Federal Circuit Clarifies Patent Term Adjustment Provisions

by Pepper Hamilton LLP
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On January 15, 2014, the Federal Circuit issued in Novartis v. Lee its anticipated opinion regarding the proper interpretation of 35 U.S.C. § 154, the statute that determines how patent term adjustment (PTA) is calculated. The decision focused on 35 U.S.C. § 154(b)(1)(B), that provides “no more than three-year application pendency.” If the U.S. Patent and Trademark Office (USPTO) takes longer than three years to issue a patent, the period of time after three years is added to the patent term. This is often referred to as “B-Delay.” There are exceptions to the B-Delay rules, and at issue in this case was the effect of filing a Request for Continued Examination (RCE) on the PTA calculation. The USPTO’s interpretation of the law and its formula for calculating PTA had been challenged, with district courts issuing conflicting opinions regarding the proper interpretation. Novartis argued that filing an RCE should have no effect on B-Delay if the RCE was filed more than three years after the patent application was filed. In contrast, the USPTO argued that the statute excluded time consumed by “continued examination” from counting towards B-Delay. The Federal Circuit adopted the USPTO interpretation of the law. The Federal Circuit stated:

The better reading of the language is that the patent term adjustment time should be calculated by determining the length of the time between application and patent issuance, then subtracting any continued examination time (and other time identified in (i), (ii), and (iii) of (b)(1)(B)) and determining the extent to which the result exceeds three years. Such a reading ensures that applicants recover for any “delay[s] due to the failure of the [PTO],” without allowing the applicant to recover for “any time consumed by continued examination,” as the statute requires. Id. § 154(b)(1)(B)(i).

Accordingly, any time consumed by continued examination will not be counted as B-Delay.

The Federal Circuit, however, also ruled that “continued examination” concludes once a notice of allowance is issued. This ruling by the Federal Circuit was contrary to the USPTO’s current interpretation of the law. The court explained:

[T]he PTO contends that any time up until the patent issues, even after allowance, should be excluded from the adjustment awarded to the patentee. We reject the PTO’s view that the time after allowance, until issuance, is “time consumed by continued examination” and so is excluded from adjustments given to the patentee. Such time from allowance to issuance undisputedly would count toward the PTO’s three-year allotment in a case not involving a continued examination. There is no basis for distinguishing a continued examination case.”

“The common-sense understanding of “time consumed by continued examination,” 35 U.S.C. § 154(b)(1)(B)(i), is time up to allowance, but not later …”

Accordingly, once a notice of allowance is issued after a RCE is filed, the B-Delay can accrue again.

It is not known if and when the USPTO will modify its formula for calculating PTA in view of the Novartis decision. In order for patentees to take advantage of this ruling, a proper review of a patent’s PTA should be undertaken because any petition requesting additional PTA must be filed within strict deadlines. Once the deadline for filing the petition passes, an error in PTA cannot be corrected. The attorneys at Pepper Hamilton can help review your portfolio to see if additional PTA is available to extend the term of your patents.

The complete decision can be found at http://www.cafc.uscourts.gov/images/stories/opinions-orders/13-1160.Opinion.1-13-2014.1.PDF.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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