On January 7, 2010, the Federal Circuit affirmed a district court decision that the U.S. Patent and Trademark Office (USPTO) incorrectly applied 35 U.S.C. § 154(b) in calculating Wyeth's patent term adjustments. Wyeth v. Kappos, No. 2009-1120 (Fed. Cir. Dec. Jan. 7, 2010). Judge Rader, writing for the panel (Judges Plager and Moore), explained that the USPTO's interpretation was incorrect because it was contrary to the plain meaning of the clear and unambiguous statute and the legislative history "provide[d] no reason to depart from the language of section 154(b)." Slip op. at 13.
Wyeth will impact the patent terms of many current or soon-to-be issued patents. The reasoning of Wyeth with respect to Chevron may affect whether the USPTO continues to argue that it should be afforded Chevron deference.
- Patent owners and applicants should review their pending applications and recently issued patents to determine if any patent term adjustment needs correction.
- Parties involved in litigation may have to reassess strategy because some asserted patents may now receive longer patent term adjustments.
- This is the second significant case in which the Justice Department asserted the theory that the USPTO deserves Chevron deference when interpreting a patent statute.
The Legal Claims at Issue
Section 154(b)(1)(A) provides for a patent term adjustment of one day for each day the issuance of a patent is delayed due to the failure of the USPTO to meet examination deadlines (referred to as "A delay"). Section 154(b)(1)(B) provides for a patent term adjustment of one day for each day the issuance of the patent is delayed beyond three years ("B delay"). At the heart of the dispute was § 154(b)(2) which provides:
To the extent that periods of delay attributable to grounds specified in paragraph (1) overlap, the period of any adjustment granted under this subsection shall not exceed the actual number of days the issuance of the patent was delayed.
The USPTO has interpreted and applied this section to mean that A delays always overlapped with subsequently occurring B delays regardless of whether the A delays occurred during the first three years of prosecution or after the three-year mark. The USPTO in effect calculated adjustments based on the greater of A delays incurred or B delays incurred.
Wyeth disputed the USPTO's patent term adjustment calculation for its patent relating to chemical compounds that treat Alzheimer's disease, and filed suit in the district court. In a summary judgment motion, the USPTO argued that its interpretation was correct and should also receive Chevron deference.
Wyeth argued in its own summary judgment motion that the USPTO's interpretation was contrary to the statute and that adjustments should be calculated such that only A delays occurring after the three-year mark would be considered overlapping with B delays. Wyeth urged that A delays occurring within the first three years of prosecution should be added to any B delays occurring after the three-year mark to calculate adjustments.
The district court granted summary judgment for Wyeth, holding that Chevron deference did not apply because the USPTO's interpretation did not have the authority to issue substantive rules." Even if Chevron were applicable, the court "would have rejected the USPTO's interpretation as contrary to the plain language of the statute." Id. at 6.
The Federal Circuit's Analysis
On appeal, the Federal Circuit reviewed the grant of summary judgment without deference. As an initial matter, the court held that the provisions of § 154(b) were not ambiguous. In so doing, the court noted that the statute clearly sets the period of delay for A delays as running "from the date the USPTO misses the specified deadline to the date (past the deadline) of response to the underlying action." Id. at 8. Likewise, the B delays run "from the three-year mark after filing until the application issues." Id. The court further noted that according to the statute, "[b]efore the three-year mark, no 'overlap' can transpire between the A delay and the B delay because the B delay has yet to begin or take any effect." Id. In summary, the failing of the USPTO's statutory construction, according to the Federal Circuit, was "it considers the application delayed under [the B guarantee] during the period before it has delayed." Id. (quoting Wyeth v. Dudas, 580 F. Supp. 2d 138, 142 (D.D.C. 2008) (emphasis in original)).
The Federal Circuit dismissed the USPTO's argument that the court's construction of the statutes would result in "double counting" of A and B delays because A delays during the first three years of prosecution cause subsequent B delays three years after filing and that as a result similarly situated patentees could be treated differently depending on when the A and B delays occurred during the prosecution. The court addressed the argument by stating "the statute requires as much." Id. at 9. The court explained that, "[r]egardless of the potential of the statute to produce slightly different consequences for applicants in similar situations, this court does not take upon itself the role of correcting all statutory inequities, even if it could. In the end, the law has put a policy in effect that this court must enforce." Id. at 10.
The court also considered the USPTO's arguments that the legislative history of § 154(b) supported the USPTO's statutory interpretation. In dismissing the USPTO's arguments, the court stated that "[f]ar from intentions contrary to the meaning of section 154(b), the legislative history generally supports the interpretation required by the statutory language itself." Id. at 11.
Wyeth will affect many newly issued patents by altering the USPTO's method of calculating patent term adjustments. The decision will be beneficial for many patents because A delays which occur in the first three years of prosecution will no longer be considered to "overlap" with any subsequent B delays. Instead, A delays in the first three years will be added to B delays occurring after the three-year mark.
Finally, the Federal Circuit again declined to apply Chevron deference to the USPTO's interpretation of an important patent statute. In so doing, the court held that "the language of the statute itself controls this case and sets an unambiguous rule for overlapping extensions." Id. at 13. This marks at least the second time in recent years the Department of Justice and the USPTO have argued that the USPTO's interpretation of a patent statute is entitled to Chevron deference. It had previously done so in Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009), which was vacated pending a rehearing en banc and then dismissed as moot by joint motion of the parties. It remains to be seen whether the new administration will continue to assert that Chevron deference applies to USPTO interpretations of patent statutes in the future.