[Portions of this article were originally published in Genetic Engineering News.]
The Federal Circuit's recent decision in Wyeth v. Kappos may result in longer patent terms for many patents. The Court determined that the U.S. Patent and Trademark Office (PTO) had erroneously interpreted the patent term adjustment (PTA) statute in a manner that shortchanged patentees by under-calculating PTA in certain circumstances. To maximize patent term and patent value, applicants should understand the PTA statute and take PTA into account when formulating patent strategies. The potential impact of PTA also should be taken into account when performing due diligence reviews for product clearance, as PTA can extend the term of a patent well beyond the standard 20 years from the filing date.
While older U.S. patents have a 17-year term measured from the grant date, patents issuing from applications filed on or after June 8, 1995 have a 20-year term that runs from the earliest effective non-provisional U.S. filing date. The change to a 20-year patent term underscored the adverse consequences of delays in the patent examination process, as any such delay shortens the effective term of the patent. To address this problem, Congress enacted the PTA statute (35 U.S.C. § 154(b)(1)) to compensate for PTO delays under certain circumstances. The statute provides “guarantees” against three different types of PTO delay:
- “A” delay, when the PTO fails to act in accordance with set timeframes (such as issuing a first office action within 14 months, issuing a second action or allowance within four months of a response, and issuing a patent within four months of the Issue Fee payment).
- “B” delay, when the PTO fails to issue a patent within three years of the actual filing date of the patent application.
- “C” delay, when the application is involved in an interference or appeal, or is subject to a secrecy order. 35 U.S.C. § 154(b)(1)(C).
The statute also provides that “[t]o the extent that periods of delay … overlap, the period of adjustment … shall not exceed the actual number of days the issuance of the patent was delayed.” The issue in the Wyeth case surrounded the interplay between A delay and B delay, and how double counting of those types of delay is to be avoided.
Since at least 2004, the PTO took the position that any A delay contributes to B delay, and thus “overlaps” with B delay. Under this interpretation, the PTO awarded PTA for only the longer of its A delay or its B delay, not both. Wyeth challenged this interpretation, arguing that A delay and B delay only “overlap” if the delay occurs on the same calendar day. The district court agreed with Wyeth, and the Federal Circuit now has affirmed that decision. The Court determined that the clear and unambiguous statutory language provides that “no ‘overlap' happens unless the violations occur at the same time.”
The Wyeth decision could result in additional PTA for many patents, particularly for medical device patents that often experience both A delay and B delay. According to the 2009 Patent Pendency statistics published by the PTO, patent applications relating to medical devices (examined in Group 3700) wait for an average of 24.7 months before receiving a first office action. That represents an average A delay of 10.7 months for the first action alone. While the average device application is granted in under three years (32.7 months), many applications take longer to issue, and so also experience B delay.
Now that the Court has determined that A delay and B delay should be added when determining the total PTA award, many patents that were pending for more than three years will be entitled to a longer term. For example, if the PTO took 24 months to issue a first office action (an A delay of 10 months) and the patent issued three years and six months after its filing date (a B delay of six months), the patentee now will be credited with 16 months of delay under Wyeth, where the PTO previously would have credited only 10 months of delay (the longer of the two types of delay). This additional patent term may be particularly valuable to medical device patents, which often retain their value throughout their term.
Not all patents that take a long time to issue are awarded PTA, however. The PTA statute provides that the PTA award is “reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution.” Thus, if an applicant delays the examination process more than the PTO, the patent may not receive any PTA, even if it took much longer than three years to issue.
Applicants should be aware of the PTA regulations that define certain actions as constituting delay. For example, while applicants may not be surprised to learn that extending response periods can count as delay, they might not realize that the timing of other filings can result in charges of delay. Applicants also should be aware of the impact of certain patent strategies on PTA. For example, filing a request for continued examination (RCE), divisional or continuation application, or Terminal Disclaimer all can have significant impact on PTA.
PTA considerations also are important to due diligence and product clearance. For example, it cannot be assumed that a patent granted on a pending application will expire 20 years from its U.S. filing date, as PTA could extend the term for many months or years. Pending applications can be monitored for the accrual of PTO delay and applicant delay, and PTA predictions can be based on this information.
The Wyeth decision provides additional opportunities to maximize patent term and enhance patent value by developing patent strategies that take the PTA provisions into account. While some PTA strategies involve the minutiae of day-to-day patent practice, they can significantly enhance return on investment if they result in a longer patent life for an important product.