Exelixis, Inc. v. Kappos, No. 1:12-cv-00096, 2012 U.S. Dist. LEXIS (E.D. Va. Nov. 1, 2012)

On November 1, 2012, the U.S. District Court for the Eastern District of Virginia held that Patent Term Adjustment (“PTA”) awards arising from the failure of the U.S. Patent and Trademark Office (“USPTO”) to grant a patent within three years of the patent application filing date are not necessarily curtailed by a Request for Continued Examination (“RCE”) filed more than three years after the filing date. Prior to this opinion, the USPTO interpreted the PTA provisions of 35 U.S.C. § 154 to terminate the accrual of a certain component of PTA once an RCE was filed. This decision is significant because, barring a successful appeal by the USPTO, many patentees may be entitled to significantly increased PTA awards for patents whose prosecution involves RCEs filed more than three years after the filing date.

Patent Term Adjustment Background

The American Inventors Protection Act (AIPA) of 1999 (codified at 35 U.S.C. § 154) provides for PTA arising from three types of patent examination delays:

  • “A Delays” arising from the failure of the USPTO to comply with various statutory deadlines (e.g., failing to mail a first office action within fourteen months of the patent application filing date under 35 U.S.C. § 111(a));
  • “B Delay” arising from the failure of the USPTO to grant a patent within three years of the patent application filing date; and
  • “C Delays” arising from certain administrative actions (e.g., interferences, secrecy orders, and appeals).

The patent term adjustment award under 35 U.S.C. § 154 is calculated as:

  • the number of days of A Delays, plus
  • the number of days of B Delay, plus
  • the number of days of C Delays, less
  • the number of days of overlap between the A Delays, B Delay, and C Delays, and less
  • the number of days of applicant delay reflecting the failure to diligently conclude prosecution of the application.

The Exelixis Decision

Exelixis, Inc. filed suit in the U.S. District Court for the Eastern District of Virginia seeking review and correction of patent term adjustment granted by the USPTO for U.S. Patent No. 7,989,622 (“the ‘622 Patent”) that issued on August 2, 2011.

Exelixis filed the ‘622 Patent on January 15, 2008 as a national phase application and, after receiving a final Office Action, filed a Request for Continued Examination on April 11, 2011. Three weeks later, the USPTO issued a Notice of Allowance. After payment of the issue fee, the patent issued with a PTA award of 368 days, reflecting 344 days of A Delays, 85 days of B Delay, and 61 days of applicant delay.

Under the USPTO’s interpretation of the statute, accrual of B Delay terminated upon the filing of the RCE. Thus, the USPTO’s PTA calculation of the B Delay awarded 85 days for the period beginning on the three-year anniversary of the filing date and ending on the day before the filing of the RCE instead of 199 days for the period beginning on the three-year anniversary of the filing date and ending on the issue date.

Exelixis argued that if an RCE is filed after the three-year period commenced on the application filing date, the UPSTO should extend the patent term one day for each day of delay until the patent issues, based on Section 154(b)(1)(B) that reads in pertinent part:

(B) GUARANTEE OF NO MORE THAN 3-YEAR APPLICATION PENDENCY.— Subject to the limitations under paragraph (2), if the issue of an original patent is delayed due to the failure of the United States Patent and Trademark Office to issue a patent within 3 years after the actual filing date of the application in the United States, not including—

     (i) any time consumed by continued examination of the application requested by the applicant under section 132(b);

     […]

the term of the patent shall be extended 1 day for each day after the end of that 3-year period until the patent is issued.

The District Court held that Section 154(b)(1)(B) operates by:

  • starting a three-year time clock on the application filing date,
  • tolling the clock if an RCE (or an interference, secrecy order, appeal, or applicant-initiated request for delay) is filed within the three-year period, and
  • adding a day to the patent term award for each day of delay after the three-year period.

Although the USPTO argued that the language of the statute should be read to include “then” before “not including” so as to toll the clock when an RCE is filed after the three-year time period, the court found the USPTO’s argument to be unpersuasive and characterized the argument as an attempt to rewrite the statute itself.

Effect of the Exelixis Decision

Any appeal of this decision to the U.S. Court of Appeals for the Federal Circuit must be filed within 60 days of the entry of judgment. The USPTO has not indicated whether it will appeal the decision.

In the interim, patentees may wish to review recently-issued patents and other patents of particular value and consider the following actions depending on the issue date of the patent:

  • Patents issued less than two months ago – Patentees with recently issued patents may file a petition with the USPTO requesting reconsideration of the PTA calculation within two months of the issue date. Although the USPTO may deny or defer a decision on such petitions until any appeals of the Exelixis case are resolved, any such delay by the USPTO potentially could provide the basis for patentees to defer the expense of filing a complaint to challenge the PTA calculation if the recently-decided Bristol-Myers Squibb v. Kappos decision, which held that the 180-day deadline to file suit is tolled by a timely-filed petition with the USPTO, is deemed applicable.
  • Patents issued more two months ago, but less than 180 days ago – Patentees with patents issued beyond the two-month window for petitioning the USPTO may challenge the PTA calculation by filing a law suit in the U.S. District Court for the Eastern District of Virginia. Although the cost of preparing and filing a complaint is larger than the cost of a petition, the U.S. government has typically sought to stay and remand such “follow-on” PTA suits to the USPTO, thereby making it possible to avoid many of the types of costs borne by Exelixis in this case, which may be what happens if such a lawsuit is filed in these circumstances.
  • Patents issued more than 180 days ago – Despite the almost three years since the Wyeth v. Kappos sea change in the law of patent term adjustment, neither the courts, the USPTO, nor Congress have addressed whether and how owners of patents issuing well before favorable PTA decisions may benefit from such changes in the law. Patentees of older patents that are likely to have significant value toward the end of their term may wish to monitor Novartis AG v. Kappos, Case No. 1:10-cv-01138-ESH (D.D.C.), which is the lead case seeking application of the Wyeth v. Kappos formula to older patents and may wish to file similar law suits to best preserve their rights in the event of a favorable decision in Novartis v. Kappos.

Conclusion

Depending on the ultimate resolution of the Exelixis case, patentees and applicants may benefit from increased PTA awards arising from increased B Delay when an RCE is filed after the three-year time period expires.

While awaiting further actions from the USPTO in the case, patent owners may wish to review the PTA calculations performed by the USPTO and take appropriate action to best preserve their rights to additional patent term where additional days of PTA are of particular importance.