Patent Term Adjustment (PTA) and Patent Term Extension (PTE) compensate a patent applicant for delays that occur during patent prosecution. PTA compensates applicants for USPTO-caused delays; PTE compensates a patent owner for delays caused by the regulatory review process before a product can be commercially marketed. PTA and PTE lengthen the term of the patent, theoretically permitting patent owners to enjoy the full 20-year patent term from the time of first non-provisional filing. Here, how do three Federal Circuit opinions, Supernus, Novartis I, and Novartis II, affect PTA and PTE calculations respectively and what considerations patent applicants should weigh.

I. Patent Term Adjustments (PTA)

Decision: Supernus Pharm. Inc. v. Iancu, 913 F.3d 1351 (Fed. Cir. 2019) (“Supernus”)

Holding: The Federal Circuit held that the USPTO’s PTA reduction of 546 days was inconsistent with 37 C.F.R. § 1.704. Because Supernus could not have taken reasonable efforts to conclude prosecution during the 546-day period between the filing of a request for continued examination and notification of an EP notice of opposition, those 546 days could not be treated as applicant delay.

Background: Supernus and United Therapeutics appealed an entry of summary judgment by the U.S. District Court for the Eastern District of Virginia. The District Court reasoned that Gilead Sciences Inc. v. Lee, 778 F.3d 1341 (Fed. Cir. 2015) supported the USPTO’s reduction of the PTA by a 546-day period. Gilead and Supernus interpret the meaning of 37 C.F.R. § 1.704. in the context of 35 U.S.C. § 154, which governs PTA.

Prior to 1995, patent term was seventeen years from the issuance date. In 1995, the U.S. changed the patent term to twenty years from the first nonprovisional application filing date for which benefit is claimed. After the change, any USPTO delays effectively shortened the patent term. The American Inventors Protection Act of 1999 amended 35 U.S.C. § 154(b) to address USPTO-caused delays.

Under 35 U.S.C. §154 (b)(1)(A)-(C), an application is entitled to a patent term adjustment for three reasons:

  • If the USPTO fails to meet specific deadlines detailed in 35 U.S.C. §154 (b)(1)(A) (i)-(iv);
  • If the USPTO fails to issue a patent within three years of the filing date;
  • Any delays due to interferences, secrecy orders, and (successful) appeals.

But Section 154(b)(2) provides limitations on PTA, including the limitation that any PTA shall be reduced by and equal to the period the applicant failed to engage in reasonable efforts to conclude prosecution. Then under 37 C.F.R. § 1.704, it details circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude examination of an application. One of the circumstances that constitutes a failure to engage in reasonable efforts is the “submission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner after a reply has been filed.” 37 C.F.R. § 1.704(c)(8). Gilead and Supernus address the USPTO’s interpretation of 37 C.F.R. § 1.704(c)(8) and the reasonableness of that interpretation.

In Gilead, the court addressed the issue of whether the statute requires an applicant’s conduct to result in actual delay or whether it may also include conduct having potential to result in delay, regardless of whether such delay occurred. Gilead, the patent owner, challenged the USPTO’s subtraction of a 57-day applicant delay based on the time expended between its initial reply and its submission of a supplemental information disclosure statement (“IDS”). Gilead’s filing of the supplemental IDS did not result in any actual delay. The Gilead court conducted a Chevron analysis. Chevron, U.S.A. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778 (1984). In step one of the analysis, the court found the statute did not precisely address whether a failure to engage in reasonable efforts requires actual delay. In step two of the analysis, the court found it was a reasonable interpretation of the statute to include applicant actions that have potential to result in delay despite whether such delay occurred. As a result, 37 C.F.R. §1.704(c)(8) allows for deductions to PTA as a result of actual delays and potential delays.

In Supernus, Supernus filed a U.S. patent application and a European patent application in April 2006. The USPTO issued a final rejection in August 2010. In February 2011, Supernus filed a request for continued examination (RCE) with the USPTO. In August 2012, the European Patent Office (EPO) notified Supernus’s European counsel that a Notice of Opposition had been filed. In September 2012, Supernus received a letter from its European counsel informing them of the opposition notice. In November 2012, Supernus filed a supplemental IDS to inform the USPTO of the opposition. The supplemental IDS was filed 100 days from the EPO notification to Supernus’s European counsel and 646 days from the RCE in the U.S. In September 2013, the USPTO issued an Office Action responding to Supernus’s RCE. In January 2014, Supernus filed a response, resulting in a Notice of Allowance in February 2014. Supernus’s patent was issued in June 2014 with 1,260-days of PTA.

But controversy ensued over the proper length of PTA. The USPTO attributed 2,321 days to USPTO-caused delays, 175 days to overlap between Type A and Type B delays, and 886 days to applicant-caused delays.

2321-175-886 = 1260

The 646-day period between the filing of the RCE on February 22, 2011, and the filing of the IDS on November 29, 2012, was included in the 886 days of applicant delay. Supernus conceded that it failed to engage in reasonable efforts for the 100-day period between the EPO notification to its EP counsel and the filing of the IDS, but disputed and appealed 546 days, the period between the filing of the RCE on February 22, 2011, and the EPO notification to Supernus’ European counsel on August 21, 2012.

The USPTO argued that Gilead and 37 C.F.R. § 1.704(c)(8) supported the 546-day reduction because “any IDS submission by a patentee after the filing of an RCE interferes with the USPTO’s ability to process an application because the examiner may be forced to go back and review the application again.” On appeal, the U.S. District Court for the Eastern District of Virginia agreed with the USPTO.

Supernus countered by arguing that 37 C.F.R. § 1.704(c)(8) was being construed in an arbitrary and capricious way, and otherwise contrary to 35 U.S.C. § 154(b)(2). Despite Supernus’ argument that there were no efforts it could have made because they could not have known about EPO filings prior to August 2012 (when the EPO notified Supernus’ European counsel of the opposition), the district court granted summary judgment in favor of the USPTO. The district court concluded that the Gilead decision “foreclosed, as a matter of law, Supernus’s statutory interpretation arguments” and that the USPTO did not err in the PTA calculation.

The Federal Circuit reversed and remanded. The Federal Circuit distinguished Supernus from Gilead in two ways. First, the Chevron analysis in Gilead addressed the question “whether a failure to engage in reasonable efforts requires conduct that actually causes delay.” That was a very different question from the one in Supernus, which evaluated whether Chevron analysis would approve of “whether the USPTO may reduce PTA by a period that exceeds the ‘time during which the applicant failed to engage in reasonable efforts to conclude prosecution.’” Secondly, the patent applicant in Gilead could have submitted the information in its IDS with its initial reply. In Supernus, the patent applicant could not have submitted the information in its IDS before its European counsel received the EPO notification. Note, according to 37 C.F.R. §1.704(d), the patent owner has a 30-day grace period to file an IDS in which there is no penalty once a communication is received from a patent office in a counterpart foreign or international application.

The Federal Circuit found that Gilead did not foreclose Supernus’s statutory argument. Rather Gilead had found that PTA reductions were allowed for both actual and potential delays but did not address whether PTA reductions were allowed if there was no failure to engage in reasonable efforts. Therefore, the Federal Circuit held that Gilead was not controlling and that Supernus was entitled to its own Chevron analysis.

Under step one of the Chevron analysis, the Federal Circuit decided that the plain language of the PTA statute addressed the issue here: “whether the USPTO may reduce PTA by a period that exceeds the ‘time during which the applicant failed to engage in reasonable efforts to conclude prosecution.’” The Federal Circuit concluded “no.” “Any reduction to PTA shall be ‘equal to the period of time during which the applicant fails to engage in reasonable efforts to conclude prosecution of the application.’” 35 U.S.C. § 154(b)(2)(C)(i).

The Federal Circuit stated that 35 U.S.C. § 154(b)(2)(C)(i) places two limitations on the amount of time the USPTO can use as applicant delay to reduce PTA: 1) any reduction must be equal to the period of time an applicant fails to engage in reasonable efforts; and 2) the reduction must be tied to the specific time period during which the applicant failed to engage in reasonable efforts. Supernus Pharm. Inc. v. Iancu, 913 F.3d at 1358-59. “PTA reduction must be the same number of days as the period from the beginning to the end of the applicant’s failure to engage in reasonable efforts to conclude prosecution.” Id. at 1359.

Here, the USPTO exceeded the amount of time the statute permitted them to reduce PTA. During 546 days of the days (646 days in all) between the filing of the RCE on February 22, 2011, and the filing on the IDS on November 29, 2012, there were no actions that Supernus could have taken; the EP notice of opposition did not exist yet. Therefore, the subtraction of 546 of the 646 total days was contrary to the PTA statute. The intent of the statute is “not [to] adversely impact applicants […] who could have done nothing to advance prosecution.” Id. at The Federal Circuit reversed and remanded the district court’s decision, concluding that “[a] period of time including no identifiable efforts that could have been undertaken cannot be ‘equal to’ the period of failure to undertake reasonable efforts under the terms of the statute.” Id. at

B. Practical Takeaways

The holding of Supernus allows for a case-by-case determination of what reasonable efforts could have been made under the circumstances. PTA is calculated by a computer program that uses information recorded in the PALM database and in PAIR. However, the information is not always accurate. Events external to the USPTO (e.g., an EPO opposition) are not recorded in the PALM system so the USPTO may not take all relevant events into account when calculating PTA. The patentee, therefore, must check the USPTO’s calculations. The USPTO acknowledged this and published an “Interim Procedure for Requesting Recalculation of the Patent Term Adjustment With Respect to Information Disclosure Statements Accompanied by a Safe Harbor Statement.” 83 Fed. Reg. 55,102 (Nov. 2, 2018).

In checking the USPTO’s PTA calculation, the patentee should determine if the USPTO applied the law and rules correctly to their facts. If the patentee determines the USPTO failed to account for an event or incorrectly applied the law/rules, the patentee must request reconsideration in the USPTO within two months of patent issuance (37 C.F.R. § 1.705(b)). The deadline for filing a district court case is within 180 days of the decision on request for reconsideration (35 U.S.C. § 154 (b)(4)). Although the process may appear onerous, it may prove to be worthwhile because lengthening the patent term and concomitantly, the period of exclusive sales, can generate substantial revenue.

The patentee should try to avoid actions during prosecution that result in reductions in PTA. For example, the patentee should always ensure that replies are complete. If an error or omission is identified after a reply is filed, the patentee should ask the examiner if it can be corrected in the next reply or by an examiner’s amendment. Patentees should try to avoid filing terminal disclaimers, but, if needed, the patentee should try to avoid disclaiming beyond a date certain.

Additionally, patentees should try to avoid filing RCE’s. Rather, they should consider the pros and cons of arguing against or even appealing rejections. The patentee should consider filing an appeal if grounds exist and the record is likely to conclude in a successful appeal with respect to at least one meaningful claim. Winning on at least one claim on appeal entitles the application to C-delay for any time consumed by the appeal, starting when jurisdiction vests in PTAB. 35 U.S.C. § 154 (b)(1)(C). To maximize C-delay, consider filing the appeal brief along with the Notice of Appeal, which will accelerate the vesting of jurisdiction in PTAB. Also, if the Examiner files an answer, consider responding as soon as possible.

II. Patent Term Extensions (PTE)

Decision: Novartis Pharms. Corp. v. Ezra Ventures LLC, 909 F.3d 1367 (Fed. Cir. 2018) (“Novartis I”)

Holding: A later-filed, later-issued patent cannot serve as an obviousness-type double patenting (ODP) reference against an earlier-filed, earlier-issued patent where the difference in patent terms is due to a difference in pre-URAA and post-URAA status and a validly-obtained patent term extension.

Background: Ezra Ventures LLC appealed a judgment of U.S. Patent No. 5,604,229 (’229 patent) by the District Court of Delaware holding that the ’229 claims were not invalid for obviousness-type double patenting (ODP) over U.S. Patent No. 6,004,565 (’565 patent). The district court concluded that “obviousness-type double patenting does not invalidate an otherwise validly obtained PTE under 35 U.S.C. § 156.” Novartis I, 909 F.3d at 1369.

Below is a time chart of relevant dates for the ’229 and ’565 patents from the decision. Here, the terms at issue were September 23, 2017, and February 18, 2019.

Under 35 U.S.C. § 156, a patent owner can extend the term of a patent containing at least one claim that covers a product that has been subject to premarket regulatory review in the United States or a method of using or manufacturing the product; this term is PTE. The aim is to “restore the value of the patent term that a patent owner loses during the early years of the patent because the product cannot be commercially marketed without approval from a regulatory agency.” Id. PTE is calculated by adding half of the time for the testing phase with all the time for the regulatory approval process and subtracting any time the applicant did not act with due diligence. The extension may not exceed five years from the patent expiration date or fourteen years from regulatory approval. Because a patent owner usually owns multiple patents that cover the same product (and/or its use and manufacture), 35 U.S.C. § 156 (c)(4) limits PTE to only one patent’s term for each regulatory review period for any product.

Here, Novartis’s ’229 patent had an original expiration date of February 2014. Novartis’s later-filed ’565 patent had an expiration date of September 2017. Novartis applied for PTE on the ‘229 patent which extended the expiration date to February 2019, after the ‘565 patent expiration date. In district court, Ezra argued that granting the PTE would 1) effectively also extended the term of the ‘565 patent and therefore violated subsection 35 U.S.C. § 156 (c)(4) (limiting PTE to one patent for any product); 2) violate the “bedrock principle” that the public may practice an expired patent; and 3) render the ’229 patent invalid for statutory and obviousness-type double patenting. Id. at 1370.

The district court found the ’229 patent valid, unexpired, and enforceable all the way to the final date of the PTE, February 18, 2019. Ezra appealed on the issues of statutory construction and obviousness-type double patenting. The Federal Circuit affirmed, holding “[o]bviousness-type double patenting does not invalidate a validly obtained PTE” in this scenario. Id. at 1373.

The Federal Circuit found none of Ezra’s arguments to be persuasive. The court emphasized the Merck & Co. v. Hi-Tech Pharmacal Co., 482 F.3d 1317 (Fed. Cir. 2007) decision stating

nothing in the statute restricts the patent owner’s choice for patent term extension among those patents whose terms have been partially consumed by the regulatory review process. Importantly, Congress did not, through § 156, compensate a loss of term for all patents affected by regulatory review. In striking a balance between the competing interests of new drug developers and low-cost generic competitors, Congress limited a PTE grant for such a patent owner to only one of its patents.

Id. at 1372. The Federal Circuit also highlighted the district court’s explanation that “the expiration of a patent does not grant the public an affirmative right to practice a patent; it merely ends the terms of the patentee’s right to exclude others from practicing the patent. Id. at 1371.

Addressing Ezra’s policy argument, the court noted that Ezra failed to provide any “authority indicating that a policy in favor of dedicating an expired patent’s subject matter to the public can override Congress’s express statutory language.” Id. The Federal Circuit noted that “[t]his case also does not present the concerns that drove recent decisions of this court regarding obviousness-type double patenting in the post-URAA context. For example, there is no potential gamesmanship issue through structuring of priority claims as identified in Gilead[.]” Id. at 1374.

The court also held the fact that the ’565 patent cannot be practiced during the ‘229 patent’s extended term is a permissible consequence of the legal status conferred upon the ’229 patent by 35 U.S.C. § 156, and not an impermissible extension of the ‘565 patent. Id. at 1373. Therefore, Novartis’s selection to extend the patent term of the ’229 patent, instead of the term of the ’565 patent, does not violate 35 U.S.C. § 156(c)(4).

Additionally, the Federal Circuit concluded that ODP does not invalidate a validly obtained PTE in Novartis I. The court agreed with the district court’s logical extension of Merck and highlighted that Merck noted the contrast between Sections 156 and 154. That is, Section 154 expressly excluded patents in which a terminal disclaimer was filed from the benefit of PTA, but Section 156 has no similar express prohibition for PTE. The court states, “if a patent, under its pre-PTE expiration date, is valid under all other provision of law, then it is entitled to the full term of its PTE.” Id. at 1374.

Finally, the court emphasized that ODP is a judge-made doctrine and that agreeing with Ezra would mean that a judge-made doctrine would cut off a statutorily authorized time extension. Id. at 1375.

B. Novartis II

Decision: Novartis Pharms. Corp. v. Breckenridge Pharm. Inc., 909 F.3d 1355 (Fed. Cir. 2018) (“Novartis II”)

Holding: A post-URAA patent that issues after and expires before a pre-URAA patent may not qualify as a double patenting reference against the pre-URAA patent.

Background: Novartis appealed an invalidity judgment of U.S. Patent No. 5,665,772 (’772 patent) by the District Court of Delaware based on ODP. The district court applied the Gilead Sciences, Inc. v. Natco Pharma Ltd., 753 F.3d 1208 (Fed. Cir. 2014) decision to find that the later-filed but earlier-expiring patent, U.S. Patent No. 6,440,990 (‘990 patent), can serve as a double patenting reference for an earlier-filed but later-expiring patent, the ’772 patent.

As noted earlier, the Uruguay Round Agreements Act (URAA) changed the patent term from seventeen years from the issuance date to twenty years from the first nonprovisional application filing date for which benefit is claimed. Despite the change, there was still an emphasis on ensuring that patent owners with pre-URAA patents enjoyed the full patent term. Congress implemented the 35 U.S.C. § 154(c)(1) (“URAA transition statute”) to protect pre-URAA patent owners; “The term of a patent that is in force on or that results from an application filed before June 8, 1995 shall be the greater of the 20-year term as provided in subsection (a), or 17 years from grant, subject to any terminal disclaimers.”

In Gilead, the court held that a later-filed but earlier-expiring patent can serve as a double-patenting reference for an earlier-filed but later-expiring patent in the post-URAA context. Gilead sued Natco for infringement of its U.S. Patent No. 5,763,483 (’483 patent). Natco asserted that the ’483 patent was invalid for ODP over Gilead’s U.S. Patent No. 5,952,375 (’375 patent). The ‘375 patent was filed in February 1996, and the ‘483 was filed on December 1995. Both patents were filed post-URAA (June 1995) and expired twenty years after the first nonprovisional application filing date for which benefit was claimed. The ‘375 patent expired in February 2015, and the ‘483 expired in December 2016. Although the ‘375 patent was filed later, it expired before the ‘483 patent; a timeline from the decision is reproduced below. The court held that the ‘375 patent served as a double patenting reference against the ‘483 patent even though the ‘483 patent issued first and expired after the ’375 patent.

The district court applied the Gilead holding to the facts in this case. Here, the ’772 patent was filed in April 1995, pre-URAA. The ‘990 patent was filed in May 1997, post-URAA. However, both patents had the same effective filing date, September 24, 1993. The ‘772 originally expired in September in 2014, but it was extended by PTE to expire in September 2019 -- after the later-filed ’990 patent, which expired in September 2013, due, in part, to the enactment of the URAA. The district court found the asserted claims of the Novartis’s ’772 patent were invalid for ODP because they were not patentably distinct from the claims of Novartis’s ’990 patent. Id. at 589.

A timeline from the decision is reproduced below:

Novartis presented three arguments at the district court: 1) there is no unjustified extension or public harm because the ’772 patent’s expiration date is the same as it would have been had the ’990 patent never issued; 2) Novartis had not engaged in any gamesmanship to obtain the benefit of one patent gaining a later expiration date; and 3) allowing an earlier-expiring post-URAA patent to serve as a double patenting reference against a later expiring, pre-URAA patent would effectively shorten the term of the pre-URAA patent. Id. at 587-588.

The district court found the arguments unpersuasive, stating it saw “no reason why such a patent term extension would protect a patent from a double patenting challenge.” Id. at 589. Additionally, the court stated prior case law did not require gamesmanship. The district court stated, “what matters in a double patenting analysis, at least for post-URAA patents, is the expiration dates of the patents.” Id. at 586.

The Federal Circuit reversed, holding that the Gilead logic does not apply to the facts in this case. Id. at 1358. Gilead addressed whether a patent that issues after but expires before another patent can qualify as a double patenting reference against the earlier-issuing, but later-expiring patent when the two patents are post-URAA.

Here, the issue is whether a post-URAA patent that issues after and expires before a pre-URAA patent can serve as a double patenting reference against the pre-URAA patent. According to the Federal Circuit, it cannot.

The Federal Circuit held that, while it is proper for the district court to use the expiration date of a post-URAA patent as a reference point for an obviousness-type double patenting inquiry, it is only proper in a post-URAA context. In addition, “the present facts do not give rise to similar patent prosecution gamesmanship” that existed in Gilead. Id. at 1364. If both patents were in the pre-URAA context, they would have expired on the same day. Unlike in Gilead, where the ’483 patent was issued after the ‘375 patent was issued and thus the ‘375 patent could be used as a double patenting reference, when the ‘772 patent issued, the ‘990 patent had not yet issued and thus did not exist as a double patenting reference against the ‘772 patent. Additionally, rejecting the extension of Gilead in this instance is consistent with the URAA transition statute. “[T]o require patent holders to truncate any portions of the statutorily-assigned term of a pre-URAA patent that extends beyond the term of a post-URAA patent would be inconsistent with the URAA transition statute.” Id. at 1366. The law change should not “abrogate Novartis’s right to enjoy one full patent term on its invention.” Id. at 1367. Therefore, the Federal Circuit held that it was improper to apply Gilead and to use the post-URAA ’990 patent as a double patenting reference against the pre-URAA ’772 patent.

C. Practical Takeaways

The Novartis I and II holdings cabin the Gilead decision by concluding that ODP may not be used to undercut a validly-obtained PTE and that the Gilead decision does not apply when the facts include both pre- and post-URAA patents.

Conclusion

The goal of PTA and PTE is to maintain patent term. While Congress has enacted statutes to protect patentees from diminished patent term, patentees need to be proactive in the patent prosecution process to maximize their patent term. The onus is on the patentee to ensure the USPTO has correctly applied the law/rules. And when in doubt, request reconsideration, and then, if needed, appeal. As Davey Crockett reputedly said: “Be sure you are right, then go ahead.”