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Patent Term Adjustment deductions for applicant delay are only appropriate when the Applicant could have taken steps to advance prosecution but failed to do so

Elizabeth Crompton

Elizabeth Crompton
Associate
Haynes and Boone, LLP

In Supernus Pharmaceuticals, Inc. v. Iancu, No. 2017-1357 (Fed. Cir. Jan. 23, 2019), the Federal Circuit rejected the U.S. Patent and Trademark Office’s practice of deducting time from the patent term adjustment (PTA) for applicant delays during periods of time when the applicants had no reasonable steps to take to advance prosecution.  Slip op. at 19.

The PTA statute provides that PTA will be reduced by the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.  35 U.S.C. § 154(b).  The U.S. Patent and Trademark Office (USPTO) promulgated regulations relating to PTA, including 37 C.F.R. § 1.704(c)(8), which states

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, in which case the period of adjustment set forth in § 1.703 [that extends the patent’s term due to USPTO delay] shall be reduced by the number of days, if any, beginning on the day after the date the initial reply was filed and ending on the date that the supplemental reply or other such paper was filed . . . .

Slip op. at 4-5.  Relying on this regulation, the USPTO taxed applicants with delay if they submitted an information disclosure statement (IDS) after filing an RCE, even when the applicants did not know of the information disclosed and therefore could not have filed the IDS sooner.  This is the specific practice challenged in Supernus.

Supernus had filed a request for continued examination in a pending application.  Id. at 6.  About 18 months after filing the RCE, Supernus received notice from the European Patent Office that an opposition had been filed against a related European patent.  Id. at 6-7.  Supernus submitted a supplemental IDS to the USPTO, informing it of the opposition and providing the cited documents.  Id. at 7.  More than nine months later, the USPTO issued the first office action responding to Supernus’s RCE.  Id.  When the patent issued from that application, the USPTO calculated the PTA and subtracted 646 days of applicant delay for the period between when the RCE was filed and when Supernus filed the IDS with information about the opposition.  Id. at 7-8.  Supernus conceded that it was responsible for 100 days of delay after it received notice of the opposition before filing the IDS but challenged the USPTO’s attribution of applicant delay to the time between filing the RCE and receiving notice of the opposition.  Id. at 8-9.

The USPTO rejected Supernus’s request for reconsideration of the PTA calculation.  Id. at 8.  According to the USPTO, the Federal Circuit’s decision in Gilead Sciences, Inc. v. Lee, 778 F.3d 1341, 1350-51 (Fed. Cir. 2015) required charging the applicant with a delay for submitting an IDS after filing an RCE.  Id.  The USPTO explained that Supernus’s IDS submission was subject to the same rationale as Gilead, which required reduction for applicant delay “under 37 C.F.R. § 1.704(c)(8) because any relevant information submitted to the USPTO after an initial reply interferes with the USPTO’s ability to process an application.”  Id.  So analogously, “[t]he same analysis applies to submission of an IDS document after the filing of an RCE” because “[a]ny IDS submission by [a] patentee after the filing of a[n] 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.”  Id. (alterations in original).

On appeal to the U.S. District Court for the Eastern District of Virginia, Supernus moved for summary judgment on the grounds that the regulations relied on by the USPTO are arbitrary, capricious, and contrary to the PTA statute.  Id.  The district court agreed with the USPTO, holding that the Federal Circuit’s decision in Gilead required the outcome.  Id.; Gilead, 778 F.3d at 1350-51.

The Federal Circuit reviewed the decision relating to PTA in accordance with the Administrative Procedure Act.  Slip op. at 10.  Under this standard, the Federal Circuit would set aside the USPTO’s actions if they were found to be “in excess of statutory jurisdiction, authority, or limitations,” or “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. §§ 706(2)(A), (C).

The Federal Circuit discussed its prior decision in Gilead, in which the Court considered the reasonableness of 37 C.F.R. § 1.704(c)(8) and whether the PTA statute required deduction for applicant delay in instances where the applicant’s conduct did not actually delay the conclusion of prosecution, and specifically whether “filing a supplemental IDS after submitting a reply to a restriction requirement constitutes a failure to engage in reasonable efforts to conclude prosecution of the application.”  778 F.3d at 1346; see also slip op at 11.  The USPTO charged Gilead with applicant delay for the time between filing a response to a restriction requirement and filing a supplemental IDS.  Gilead, 778 F.3d at 1345; see also  slip op at 11.  The Federal Circuit agreed, holding that the USPTO’s interpretation of the statute and its application in 37 C.F.R. § 1.704(c)(8) were reasonable because submitting an IDS after responding to a restriction requirement “interferes with the PTO’s ability to conclude the application process because of significant time constraints faced by the PTO.” Gilead, 778 F.3d at 1350; see also  slip op at 11.  “A supplemental IDS, such as the one that Gilead submitted, [may] force[ ] an examiner to go back and review the application again, while still trying to meet his or her timeliness obligations under § 154.” Gilead, 778 F.3d at 1350 (quoting Gilead Scis., Inc. v. Rhee, 976 F. Supp. 2d 833, 837-38 (E.D. Va. 2013) (alterations in original)); see also  slip op at 11.

The Federal Circuit distinguished its holding in Gilead, explaining that Gilead only ruled that “the regulation reasonably drew no line between actual and potential delay and could include a supplemental IDS.  It did not hold the regulation was reasonable in reducing PTA for periods during which there was no failure to engage in reasonable efforts to conclude prosecution.”  Slip op. at 11-12.  Gilead did not decide whether the circumstances challenged by Supernus would constitute failure to engage in reasonable efforts to conclude prosecution.

In contrast to Gilead, Supernus could not have taken any steps to conclude prosecution of the patent during the 546-day period between when the RCE was filed and the EPO notification of the opposition.  Slip op. at 12.  So the question to be considered was “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.’” 35 U.S.C. § 154(b)(2)(C)(i); slip op at 12-13.  This was a completely different question from Gilead.  Therefore, the Federal Circuit explained, Gilead is not controlling, and the district court erred in granting summary judgment to the USPTO based on the holding in GileadSlip op. at 13.

The Federal Circuit considered the USPTO’s interpretation of the PTA statute under Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) and found its answer at Step 1.  Slip op. at 13.  The first question in an analysis under Chevron is “whether the statute’s plain terms ‘directly addres[s] the precise question at issue.’”  Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 986 (2005) (quoting Chevron, 467 U.S. at 843); see also  slip op at 13.

According to the Federal Circuit, the PTA statute’s language was clear and unambiguous.  Pereira v. Sessions, 138 S. Ct. 2105, 2113 (2018); see also Chevron, 467 U.S. at 842–43 (“If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.”); slip op at 13.  The PTA statute clearly states, “The period of adjustment of the term of a patent under paragraph (1) shall be reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.”  35 U.S.C. § 154(b)(2)(C)(i) (emphasis added); slip op at 14.  Therefore, based on the plain language of the statute, the Federal Circuit held that the USPTO could not deduct, as applicant delay, time during which the applicant could not do anything to advance prosecution of the application.  Slip op. at 14.  Such a deduction would exceed the time “during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.”  35 U.S.C. § 154(b)(2)(C)(i); slip op at 14.

The Federal Circuit explained that the statute has two clear limitations on the amount of time that can be considered applicant delay for reducing PTA: (1) any reduction to PTA must be equal to the period of time during which the applicant fails to engage in reasonable efforts, and (2) the reduction is expressly tied to the specific time period during which the applicant failed to engage in reasonable efforts.  Slip op. at 15.  The Federal Circuit analyzed both limitations.

First, the Federal Circuit considered the meaning of the term “equal to the period of time during which the applicant failed to engage in reasonable efforts.”  Id. at 15.  The Federal Circuit explained, “PTA reduction cannot exceed the period of time during which an applicant failed to engage in reasonable efforts.  Thus, if there is no period of time during which the applicant could have but failed to engage in reasonable efforts, there can be no reduction to the PTA.”  Id.  The Court continued, “The word ‘during’ is similarly understood to mean ‘from the beginning to the end of (a particular period)’ or ‘at some time between the beginning and the end of (a period).’”

Thus, the statutory period of 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. PTA cannot be reduced by a period of time during which there is no identifiable effort in which the applicant could have engaged to conclude prosecution because such time would not be “equal to” and would instead exceed the time during which an applicant failed to engage in reasonable efforts. This is consistent with the PTA extensions of “1 day for each day” granted for the A, B, and C types of USPTO delays.

Slip op. at 15-16.

Next, the Federal Circuit examined the legislative intent, explaining that the intention of the “equal to” limitation was that “applicants will be charged the full amount of time corresponding to their own delay.”  Id. at 16.  But this provision also protects applicants because the PTA is only reduced by the amount of time during which the applicant failed to engage in reasonable efforts.  Id.  The Federal Circuit explained, “The USPTO cannot, therefore, count as applicant delay any period of time during which there were no efforts in which the applicant could have engaged to conclude prosecution of the patent.”  Id.  Thus, if no identifiable efforts could have been undertaken during a given time period, that period cannot be “equal to” the statutory period of time during which the applicant failed to undertake reasonable efforts.  Id.  Otherwise, the “reasonable efforts” language in the statute would be superfluous. Id.

Turning to the specifics of the case, the Federal Circuit noted that during the 546 days between when Supernus filed its RCE and when it received notice of the opposition from the EPO, there were no efforts Supernus could have taken to conclude prosecution.  Id. at 18.  As such, because the applicants did not fail to take available steps to conclude prosecution, the 546 days of applicant delay charged by the USPTO was contrary to the plain meaning of the statute.  Id.  “The USPTO’s interpretation of the PTA statute applied in these circumstances exceeds the statutory limitations for PTA reduction and therefore, the USPTO actions are ‘in excess of statutory . . . authority.’” Id. (alteration in original) (citing 5 U.S.C. § 706(2)(C)).  The Federal Circuit reversed the district court’s grant of summary judgment and remanded.  Id. at 19.

This decision underscores the importance for patent applicants to check the USPTO’s PTA calculation.  A deduction for applicant delay is only appropriate when the applicant could have taken steps to advance prosecution but failed to do so.  However, neither this decision nor the decision in Gilead makes clear whether submission of a supplemental IDS based on newly-discovered prior art that could have been found sooner would count as failure to take reasonable steps to advance prosecution.  The best practice is still to submit IDSs as early as possible and avoid supplemental submissions.

Elizabeth Crompton is an experienced trial attorney who uses her advanced education and experience to understand complex technical matters and help clients achieve their goals. Elizabeth concentrates on patent disputes before district courts and the Federal Circuit. She also counsels clients on infringement, validity and enforceability of patents, particularly in the chemical/biological and mechanical areas, including Hatch-Waxman, as well as design patents.
http://www.haynesboone.com/people/c/crompton-elizabeth

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