Federal Circuit Puts An End To PTO's Patent-Term Adjustment Follies

 

By Kimberly Seluga

 

A

dditional months – or even days – of patent life can often be highly profitable in the context of certain products, especially pharmaceuticals. The potential value of a longer patent term is illustrated by two pharmaceutical companies’ willingness to take on the PTO in order to provide their patents with a few more breaths of air. 

At the focal point of their case was the federal law that requires the PTO to grant patent term adjustments to eligible applicants based on PTO delay. Any patentee who disagrees with the PTO’s adjustment determination may submit a request for reconsideration to the PTO within two months of the patent issue date and has the further option of appealing to the United States District Court for the District of Columbia within 180 days of the patent issue date.  See 37 C.F.R. § 1.705(d); 35 U.S.C. §156(b)(4)(A). 

Wyeth and Elan Pharma International, dissatisfied with the PTO’s calculation of their patent term adjustments, filed such an appeal in the Wyeth case. The district court ruled that the PTO misconstrued the patent term adjustment statute and has been routinely underestimating patent term adjustments by erroneously concluding that PTO delays that occur before the third year of prosecution should not be counted cumulatively with the number of days by which issuance of a patent is delayed beyond three years from the filing date.

The PTO appealed the decision to the Federal Circuit, which recently issued a decision well worth the wait for the patent community.

Like the district court, the Federal Circuit concluded that, based on the plain meaning of the patent term adjustment statute, the PTO’s interpretation is just plain wrong.  As a result, the life of key patents held by Wyeth and Elan Pharma will be extended over 200 additional days, marking a huge success for both pharmaceutical companies and laying the groundwork for requiring the PTO to dole out longer patent terms to many applicants.

The Federal Circuit carefully examined the relevant “patent term guarantees” under the statute. See 35 U.S.C. § 154(b). Congress guarantees “prompt Patent and Trademark Office responses,” whereby if issuance of a patent is delayed due to failure of the PTO to provide notifications to the patentee at the various enumerated statutory deadlines,[1] “the term of the patent shall be extended 1 day for each day after the end of the period specified . . . until the action described in such clause is taken.”  35 U.S.C. § 154(b)(1)(A). This guarantee is referred to as the “A guarantee” and the associated delays on the part of the PTO are referred to as “A delays.” 

Congress further guarantees “no more than 3-year application pendency,” whereby if the PTO fails to issue a patent within 3 years after the filing date, “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). This guarantee is referred to as the “B guarantee” and the associated delays are referred to as “B delays.”  B delays can be recovered whether caused by the PTO or the applicant.[2]  

Because combining A delay and B delay could in some cases result in a windfall to patentees by way of double counting, Congress limited these patent term adjustments to the actual number of days of delay. Specifically, the statute provides, “[t]o 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.” 35 U.S.C. § 154(b)(2)(A). 

Although the Federal Circuit had no duty to defer to the district court’s summary judgment ruling, its opinion significantly echoes the lower court’s criticism of the PTO’s calculation of patent term adjustments under 35 U.S.C. § 154. As discussed in more detail in the January 2009 IP Update, the central question in the case was how to interpret when “periods of delay” “overlap” under section 154(b)(2)(A). This section of the statute was key to the analysis because the answer determines the interplay of “A delay” and “B delay” and consequently the ultimate length of a patent term extension. 

Like the court below, the Federal Circuit disagreed with the PTO’s regulation interpreting the statute and its resulting practice of counting the greater of A or B delay but never both. The court found the PTO’s interpretation “strained” and found no ambiguity in the meaning of the statute. The court interpreted A delay and B delay as follows:

The “period of delay” for purposes of the A clause . . .  runs from the date the PTO misses the specified deadline to the date (past the deadline) of response to the underlying action.

The “period of delay” under the express language of the B clause . . . runs from the three-year mark after filing until the application issues.

With respect to B delay in particular, the court repeated the following statement from the district court with affirming approval: “The problem with the PTO’s interpretation is that is considers the application delayed under [the B guarantee] during the period before it has delayed.” 

In light of its strict interpretation of B delay, the court was not convinced that the language of section 154(b)(2)(A) stating that the adjustment “shall not exceed the actual number of days the issuance of the patent was delayed” supported the PTO’s position. It concluded that “no ‘overlap’ happens unless the violations occur at the same time,” making it, contrary to the PTO’s view, impossible for “overlap” to occur before the three-year mark. Thus, the court affirmed that in circumstances where A delay occurs before the three-year mark and the patent fails to issue within three years, both A and B delay will count toward a patent term extension.

Clinging to its plain reading of the statute, the court considered the PTO’s arguments that principles of equity, the legislative history of the statute, and the doctrine of administrative deference dictated a different result, but was unpersuaded. Although the court acknowledged that certain patentees might receive windfall extensions under its interpretation of the statute, it found similar inequities could result under the PTO’s interpretation. Despite noting potential problems with the statute under either reading, the court would not “take upon itself the role of correcting all statutory inequities, even if it could.” 

Further, the court would not depart from the plain language of the statute because no argument by the PTO regarding legislative intent, including the argument that Congress intended to cap patent terms at 17 years, constituted a “most extraordinary showing of contrary intentions” by Congress. The court also found no reason to afford special deference to the PTO’s interpretation given the “unambiguous” language of the statute.

On January 21, the PTO announced that it would not appeal the Wyeth decision. As a result, we can expect to see the PTO take immediate action to conform its method of calculating patent term adjustments to the Federal Circuit’s ruling. On January 28, the PTO announced that while it is making updates to its calculation system it will waive the fee and petition for processing recalculation requests that are based on the calculation errors identified in Wyeth.

This interim procedure is available to a patentee whose patent issues before March 2, 2010, and who requests it no later than 180 days after the issue date. The PTO expects its updates to be completed by March 2 and its “interim procedure will enable patentees to request a recalculation quickly and at no charge.”

While the Federal Circuit’s decision has put to rest the question of how a patent term extension should be calculated, still open is the question of whether there is any opportunity for more senior patentees (who are now outside of the prescribed periods for requesting or petitioning for reconsideration of their patent term extensions) to remedy the PTO’s past calculation blunders. 

In its January 21 announcement, the PTO casually attempted to quell the potential resurrection of stale patent term extension determinations by issuing a statement “reminding” applicants and patent owners of the PTO’s deadlines for seeking review of patent term adjustment determinations. Like Wyeth and Elan Pharma, however, countless patentees may have lost hundreds of precious days of patent life under the PTO’s past patent term extension regime, many of whom are now outside the reconsideration periods. 

It is unclear whether the PTO’s attempt to ward off additional re-determination cases marks the end. Future cases may shed some light on this issue, but it could be a long time before judicial guidance is provided. In the meantime, it would not be surprising if those patentees with the most to gain, such as those in the pharmaceutical industry, pursue as yet unexplored avenues in the PTO or beyond in attempts to obtain recalculations of their patent term extensions.    

 

.