By Kevin E. Noonan —

Yesterday, Judge Claude M. Hilton, District Court Judge for the Eastern District of Virginia, handed The Medicines Company (MDCO) a victory in its long-standing dispute with the U.S. Patent and Trademark Office over the timeliness vel non of its Patent Term Extension Request for its patent on the blockbuster drug Angiomax® (bivalirudin).  In his opinion granting summary judgment to MDCO, it was clear that the judge was not happy with the Office's response to his earlier Order mandating reconsideration of its decision that the Request was not timely filed; judicial displeasure, if not pique, seems reasonable in view of the seemingly summary way the Office "complied" with the earlier Order.

The tale has been often told on the circumstances surrounding MDCO's PTE Request.  Pursuant to 35 U.S.C. § 156, MDCO had 60 days from the date that Angiomax® received regulatory (FDA) marketing approval to file its PTE Request (35 U.S.C. § 156(d)(1)).  The approval letter was sent by FDA to MDCO by facsimile transmission at 6:17 pm on Friday, December 15, 2000.  The FDA subsequently published the approval date for Angiomax® on its website as being December 19, 2000.  MDCO filed its PTE Request on February 14, 2001, a date that is 61 days after December 15, 2000, 58 days after December 18, 2000 (the Monday following the date of the Friday night fax) and 57 days after the approval date FDA posted on its website for Angiomax®.  These calculations were complicated by a later-issued directive by the PTO that, for purposes of calculating the time period for filing a PTE Request, the Office would consider the day FDA mailed its approval letter in the calculation (i.e., the times above are each increased by one day) (In re Patent Term Extension Application for U.S. Patent No. 5,817,338, 2008 WL 5477276 (Comm'r. Pat. Dec. December 16, 2008)).  In any case, the PTO, relying on a certification from FDA that the approval date was Friday, December 15, 2000, refused MDCO's Request, costing the company to lose 4.5 years (about 1773 days) of extension for its U.S. Patent No. 5,196,404 (which nominally expired on March 23, 2010).

MDCO filed a request for reconsideration of this decision, on the grounds that the FDA faxed its letter "after hours" on a Friday, "and that under FDA's practices, facsimiles submitted to FDA after close of business are considered received by the Agency on the next business day" (emphasis added).  Applying this standard, the approval notification date would have been Monday, December 18th, and MDCO's Request would have been timely filed even under an interpretation including the approval date in the 60-day period.  The PTO transmitted the request for reconsideration to FDA (since the dispute involved FDA procedures), which the FDA rejected without comment or support, maintaining that the approval date was Friday, December 15th.

The PTO did not issue a formal denial of MDCO's request, but instead permitted the company to file an amended request for reconsideration and an amended extension application, which were filed on March 13, 2007.  Less than six weeks later, on April 26, 2007, the PTO denied the request, again with no explanation of the inconsistency in the FDA's position on submissions to and notices from the agency.  It was at this time that the Office applied the revised calculation for determining when a PTE Request must be filed, determining in this case that MDCO had filed its Request 2 days late.

MDCO filed a petition for leave to file a second request for reconsideration on the grounds that it had not had an opportunity to address this new interpretation of the deadline date for filing its PTE Request.  In its papers MDCO argued that there was no requirement in the statute that would preclude the Office from adopting its proposed "next business day" rule, and that such an interpretation would "comport with the statute's text and purpose."  While the Office granted leave for filing the second request for reconsideration (based on the "extraordinary situation" occasioned by its change in how days were counted for calculating the filing deadline), it denied the request substantively.  The PTO's position was that the Office did not have the authority under § 156 to adopt the proposed "next business day" rule, at least because there was no basis to distinguish "during business hours" from "after business hours" in the statute, which recites the date (per the PTO, "span[ning] the course of 24 hours").

MDCO brought suit in Judge Hilton's Court, and on March 16, 2010 the judge ordered on remand that the Office reconsider its position on the grounds that "§156(d)(1) was a remedial statute and that it should be liberally construed," and that "the PTO was not bound by statute or case law to reject the business day interpretation of the work date in §156(d)(1)."  Three days later, the Office "without any additional hearings" issued another decision again rejecting the "next business day" interpretation of the statute advanced by MDCO.  The Office went further, holding that the timing provisions of the statute were not remedial in nature, and that the Office was bound by Federal Circuit authority to interpret the word "date" in the statute as the calendar day on the FDA approval letter.  In response, MDCO returned to the District Court under the Administrative Procedures Act, 5 U.S.C. §§ 551-706, arguing that the agency's action was arbitrary and capricious.

The Court began its analysis on the question of what level of deference was owed to the PTO decision, under either Skidmore v. Swift, 323 U.S. 134 (1944), or Chevron U.S.A. Inc. v. National Resource Defense Council, Inc., 467 U.S. 837 (1984), so-called "Chevron deference" being a higher level.  The Court noted that an agency is entitled to Chevron deference generally for its interpretations of law "set forth after notice-and-comment rulemaking or formal adjudication under 5 U.S.C. §§556-557."  Immediately, the Court disqualified the latter grounds for applying Chevron deference to its decision in this case, stating that "[t]he government does not deny that PTE decisions are informal adjudications."  To qualify for Chevron deference regarding the PTE determination, the Court required a "relatively formal administrative procedure," evidence that Congress intended that such decisions be given deferential judicial review, and that the Office itself gives such decisions precedential effect, citing Pesquera Mares Australes Ltda. v. U.S., 266 F.2d 1372 (Fed. Cir. 2001).

The Court found that the circumstances under which the PTO makes PTE determinations (ex parte review, the level of discretion given to the Director to require additional information from applicants, and the absence of formal hearings or administrative review other than requests for reconsideration) are inconsistent with the kinds of "relatively formal process[es] envisioned in Pesquera."  Moreover, the Court cited Federal Circuit precedent that PTO proceedings are not governed by 5 U.S.C. §§ 556-557, citing Brand v. Miller, 487 F.3d 862 (Fed. Cir. 2007).  The Court rejected the PTO's arguments to the contrary; indeed, the Court distinguished the government's citation of Glaxo Operations UK Ld. v. Quigg, 894 F.2d 392 (Fed. Cir. 1990), for the proposition that PTE determinations should be given deference by noting that the Court deferred to the agency's "scientific and technical expertise," but that the Court had "expressly rejected the PTO's claim for deference to its statutory interpretations of PTE proceedings" (expressly, that "we will give . . . little or no deference to the [PTO's] surmise of Congress' intent in framing its definition").  Nor does the Court find that the Office is entitled to Chevron deference under 35 U.S.C. § 2(b)(2), which is limited to procedural rulemaking not statutory interpretation.  The Court also rejected the government's argument that the Office's decision should be given Chevron deference due to consistent application of the calendar day interpretation of the statutory language, in the face of admissions by the Office that it had "never previously considered the choice between calendar day and business day interpretations of §156(d)(1)" (saying that "it cannot claim to give precedential effect to decisions that do not exist"), particularly since the Office is entitled to change its position at any time with no more than a "reasonable explanation" of why it has done so.

The Court then arrived at the heart of the matter:

It is well established that "[d]eviation from [a] court's remand order in . . . subsequent administrative proceedings is itself legal error, subject to reversal on further judicial review."  Sullivan v. Hudson, 490 U.S. 877, 886 (1989).  If an agency is dissatisfied with any part of a district court's order, the remedy is to appeal the case and not, under guise of a hearing, to relitigate a question already finally decided by the district court.  Hooper v. Heckler, 752 F.2d 83, 88 (4th Cir. 1985).  When a case returns to a court for a second time after the court has remanded it with explicit instructions to the agency, the court examines with care the order of the agency to ensure that its earlier decision has been followed.  Guillen-Garcia v. INS, 60 F.3d 340, 344 (7th Cir. 1995).

It is abundantly clear that the Court believed the Office did not comply with this legal standard.  The opinion reviewed its instructions to the Office from its earlier Order, that the statute, being remedial in nature should be given "liberal construction," something that the Office had done in the Synchromed case (In re Patent No. 4,146,029 (Comm'r. Pat. July 12, 1988)).  The Office declined to do so in this case, based on its interpretation that while § 156 may be remedial generally, "the specific timing provision at issue, §156(d)(1), is not."  This decision was in error, according to the Court's opinion, inter alia because "[a]ll of the provisions of a remedial statute . . . should be construed liberally."  "[E]verything is to be done in advancement of the remedy that can be done consistently with any fair construction that can be put upon [the statute]," according to the opinion, citing as an example White v. Cotzhausen, 129 U.S. 329 (1889).  The Court rejected the government's contention that because "Congress did not provide a mechanism for USPTO to prevent the loss of an applicant's patent when the applicant missed a deadline" it was compelled to reject the Court's earlier directive that § 156(d)(1) should be construed liberally.  And the Court further found that "[t]he PTO's failure to acknowledge its prior relevant practices is an independent violation of the Administrative Procedures Act," citing the Synchromed case.  Finally, the Court rejected the government's position that § 156(d)(1) and another part of the statute, § 156(g)(1))B)(ii), must be construed identically, since "[t]he relevant statutory language is different and the provisions serve distinct purposes" (§ 156(d)(1) defines the time for filing the PTE Request, while § 156(g)(1))B)(ii) defines the dates for calculating the time FDA took to review and approve the drug).  The Court discerned a clear distinction between the meaning and purpose of the two portions of the statute, and noted that "the logic that led the FDA to adopt for itself a business day construction [with regard to §156(g)(1))B)(ii)] . . . applies with equal force to the construction of §156(d)(1)."

The Court further took the Office to task for ignoring its earlier instructions:

Even if the PTO were writing on a blank slate without the benefits of the Court's prior opinion, its decision still could not stand.  In numerous respects, the decision violates the APA and advances an interpretation of §156(d)(1) that is unreasonable even under the most deferential standard of review, let alone the more exacting review that applied to the appeal of a remanded order [citing Chamber of Commerce v. SEC, 443 F.3d 890 (D.C. Cir. 2006)].

The Court then addressed the practical consequences of the PTO's asserted interpretation of the rule, to illustrate its unreasonableness.  The Court says that under the Office's interpretation, "the date stamped on the FDA approval letter starts the 60-day period for filing [a PTE Request], even if the FDA never sends the letter, sends it to the wrong address, delays in sending it or sends it by means that would take multiple days to reach the applicant."  (The Court also noted that the Federal Rules of Civil Procedure automatically add three days for a party to act within a specified time after service if service is accomplished by any means other than hand delivery.)  Since the PTO's decision failed to address this issue, "[t]hat failure, by itself, renders the PTO's decision arbitrary and capricious."  The issue is not whether such failures are likely or if there are provisions in place to prevent them, but that "over time mistakes are inevitable . . . .  An interpretation that imposes such drastic consequences when the government errs could not be what Congress intended."

The Court left little to chance in assuring that the Office will understand its Order this time:

The Court finds the proper interpretation of §156(d)(1) is a business day construction of the phrase "beginning on the date."  Of the parties' competing interpretations the business day construction is consistent with the statute's text, structure and purpose.

"[T]he courts are the final authorities on issues of statutory construction" and "must reject administrative constructions of [a] statute . . . that are inconsistent with the statutory mandate or frustrate the policy that Congress sought to implement" [citing Ethicon, Inc. v. Quigg, 849 F.2d 1442 (Fed. Cir. 1988)].

The judge's order was simple:  that the PTO accept MDCO's PTE Request as having been timely filed, and that the Office interpret the meaning of the timing provisions of § 156(d)(1) to include the next business day for notifications received after the close of business.

It remains to be seen whether the Office will challenge this ruling, and if it does not whether it will expedite review of MDCO's PTE Request (and restore the additional term to this expired patent).