The normally dry and arcane topic of patent term adjustment (PTA) has taken on new urgency and importance over the past several months as recent district court decisions have opened the possibility that patentees may be entitled to months or even years of additional patent term. Such additional term could represent millions or even hundreds of millions of dollars in value for products, like pharmaceuticals, which see peak sales toward the end of their patent life. Specifically, two district courts have recently held that the U.S. Patent and Trademark Office (USPTO) has been incorrectly calculating PTA for patent applications in which a Request for Continuation (RCE) was first filed more than three years after the application's filing date. These district courts held that the USPTO's interpretation of the patent term adjustment statute in 37 C.F.R. § 1.703(b)(1), which cuts off B Delay PTA after the filing of an RCE, contradicts the patent term adjustment statute, 35 U.S.C. § 154(b)(1)(B), and such, is "not in accordance with law" and "in excess of [its] statutory . . . authority" under the Administrative Procedures Act. According to these two decisions, the USPTO should award PTA in cases where an RCE was first filed only after the USPTO failed to meet its statutory requirement to issue a patent within three years. But just two months after these decisions, a third decision came out reaching the opposite conclusion and upholding the USPTO's current calculation methods. All three cases are currently on appeal to the U.S. Court of Appeals for the Federal Circuit. Patent practitioners should be aware of these developments and consider how to preserve their rights.
Historically, a U.S. patent expired seventeen years after it issued. See 35 U.S.C. § 154 (1992). To comply with treaty obligations under the General Agreement on Tariffs and Trade (GATT), and harmonize U.S. patent law with the law of other countries, Congress amended the Patent Act in 1995 to provide that a U.S. patent expires twenty years after the application for the patent is filed. See 35 U.S.C. § 154(a)(2). Unlike the prior regime, this twenty-year period begins to run before a patent is issued. As a result, any delay by the USPTO in the processing of a patent application reduces the duration of the applicant's patent term because the delayed issuance of a patent results in a concomitant delay in an applicant's ability to enforce its patent rights.
To address such delays, Congress passed the American Inventors Protection Act of 1999, which sets deadlines for USPTO action and compensates patentees for USPTO delays by granting additional patent term (referred to as "patent term adjustment"). To accomplish this goal, Congress established three "Guarantees" for patentees, defined in 35 U.S.C. § 154(b)(1)(A), (B), and (C). The USPTO's failures to comply with those guarantees are commonly referred to as "A Delay," "B Delay," and "C Delay," respectively. "A Delay" extends patent term one day for each day that the USPTO does not meet certain examination deadlines. "B Delay" awards one day of patent term adjustment for each day beyond three years from the filing date until the patent issues (subject to certain exclusions). "C Delay" extends patent term one day for each day of delay due to an interference, secrecy order, or successful appeal. This additional patent term, however, is limited by any applicant-caused delay that occurred during patent prosecution, a prohibition on double-counting adjustment that occurred on the same day, and the inability to extent a patent's term beyond the date in a terminal disclaimer. 35 U.S.C. § 154(b)(2). A patent's total patent term adjustment is A Delay + B Delay + C Delay – applicant-cause delay – overlapping days.
The RCE Cases
The recent case law developments relating to patent term adjustment involve "B Delay," which arises out of the statutory "Guarantee of No More than 3-Year Application Pendency" set forth in 35 U.S.C. § 154(b (1)(B). That provision states:
(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.
35 U.S.C. § 154(b)(1)(B). Of particular interest in these recent cases is subsection (i), which excludes from B Delay "any time consumed by continued examination of the application requested by the applicant under section 132(b)." Section 132(b) of the Patent Act allows for "the continued examination" of a patent application after the USPTO the USPTO has closed prosecution if the applicant submits one of the required papers (i.e., an amendment to the patent application or new evidence of patentability), which has been termed an RCE, or "Request for Continued Examination."
In its regulations, the USPTO has been interpreting this statute so that the filing of an RCE cuts off patent term adjustment regardless of whether the RCE was filed before or after the USPTO's three-year deadline to issue a patent. 37 C.F.R. § 1.703(b). Several companies challenged the USPTO's interpretation of the statute, arguing that the plain meaning of the statute only requires that patent term adjustment be cut off if an RCE is filed before the USPTO's three-year deadline, not after.
The Exelixis v. Kappos and Novartis v. Kappos Decisions
In the first of these decisions, Exelixis, Inc. v. Kappos, No. 1:12-cv-96, 2012 WL 5398876 (E.D. Va. Nov. 1, 2012) (Exelixis I), Judge Ellis of the Eastern District of Virginia, rejected the USPTO's interpretation of the patent term adjustment statute, finding instead that any "continued examination" in an RCE first taking place after the three-year statutory period is not properly excluded from PTA calculations under § 154(b)(1)(B)(i). The decision focused on the plain meaning of the statue: "[T]he 'not including' portion of subparagraph (B), followed by (i), (ii), and (iii), clearly and unambiguously modifies and pertains to the three year period and does not apply to, or refer to, the day for day PTA remedy." The court concluded, "Put simply, RCE's have no impact on the PTA after the three year deadline has passed and subparagraph (B) clearly provides no basis for any RCE's to reduce PTA; instead, RCE's operate only to toll the three year guarantee deadline, if, and only if, they are filed within three years of the application filing date." Since the regulation was found to be inconsistent with the plain meaning of the statute, the court ordered the USPTO to award additional PTA to Exelixis's patent. A similar decision, out of the District Court for the District of Columbia, followed just two weeks later in Novartis AG v. Kappos, No. 10-cv-1138 (ESH), 2012 WL 5564736 (D.D.C. Nov. 15, 2012), which interpreted the PTA statute in the same way and struck down the USPTO's interpretation of the statute in its regulation. Accordingly, these district court decisions have held that the USPTO's regulation improperly cuts off B Delay when an RCE is first filed after the USPTO has failed to issue a patent within three years of the application's filing date.
The Second Exelixis v. Kappos Decision
But just a couple of months later, a different judge in the Eastern District of Virginia, Judge Brinkema, came to the opposite conclusion in Exelixis, Inc. v. Kappos, 2013 WL 314754, No. 1:12-cv-574-LMB-TRJ (E.D. Va. Jan. 28, 2013) (Exelixis II). In this decision, the court disagreed with the rationale in Exelixis I and held that the PTA statute was silent regarding the impact on PTA of first filing an RCE after the three-year pendency deadline. As such, the court gave the USPTO's interpretation of the PTA statute deference and held that the USPTO's regulation was a reasonable interpretation of it. Therefore, according to this decision, the filing of an RCE—regardless of whether it is filed before or after the three-year filing anniversary—cuts of any further B Delay PTA.
How Do These RCE Cases Impact Practitioners?
While these decisions are awaiting appellate review and uncertainty in the law remains, practitioners need to make sure to preserve their rights, as it is possible that a determination will not apply retroactively. For U.S. patents that are nearing allowance or that have recently issued, practitioners should: (1) identify patent applications and recently issued patents where an RCE was first filed only after the three year anniversary of the filing deadline; (2) determine whether for that particular invention it is worth it to challenge the assigned PTA; and, if so, (3) file a petition at the USPTO and/or a civil action in district court challenging the PTA under the Exelixis I and Novartis cases. Practitioners should also be cognizant of the implications of filing an RCE before the three-year filing anniversary given the uncertainty in the law and determine whether it makes sense to do so given the various other procedural options available to the patent applicant. A decision by the Federal Circuit is anticipated in about a year.
Originally printed in CIPA Journal.