ArQule, Inc. v. Kappos, No. 1:10-cv-01904-ESH, 2011 WL 2469826 (D.D.C. June 23, 2011).

On June 23, 2011, the U.S. District Court for District of Columbia overturned the U.S. Patent and Trademark Office’s (USPTO’s) award of patent term adjustment (PTA) and held that the USPTO’s reduction of the PTA award due to a response filed on the day after Veterans Day was erroneous. Although the resulting increase in PTA in the patent at issue and other similar patents is modest, such increases may be valuable for patents for pharmaceuticals and other products where the terminal portion of patent term is of particular importance.

Patent Term Adjustment Background

In 1995, the United States changed the effective patent term from seventeen years from patent issuance to twenty years from the filing of the patent application. Under the original “seventeen-years-from-patent issue date” term rule, any delay in patent examination did not diminish the term of the patent because the term would not begin until issue, i.e., after the delay. However, a “twenty-years-from-filing date” term rule can be reduced by prolonged patent prosecution because the patent term runs during prosecution.

The American Inventors Protection Act (AIPA) of 1999 (codified at 35 U.S.C. § 154) addresses this problem by adjusting the patent term for 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 Delays” 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).

PTA accrued under the A, B, and C Delay provisions can be reduced by the failure of the applicant to engage in “reasonable efforts to conclude prosecution of the application.” 35 U.S.C. § 154(b)(2)(C)(i). The AIPA states that any failure to respond to an office action within three months is deemed to be a failure to engage in reasonable efforts to conclude prosecution and, therefore, results in reduction of PTA for each day beyond three months from the mailing date of an office action until a response is filed. 35 U.S.C. § 154(b)(2)(C)(ii).

The USPTO rigidly applies the three-month period set in § 154(b)(2)(C)(i) when calculating applicant delays to reduce PTA. This rigid interpretation often produces strange outcomes in which a response that is timely filed for the purposes of pendency and fee calculations results in a reduction of PTA. For example, if the initial (three-month) deadline to file a response to an office action falls on a Saturday, a response filed on the next business day (i.e., Monday) would not require an extension of time, but would result in a two-day reduction of PTA under the USPTO’s interpretation.

The ArQule Decision

U.S. Patent No. 7,713,969, entitled “Compositions and Methods for Treatment of Cancer,” issued on May 11, 2010. The face of the patent indicated that the term was extended by 1,127 days of PTA, reflecting 675 days of A Delay and 456 days of B Delay, less 3 days of overlap between the A Delay and B Delay and 1 day of applicant delay. The one day of applicant delay was assessed because the applicant responded to an August 11, 2009 office action on November 12, 2009 (November 11, 2009 fell on Veterans Day, a federal holiday on which the USPTO was closed for business), which was three months and one day after the office action.

ArQule challenged the USPTO’s calculation through petitions filed with the payment of the issue fee and after issuance of the patent. In its petitions, ArQule asserted that the three-month deadline to file its response was Veterans Day—a federal holiday on which the USPTO is closed. The USPTO denied both petitions and ArQule filed suit in the U.S. District Court for the District of Columbia in accordance with 35 U.S.C. § 154(b)(4)(A).

On cross-motions for summary judgment, the court ruled as a matter of statutory interpretation that the § 154(b)(2)(C)(ii) reduction of PTA for responses filed after three months is subject to the 35 U.S.C. § 21(b) ”weekend and holiday” exception just like every other deadline for an applicant to take action before the USPTO. Thus, when the three-month deadline to respond to an Office Action falls on a weekend or a federal holiday and a response is filed on the next business day, the response should not result in an assessment of applicant delay to reduce the total PTA award.

In its ruling, the court rejected arguments from the USPTO that (i) the § 154(b)(2)(C)(ii) calculation is exempt from § 21 because the calculation of PTA is an internal action taken by the USPTO and not the applicant and (ii) the inclusion of the words “shall” and “any” in § 154(b)(2)(C)(ii) insulates this calculation from § 21.

Effect of the ArQule Decision

As of Friday, July 8, 2011, the USPTO's Office of Patent Legal Administration indicated that the USPTO was still considering whether to appeal the decision and had not made any changes to the algorithms used to calculate PTA for allowed and issued patents.

In the interim, applicants and patentees seeking to maximize PTA should consider the following points, particularly for applications and patents where the terminal portion of the patent term is likely to be valuable:

  • The USPTO will likely continue, at least for the next few months, to reduce patent term for responses that are timely filed for purposes of pendency and fees, but are technically filed more than three months after the mailing date of the response. Where possible, it may be more cost-effective to file a response before or on the nominal deadline instead of incurring the costs and delays of later challenging the USPTO's calculation. (Note that responses can be filed electronically on weekends and Federal holidays when the USPTO is officially closed for business.) 
  • At least for applications that are allowed after the ArQule decision, this type of error may be challenged when paying the issue fee (as opposed to the two-month or 180-day post-issuance periods for filing a petition or a court action, respectively). Thus, applicants interested in obtaining additional days of PTA under the ArQule decision may wish to review the USPTO’s PTA calculation prior to payment of the Issue Fee. 
  • Patentees can challenge PTA decisions for patents issued within two months through a petition to the USPTO and within 180 days through a suit in the U.S. District Court for the District of Columbia, respectively. 
  • The ability of patentees to challenge PTA decisions for patents issued more than 180 days ago remains in flux as suits seeking correction of PTA calculations in view of the Wyeth v. Kappos decision are pending. Oral argument has not yet been scheduled in Bristol-Myers Squibb Co. v. Kappos, which is the lead case challenging the 180-day statutory period to file suit. Bristol-Myers Squibb Co. v. Kappos, No. 1:09-cv-01330-EGS (D.D.C. Mar. 3, 2011).

Conclusion

The law of patent term adjustment has been fluid since the original Wyeth decision in 2008 and will remain so in the short term. While awaiting further actions from the USPTO in the case, patent owners may wish to reiew the PTA calculations performed by the USPTO and take appropriate action (e.g., request reconsideration and/or file a civil action) to preserve their rights to additional patent term where additional days of PTA are of particular importance.