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IP Alert: Federal Circuit Clarifies Rules for Patent Term Adjustment

January 21, 2014

On January 15, 2014, in Novartis AG v. Lee, the Court of Appeals for the Federal Circuit addressed certain issues concerning the calculation of patent term adjustment (PTA) by the U.S. Patent and Trademark Office (USPTO). The court’s decision contained three significant holdings: (1) a patentee who lodges a court challenge to the USPTO’s determination of available PTA must bring such challenge within 180 days of the issue date of the patent, irrespective of whether the patentee is challenging the USPTO’s preliminary PTA determination or final PTA determination; (2) “type B” PTA is not available for any time consumed by continued examination, even if the applicant filed its request for continued examination more than three calendar years after the filing date of the application; and (3) the time consumed by continued examination ends at the mailing of a final action or notice of allowance, not the date the patent issues. A consequence of holding (3) is that “type B” PTA may be awarded for the time consumed between a notice of allowance and the issuance of the patent. This is contrary to the way in which the USPTO has accorded PTA in many cases.

By way of background, the term of a patent nominally extends from its issue date until the 20-year anniversary of its filing date. Because the nominal expiration date of the patent is fixed, any delays during prosecution of the patent can reduce the patent’s term. In 1999, Congress enacted legislation to address delays in prosecution. This legislation provides for adjustment of the term of a patent where the delay is due to processing time at the USPTO. The wording of this legislation is not entirely clear, and there have been numerous cases concerning the USPTO’s application of this statute. See, e.g., IP Alert: Special Request Now Available Regarding Wyeth Term Adjustment and IP Alert: Revisions of Patent Term Adjustment Provisions Relating to Appellate Review.

“Type B” PTA, so called because is specified under 35 U.S.C. 154(b), provides a nominal guarantee that the patent will take no more than three years to issue, with certain exclusions. One of the exclusions is “any time consumed by continued examination.” Prior to the Novartis decision, it was not clear whether patent term adjustment is available after the filing of a request for continued examination if the applicant filed the request for continued examination more than three years after the application filing date. See IP Alert UPDATE: USPTO Files Notice of Appeal in Exelixis v. Kappos  and IP Alert: Recent District Court Decision in Exelixis II at Odds with Exelixis I.

In Exelixis I, as reported earlier, the Eastern District of Virginia held that an applicant was entitled to type B PTA in such case. Another district court, the District of Columbia, agreed in Novartis v. Kappos. That court held, however, that Novartis had waived its claims for 15 of 18 patents at issue by failing to bring suit within 180 days after the patents had issued. The USPTO filed an appeal in the Exelixis I case, and both parties appealed in Novartis AG v. Kappos. On January 15, the Federal Circuit issued precedential opinion in the Novartis case (now styled Novartis v. Lee). The court also issued a nonprecedential opinion in the Exelixis I case, remanding the case in light of its opinion in Novartis.

The Novartis panel considered three issues: (1) the deadline for bringing suit in the USPTO; (2) whether time after the filing of a request for continued examination (RCE) that is filed after the three-year date is included in a PTA determination; and (3) whether time between allowance and issuance is included in a PTA determination even if the applicant has filed an RCE.

(1) The 180-day requirement

The statute specifies that “[a]n applicant dissatisfied with the determination made by the Director under paragraph (3) shall have a remedy by civil action against the Director filed . . . within 180 days after the grant of the patent.” Novartis contended that 180-day requirement applies only to the preliminary PTA determination that the USPTO transmits with the notice of allowance. Accordingly, Novartis contended that the 180-day limit of the statute did not apply to its patents, because Novartis was contesting the final determination of PTA announced at issuance rather than the provisional determination sent with the notice of allowance. The district court disagreed, and dismissed Novartis’s claims as untimely.

On appeal, the Federal Circuit affirmed. The court observed that under Novartis’s reading of the statute the 180-day rule “would apply to review only of provisional, but not final, adjustment determinations,” a result that the court characterized as “senseless.” The court found no reason to distinguish between provisional and final PTA determinations and held that the 180-day deadline applied to each. 

Notably, Novartis’s analysis was based on what the court perceived to be a clerical drafting error in the statute, an error later corrected by legislation.

(2) The effect of an RCE filed after the three-year date

Novartis asserted that, because it had not submitted an RCE until after the application had been pending for three years, the PTA exception for “time consumed by continued examination” was inapplicable. The Federal Circuit again disagreed, holding that “no adjustment of time is available for any time in continued examination, even if the continued examination was initiated more than three calendar years after the applicant’s filing.” The court reasoned that the statute does not include a time-of-initiation restriction on the processes excluded from PTA, and that excluding such time would be contrary to the statutory purpose to exclude from the PTA calculation delays that are not attributable to the PTO: “[F]ocus on PTO responsibility or its absence does not distinguish continued examinations according to when they were initiated.” 

(3) Time between allowance and issuance after filing of an RCE

Novartis asserted that the excluded “time consumed by continued examination” did not include time after the USPTO mailed a notice of allowance. The USPTO asserted that “time consumed by continued examination” included all time after the filing of an RCE until issuance of the patent.

The Federal Circuit agreed with Novartis. The court noted that in an application not subject to continued examination, the time between allowance and issuance would ordinarily be counted in the PTA determination. The court said “[t]here is no basis for distinguishing a continued-examination case,” because “[e]ither way such time is plainly attributable to the PTO.” 

Notably, a significant consequence of this holding is that the USPTO has been undercalculating the term of many patents by not according PTA after the date of a notice of allowance. USPTO rule 705 permits patentees in some circumstances to request reconsideration of PTA after the grant of the patent. For patents issued recently in cases where an RCE was filed, patentees may wish to review the USPTO’s PTA calculation and consider whether to request reconsideration. It is not clear whether the Federal Circuit’s issuance of the Novartis opinion will constitute adequate grounds for such petition.

For more information regarding these holdings, please contact Fitch Even partner Timothy R. Baumann.

Written by Fitch Even attorney Joshua P. Smith


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