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Chevron Deference and the USPTO’s Determination of Applicant Delay in the Calculation of Patent Term Adjustment

Angela Oliver, Associate, Haynes and Boone, LLP

With administrative law principles becoming increasingly important in patent law, a recent decision from the Federal Circuit highlights the relevance of those principles in patent prosecution.  In Intra-Cellular Therapies, Inc. v. Iancu,[1] the Federal Circuit extended Chevron deference to the USPTO’s determination that an applicant’s failure to submit a proper reply to a final Office action constituted “fail[ure] to engage in reasonable efforts to conclude prosecution of the application” under 35 U.S.C. § 154(b)(2)(C)(i), thus resulting in the accrual of applicant delay for patent term adjustment purposes. 

Congress set forth the framework for calculating patent term adjustment (“PTA”) in 35 U.S.C. § 154(b) (“the PTA statute”).  Section 154(b)(1) enumerates the types of Patent Office delay that will lead to PTA accrual, while § 154(b)(2) provides that PTA may be reduced for delays caused by an applicant.  The dispute in Intra-Cellular Therapies pertained to the calculation of applicant delay based on particular procedural steps taken by the applicant during prosecution.

By statute, PTA “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.”  § 154(b)(2)(C)(i) (emphasis added).  Congress provided one example of such failure in § 154(b)(2)(C)(ii),[2] stating that “an applicant shall be deemed to have failed to engage in reasonable efforts to conclude processing or examination of an application for the cumulative total of any periods of time in excess of 3 months that are taken to respond to a notice from the Office making any rejection, objection, argument, or other request, measuring such 3-month period from the date the notice was given or mailed to the applicant.”  § 154(b)(2)(C)(ii).

Congress authorized the Patent Office to promulgate regulations elaborating on these provisions by providing that “[t]he Director shall prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application.”  § 154(b)(2)(C)(iii).  Pursuant to this delegation, the Patent Office promulgated 37 C.F.R. § 1.704, entitled “[r]eduction of period of adjustment of patent term.”  This regulation provides that for certain types of PTA adjustment, “an applicant shall be deemed to have failed to engage in reasonable efforts to conclude processing or examination of an application for the cumulative total of any periods of time in excess of three months that are taken to reply to any notice or action by the Office making any rejection, objection, argument, or other request, measuring such three-month period from the date the notice or action was mailed or given to the applicant.”  § 1.704(b).  The regulation further describes additional “[c]ircumstances that constitute a failure of the applicant to engage in reasonable efforts to conclude processing or examination of an application.”  § 1.704(c); see also § 1.704(c)(1)–(14).

Relevant Prosecution History

During prosecution of the Intra-Cellular patent application, on April 17, 2013, the Patent Office mailed a final Office action rejecting and objecting to the claims presented.  No claims were allowed.  On July 17, 2013, three months after the final Office action, Intra-Cellular filed a submission entitled “Amendments and Response Under 37 C.F.R. 1.116.”[3]  In this first after-final submission, Intra-Cellular continued to argue the merits of the examiner’s § 103 rejection, while also adding a new claim and amending claims to address other rejections and objections.

Later that month, the Patent Office mailed an Advisory Action, explaining that Intra-Cellular’s filing overcame several of the earlier § 112 rejections and formality objections, but did not overcome the § 103 rejection.  In that Action, the examiner suggested that Intra-Cellular amend or cancel certain claims to overcome the remaining rejections and objections.  On August 7, 2013, Intra-Cellular filed a second after-final submission that adopted all of the examiner’s suggestions.  This resulted in a Notice of Allowance, and the patent subsequently issued as U.S. Patent No. 8,648,077 (“the ‘077 patent”).

Patent Term Adjustment Determination

In January 2017, the Patent Office issued its decision regarding patent term adjustment for the ‘077 patent.  In its PTA calculation, the Patent Office included 21 days of applicant delay based on the 21-day period of time between the three-month deadline for responding to the final Office action and the date of Intra-Cellular’s second after-final submission.  The issue ultimately presented to the Federal Circuit was whether this 21-day period should have been attributed to applicant delay.

As summarized in the Federal Circuit’s opinion, the Patent Office based its decision regarding this 21-day period on two rationales.  First, the Patent Office found that Intra-Cellular’s first after-final submission failed to comply with 37 C.F.R. § 1.113.  Second, the Patent Office found that the first submission was a submission of a reply having an omission under 37 C.F.R. § 1.704(c)(7).[4]  Thus, the Patent Office concluded that because Intra-Cellular’s first after-final submission was not a proper after-final reply, applicant delay began accruing on the day after the three-month deadline to respond to the final Office action.  The Patent Office further concluded that applicant delay ceased accruing when Intra-Cellular filed its second after-final submission.

Intra-Cellular challenged the Patent Office’s PTA determination by filing a complaint in the United States District Court for the Eastern District of Virginia.  The district court granted summary judgment in favor of the Patent Office, and Intra-Cellular appealed to the Federal Circuit. 

The Federal Circuit’s Analysis

On appeal, the Federal Circuit framed the issue as “whether an applicant submission, filed after a final Office action, that continues to argue the merits of the examiner’s rejection, without good cause, constitutes a ‘fail[ure] to engage in reasonable efforts to conclude prosecution’ such that applicant delay would accrue under the PTA statute.”  Intra-Cellular Therapies, 2019 WL 4458569, at *6.  In analyzing that issue, the Federal Circuit applied the Chevron deference framework.  See generally Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

Chevron established a familiar two-step procedure for evaluating whether an agency’s interpretation of a statute is lawful.”  Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 986 (2005).  Step 1 of Chevron considers “whether the statute’s plain terms ‘directly addres[s] the precise question at issue.’”  Id. (quoting Chevron, 467 U.S. at 843).  At Step 1, the Federal Circuit concluded that “the language of the PTA statute does not answer the question of what type of action by an applicant constitutes ‘reasonable efforts to conclude prosecution’ for purposes of responding to a final Office action.”  Intra-Cellular Therapies, 2019 WL 4458569, at *6.  Accordingly, the court proceeded to address Chevron Step 2.

At Step 2, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”  Chevron, 467 U.S. at 843; see also Intra-Cellular Therapies, 2019 WL 4458569, at *7.  In this portion of its analysis, the Federal Circuit thoroughly discussed the relevant regulations and credited the Patent Office’s reliance on its “longstanding regulatory standards in place for a complete and proper reply.”  Intra-Cellular Therapies, 2019 WL 4458569, at *7.  The court also looked to the structure of the PTA statute to reject a contrary interpretation proposed by Intra-Cellular.  Id. at *8.  Ultimately, the Federal Circuit held that “it is permissible to interpret an after-final submission that merely continues to argue the merits of an examiner’s final rejection as a ‘fai[lure] to engage in reasonable efforts to conclude prosecution’ such that such an applicant submission would not stop the accrual of applicant delay under the PTA statute.”  Id. at *7.  The court therefore affirmed the district court’s decision in favor of the Patent Office.

Conclusion

In recent years, arguments regarding the well-known Chevron doctrine have frequently emerged in the inter partes review context.  See, e.g., Click-to-Call Techs., LP v. Ingenio, Inc. et al., 899 F.3d 1321 (Fed. Cir. 2018), cert. granted in part sub nom. Thryv, Inc. v. Click-to-Call Techs., LP, 139 S. Ct. 2742 (2019); Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed. Cir. 2018), cert. denied, 139 S. Ct. 1366 (2019); Aqua Prods., Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc).  Indeed, in a case currently pending before the Federal Circuit, the court invited the Director of the USPTO to provide his views regarding what, if any, deference should be extended to decisions of the new PTAB Precedential Opinion Panel.[5]  The decision in Intra-Cellular Therapies, however, provides a useful reminder that administrative law principles such as Chevron also arise—and pose significant practical consequences—in the patent prosecution arena.

Intra-Cellular Therapies is not the first time the Federal Circuit has applied Chevron in the context of patent term adjustment.  As discussed previously on this blog, in Supernus Pharmaceuticals, Inc. v. Iancu, the Federal Circuit did not afford the Patent Office’s interpretation of the PTA statute Chevron deference where the plain language of the statute resolved the question presented in that case—namely, whether applicant delay could accrue under a particular regulatory provision where there was “no action that the applicant could take to conclude prosecution of the patent.”  913 F.3d 1351, 1358 (Fed. Cir. 2019) (reversing the USPTO’s attribution of applicant delay based on the submission of an IDS regarding an opposition filed against an international application).  Deeming the statutory language unambiguous, the court concluded its Chevron analysis at Step 1 and declined to defer to the USPTO’s interpretation of the statute.  Id. at 1361.  In another PTA case, however, the Federal Circuit extended Chevron deference to the Patent Office’s interpretation of the PTA statute when addressing the same regulatory provision at issue in Supernus—37 C.F.R. § 1.704(c)(8), which pertains to the submission of a supplemental reply or other paper after a reply has been filed.  See Gilead Sciences, Inc. v. Lee, 778 F.3d 1341, 1351 (Fed. Cir. 2015).  The issue in Gilead Sciences was “whether a failure to engage in reasonable efforts requires conduct that actually causes delay.”  Id. at 1349.  Applying Chevron Step 1, the court held that the PTA statute did not directly address that precise question.  Id.  Proceeding to Chevron Step 2, the court held that the agency’s interpretation of the statute (allowing applicant delay to accrue where conduct had the potential to result in delay, regardless of whether such delay actually occurred) was reasonable.  Id.   

These three decisions applying Chevron in the context of the PTA statute illustrate the importance of understanding the boundaries and potential applications of Chevron deference, even in patent prosecution.  Patent prosecutors who are comfortable navigating administrative deference doctrines may have opportunities to obtain better results for their clients, whether in the context of patent term adjustment or in another area ripe for creative advocacy. Although the court’s opinion in Intra-Cellular Therapies focused solely on Chevron deference, arguments regarding Auer deference may present additional opportunities for advocacy.  See generally Auer v. Robbins, 519 U.S. 452 (1997) (regarding an agency’s interpretation of its own regulations).  Notably, while the Federal Circuit’s analysis in Intra-Cellular Therapies required an understanding of multiple agency regulations, as well as the interplay among those regulations, the court emphasized that its decision did not rely on Auer deference “because that doctrine [was] not necessary to understanding the regulations and deciding this case.”  Intra-Cellular Therapies, 2019 WL 4458569, at *9 n.3.  Another case, however, could conceivably require a court to analyze whether the Patent Office’s interpretation of its own regulations should receive Auer deference.  As such, even for practitioners who focus primarily on patent prosecution, an understanding of the jurisprudence surrounding Auer deference is also essential—especially in light of the Supreme Court’s recent reaffirmation and clarification of that doctrine in Kisor v. Wilkie, 139 S. Ct. 2400 (2019).


[1] Intra-Cellular Therapies, Inc. v. Iancu, No. 18-1849, — F.3d –, 2019 WL 4458569 (Fed. Cir. Sept. 18, 2019).

[2] Section 154(b)(2)(C)(ii) applies “[w]ith respect to adjustments to patent term made under the authority of paragraph (1)(B).”

[3] The Federal Circuit noted that this submission, despite its title, “[did] not appear to comply with any of the permitted amendments under § 1.116(b)(1)–(3).”  Intra-Cellular Therapies, 2019 WL 4458569, at *4 n.1.

[4] The Federal Circuit noted that the Patent Office’s reliance on § 1.704(c)(7) to justify the accrual of applicant delay was “questionable.”  Intra-Cellular Therapies, 2019 WL 4458569, at *4 n.2.  As such, this article does not address that aspect of the Patent Office’s decision.

[5] Order, Facebook, Inc. v. Windy City Innovations, LLC, No. 18-1400 (Fed. Cir. Aug. 12, 2019), ECF No. 64.

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