United States: District Court Decision In Exelixis Changes Calculation Of "B Delay" Patent Term Adjustment

On November 1, 2012, the U.S. District Court for the Eastern District of Virginia held that the U.S. Patent and Trademark Office (USPTO) has been incorrectly calculating patent term adjustments (PTAs) for patent applications in which a Request for Continuation (RCE) was first filed more than three years after the application's filing date.  In particular, the district court held that the USPTO's interpretation of the patent term adjustment statute in 37 C.F.R. § 1.703(b)(1) contradicts the PTA statute, specifically 35 U.S.C. § 154(b)(1)(B), and such, is "not in accordance with law" and "in excess of [its] statutory . . . authority" under the Administrative Procedures Act.

Prior to 1995, U.S. patent terms were calculated as seventeen years from the date of issuance.  In 1994, Congress passed, and President Clinton signed into law, the Uruguay Round Agreements Act (URAA), which brought U.S. patent law into conformity with international agreements now part of the World Trade Organization (WTO).  As part of the URAA, U.S. patent terms were extended to twenty years but calculated from the application's priority date.  In 1999, Congress again amended U.S. patent law, allowing for RCEs during prosecution and setting forth how PTAs were to be calculated.  The legislative history made clear that the purpose of the PTA statute was to restore to seventeen years the patent term of diligent applicants that they would have had before URAA.  In particular, 35 U.S.C. § 154(b)(1)(B), entitled "Guarantee of no more than 3-year application pendency," states:

[I]f the issue of an original patent is delayed due to the failure of the United States Patent and Trademark Office to issue a patent within 3 years after the actual filing date of the application in the United States, not including –

(i) any time consumed by continued examination of the application requested by the applicant under section 132(b);
. . .
the term of the patent shall be extended 1 day for each day after the end of that 3-year period until the patent is issued.

The USPTO's interpretation of this statutory language was the primary focus of the court in Exelixis, Inc. v. Kappos, No. 1:12-cv-96 (E.D. Va. Nov. 1, 2012).  Specifically, at issue in the case was whether RCEs filed more than three years from the application's U.S. filing date should be considered when assessing PTAs under § 154(b)(1)(B).

Exelixis, Inc. filed a PCT application designating the United States in the USPTO on January 15, 2008, which after entering the national phase eventually issued as U.S. Patent No. 7,989,622 ("the '622 patent").  The USPTO issued a Restriction Requirement on February 22, 2010.  A first substantive nonfinal office action followed, and a final rejection issued March 9, 2011.  In response to the final rejection, the patentee submitted an RCE along with claim amendments and arguments on April 11, 2011.  On April 27, 2011, the USPTO mailed a Notice of Allowance, and the '622 patent issued on August 2, 2011.

In calculating the PTA, the USPTO added eighty-five days of PTA for the USPTO's failure to issue a patent within three years of the application filing date.  The eighty-five-day calculation was consistent with the USPTO's interpretation of 35 U.S.C. § 154(b)(1)(B), set forth in 37 C.F.R. § 1.703(b)(1):

(b) The period of adjustment under § 1.702(b) is the number of days, if any, in the period beginning on the day after the date that is three years after the date on which the application was filed . . . and ending on the date a patent was issued, but not including the sum of the following periods:

(1) The number of days, if any, in the period beginning on the date on which a request for continued examination of the application under 35 U.S.C. 132(b) was filed and ending on the date the patent was issued . . . .

The USPTO subtracted the period of time extending from the filing of the patentee's RCE (April 11, 2011) and the date the patent issued (August 2, 2011)—a total of 114 days—from the period of time extending from the expiration of the three-year statutory period (January 15, 2011) and the date the patent issued—a total of 199 days.

The court, however, rejected the USPTO's regulation, finding instead that any "continued examination" taking place after the three-year statutory period is not properly included in PTA calculations under § 154(b)(1)(B)(i).  In so holding, the court explained, "[T]he 'not including' portion of subparagraph (B), followed by (i), (ii), and (iii), clearly and unambiguously modifies and pertains to the three year period and does not apply to, or refer to, the day for day PTA remedy."  The court concluded, "Put simply, RCE's have no impact on the PTA after the three year deadline has passed and subparagraph (B) clearly provides no basis for any RCE's to reduce PTA; instead, RCE's operate only to toll the three year guarantee deadline, if, and only if, they are filed within three years of the application filing date."  Since the regulation was found to be inconsistent with the plain meaning of the statute, the court ordered the USPTO to award additional PTA to Exelixis's '622 patent.

The USPTO has appealed this decision to the Court of Appeals for the Federal Circuit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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