Court Overrules PTO Interpretation of B-Delay Calculation

By
Kevin E. Noonan —

Judge
T.S. Ellis III of the U.S. District Court for the Eastern
District of Virginia wrote the latest chapter in the story of judicial review of (and,
generally, disagreement with) how the Office has interpreted the patent term
adjustment provisions of the 1999 America Inventors Protection Act (AIPA).  This case involves so-called "B delay,"
corresponding to a date that is three years after an application's filing date
and the date on which the Office actually grants a patent pursuant to 35 U.S.C.
§ 154(b)(1)(B).  The issue
was whether the Office had correctly implemented the statute by negating B delay
in circumstances where an applicant had responded to a final rejection by
filing a request for continued examination (RCE) (also a provision newly added
to U.S. patent law by the AIPA).

The
case involved an application filed by Exelixis that resulted in grant of U.S.
Patent No. 7,989,622 entitled "Phosphatidylinositol 3-Kinase Inhibitors
and Methods of their Use."  The
application was filed on January 15, 2008 and a first Office Action promulgated
by the Office on February 22, 2010, resulting in an "A delay" (the
time from the filing date to the first substantive action in a case pursuant to
35 U.S.C. § 154(b)(1)(A)) of 283
days.  The PTO issued Final Rejection on
March 9, 2011 (38 months, i.e., 2 months from the three-year date calculated
from the filing date), to which the applicants responded on April 11, 2011;
this response was filed with an RCE.  "Less
than three weeks later" (a time the Court characterized as "commendable,
if, with respect to this application, uncharacteristic alacrity"), the
Office issued a Notice of Allowance.  Despite payment of the Issue Fee almost immediately (on April 28, 2011),
the patent did not grant until August 2, 2011.  At that time, the Office notified Exelixis that the PTA for this patent
was a total of 368 days, corresponding to 283 days of A delay, 85 days of B
delay, 0 days of C delay under 35 U.S.C. § 154(b)(1)(C) and
subtracting 61 days for applicant delay in prosecution ("C reduction"
under 35 U.S.C. § 154(b)(2)(C)).  The Office's calculation of the B delay, the
issue in the case, credited Exelixis for 85 days from the time between the date
that was three years after the application was filed and the date the Final
Rejection was mailed; the Office did not give this patent the benefit of
another 114 days corresponding from the date the RCE was filed until the grant date,
implementing Office policy that filing an RCE stops the accumulation of B delay
in the Office's PTA calculation.  These
114 days and the Office's policies that deprived the '622 patent of this
additional PTA prompted the lawsuit.  The Court set forth a helpful timeline:

The Court recognized the context of the dispute being based in an assessment of
Congressional intent in implementing the provisions of the General Agreement on
Tariffs and Trade (GATT), which changed the term of U.S. patents from 17 years
from issue to 20 years from the filing (or earliest priority) date, and the
provisions of the AIPA apparently aimed at restoring term lost as the result of
Patent Office delays in prosecution.  "Taken
as a whole," the Court said:

[T]he clear goal and purpose of these
provisions is to provide a successful applicant with a patent that can be
enforced against putative infringers for approximately 17 years — 20 years from
the date of application less three years for prosecution and examination — and
to reach this goal by providing applicants with day for day patent term
extension for delays attributable to the PTO and day for day reductions for the
patent term extension for delayed attributable to an applicant's failure to act
with alacrity in certain circumstances.

The Court characterizes the provisions of 35 U.S.C. § 154(b)
as "guarantees" according to the titles of the three sections of § 154(b)
relating to PTO delay, which is significant because the Court notes (in a
footnote) that it is permissible for courts to use titles and headings in
statutes in interpreting the meaning of the substantive provisions of law.

On
summary judgment, the Court ruled against the PTO's interpretation of the
statute based on its construction of the statutory provisions and Congressional
intent discerned inter alia from how Congress described and characterized those
provisions in the statute.  The Court
applied the deferential standard that agency action must be upheld unless it is
"arbitrary, capricious, an abuse of discretion or otherwise not in
accordance with law" under the Administrative
Procedures Act (5 U.S.C. § 706(2)(A)), noting that an
erroneous interpretation of the law satisfies this standard, citing Star Fruits S.N.C. v. U.S., 393 F.3d
1277, 1281 (Fed. Cir. 2005), and Arnold
Partnership v. Dudas, 362 F.3d 1338, 1340 (Fed. Cir. 2004).

The Court's opinion begins with the "plain language of the statute," and
the Court found that the meaning of the statute was "clear, unambiguous,
and in accord with both the statute's structure and purpose."  Section 154(b)(2) clearly and "simply"
is intended by its terms to provide a guarantee of no more than a three-year
application pendency, according to the Court's opinion, and this goal is
accomplished by "(i) starting a three year clock on the date the
application is filed, (ii) tolling the running of this clock if, within the
three year period, any of three events occur, including an RCE filing, and
(iii) adding a day for day PTA to the patent term for any delay in the issuance
of a patent after the three year clock, less any tolling, runs out."

In
the Court's view, the provisions of the statute involving RCEs have to do
solely with tolling the clock with regard to the three-year date.  The opinion
states that the portion of the statute concerning RCEs "clearly and
unambiguously modifies and pertains to the three year period and does not apply
to, or refer to, the day to day PTA remedy."  The Court characterizes as "[e]specially
notable" that the statute "does not address the filing of an RCE after
the expiration of the three year clock" (emphasis in original).  The statute "makes [it] clear that once
the three year clock has run, PTA is to be awarded on a day for day basis
regardless of subsequent events" in the Court's view.  The Court also notes that the filing of an
RCE is not contained in the section setting forth the day to day reduction in
PTA occasioned by applicant delay in prosecution, and concludes that the
statute does not consider the filing of an RCE to be an action that warrants
reduction in PTA under the statute.  The Court concludes that "RCE's gave no impact on the PTA after the three year
deadline has passed."

The Court rejected PTO arguments in favor of the Office's interpretation.  Specifically, the opinion swiftly dismissed
the argument that the statute must be interpreted as if it included the word "then"
in such a way that would support its interpretation by simply noting that the
word "then" did not appear in the statute and on the grounds that the
Office's interpretation would effectively treat the filing of an RCE as a failure
to "engage in reasonable efforts to conclude prosecution of the
application," i.e., the grounds for applicant delay where the Court had
expressly found RCE filings were not included.  If this is the interpretation the Office wants to apply to RCEs, the Court tartly recommends that the Office should be sure to "issue any
notice of rejection prior to the expiration of the three year period" as
well as require prompt filing of an RCE.  The Court also rejects the Office's position that it should be accorded
deference, saying that "deference is unwarranted when [] the statute is
unambiguous."  In this regard the Court notes that the Federal Circuit had rejected this level of deference in
the last case decided on PTA issues, Wyeth
v. Kappos.  Finally, the Court noted
that any disparate treatment that might result one application to the next
(depending on whether an RCE was filed before or after the 3-year anniversary
date) was something within the Office's power to control or minimize.

It
is likely that the government will appeal to the Federal Circuit, and thus that
the finality of this interpretation of the statute will remain delayed until
that review of complete.  This means that
there is time for prudent patent practitioners to review the PTA status of their
clients' patents to determine where there are instances where the PTA was "improperly"
calculated under the interpretation set forth in this opinion.  But time may be of the essence for some because
the statute also imposes a 180-day statute of limitations on filing challenges
to Office PTA determinations (see "USPTO Posts Notice Regarding Wyeth Decision"), and while an
intervening change in the law may permit challenges outside that period it
makes better sense to identify important patents and file a lawsuit based on
this interpretation of the B delay statutory provisions to best protect both
clients and practitioners.

Exelixis, Inc. v. Kappos (E.D. Va. 2012)
Memorandum Opinion by Judge T.S. Ellis, III