more drug companies looking to sell generic versions of that branded drug. The potential for stock price volatility as a result of that litigation activity is heightened where the targeted drug is a major contributor to the revenue stream of the publicly traded patent owner. As one can imagine, if the patents protecting that revenue stream don’t hold up, and generic competition is introduced as a result, the financial fortunes of both the branded drug company and its shareholders can be negatively affected in a significant way. And because retail investors are often attracted to volatile, high-growth potential pharmaceutical and biotech companies, those investors can often be in for a bumpy ride once patent litigation involving a company they invested in ensues.

As with all litigation, sometimes the patent-holding drug company wins and sometimes it loses. When it loses, the immediate downturn in the share price can be an unwelcome bombshell for investors — and disproportionately destructive to the retail investor base of that company. Often, those retail investors have no choice but to lick their wounds and resolve to do a better job managing their exposure going forward. But sometimes, they are motivated to do more. In a very interesting recent example involving branded drug company Amarin, a motion to challenge a negative patent ruling involving Amarin’s patent portfolio was filed by “an ad hoc group of physicians, patients, Amarin retail shareholders, and other concerned persons.” Definitely not something you see every day — or ever — in the patent world, but when a patent ruling sends a stock crashing 70%, you can imagine that at least some of that company’s shareholders will be motivated to try to take action. And in Amarin’s case, they did, with the consortium of interested parties filing a motion to intervene into Amarin’s failed case against the generics, coupled with a motion to vacate the negative patent ruling.

Unfortunately for the retail investors in the consortium, the effort proved a quixotic one, even though Amarin itself confirmed that it “did not provide [EPADI] with any support, whether substantive or financial, in the preparation of either motion.” Despite that disclaimer by Amarin, the district court did not look kindly on the consortium’s attempt to intervene, finding that it was both untimely and lacked standing. On the timeliness question, the court noted that the motion failed to make a winning showing on any of the three timeliness factors, in large part because the motion was filed a year after the court had issued its order invalidating Amarin’s patents following a bench trial.

Making matters worse for the filers, the court did not credit their argument that they had a significantly protectable interest in the case — despite the money that they lost due to the court’s invalidity ruling.

Nor did the court indulge the argument that the generics had somehow perpetrated a fraud on the court in their patent challenge. Instead, the court agreed with the defendants “that EPADI has no protectable interest in the property or transaction that is the subject of the suit because this is a patent case, and EPADI admits it has no legal interest in the patents-in-suit.” As such, intervention — even had it been a timely request — was denied, thereby also dooming the motion to vacate as well. At bottom, the court declined the invitation to incorporate the arguments of a group of nonpatent holders in a contested patent case, even when that group was largely made up of investors in the patent holder.

Ultimately, while the retail investor’s motion may have been an unusual one for a judge in a patent case to deal with, the circumstances do underscore a number of important points about patents. First and foremost, that patents can and do materially contribute to the value of a company, including publicly traded ones. As a result, investors in companies who can be impacted by patent litigation events must do their utmost to monitor those cases and calibrate their investment decisions accordingly. Second, that a patent is a piece of intellectual property that belongs to a legal owner — and even though others may have financial interests in that owner, including retail investors, when it comes to patent litigation those nonowners must content themselves with a view from the sidelines. As the effort by Amarin’s retail investors demonstrated, patents are personal.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.