Federal Circuit Partially Confirms Longer Patent Terms Under Exelixis and Novartis

On January 15, 2014, the U.S. Court of Appeals for the Federal Circuit1 confirmed that patent owners may be entitled to extended patent terms, a finding that is especially important for select pharmaceutical, biotech, and medical device patents where extending patent life can result in significant additional revenue. Specifically, the court partially upheld two district court decisions from the Eastern District of Virginia2 and the District of Columbia,3 ruling in part against the U.S. Patent and Trademark Office (USPTO) regarding patent term adjustment (PTA) length calculations.

The USPTO is legally required to increase a patent's lifetime to compensate for undue delays in "[p]atent term guarantees" that are covered under 35 U.S.C. § 154(b)(1), including: "(A) Guarantee of prompt patent and trademark office responses," "(B) Guarantee of no more than 3-year application pendency," and "(C) Guarantee of adjustments for delays due to derivation proceedings, secrecy orders, and appeals." The potential increase in patent length is calculated by determining whether the USPTO has gone beyond time periods allowed. At issue in both the district courts and Federal Circuit was the determination of whether "B" delays were properly calculated by the USPTO.

In both Exelixis and Novartis, the parties challenged the USPTO's interpretation of guarantee (B), i.e., Congress' goal to limit patent application pendency to three years. § 154(b)(1)(B) provides for a day-for-day extension of patent term for every day beyond three years after a patent application's filing date until the patent issues, except for "time consumed by continued examination of the application requested by the applicant" and other listed exceptions.4 The USPTO historically has taken the position that requesting continued examination (RCE) of a patent application after three years from the patent application's filing date tolls the day-for-day increase in patent lifetime.

The district courts in Exelixis and Novartis found that the USPTO had been incorrectly applying the law where continued examinations were requested after the three-year period had passed. Instead, the district courts ruled that RCEs filed after the three-year period had passed did not toll the day-for-day increase in patent term. On appeal, the USPTO made two arguments: 1) under 35 U.S.C. § 154(b)(1)(B)(i), no adjustment time is available for "any time consumed by continued examination" regardless of when continued examination is initiated; and 2) "time consumed by continued examination" includes the time period between allowance of the application and issuance of the patent.

While conceding that when read "in isolation, [§ 154(b)(1)(B)] might be read, as two district courts have read it," the Federal Circuit ultimately agreed with the USPTO that the proper interpretation, taking the statute as a whole, is "that the patent term adjustment time should be calculated by determining the length of time between application and patent issuance, then subtracting any continued examination time [and any other time excluded in the statute] . . . and determining the extent to which the result exceeds three years."5 Thus, the court agreed with the USPTO and partially rejected the Novartis and Exelixis district court findings that included all continued examination time filed after the three-year time period of § 154(b)(1)(B) in PTA calculations.

However, the Federal Circuit disagreed with the USPTO's interpretation of "time consumed by continued examination" as including the time period between allowance and issuance after a continued examination request is made. The court found that the period between allowance and issuance does not fall within an "examination" period since "'examination' presumptively ends at allowance."6 The court thus "attribute[ed] this time to the PTO," resulting in the inclusion of the time period between allowance and issuance in calculating PTA adjustment even where continued examination had been requested.

The practical effect of the Federal Circuit's ruling means that the extended time periods are likely not as long as calculated following the district court rulings in Novartis and Exelixis. However, the court did affirm extended patent terms where an RCE was filed as including the time period between a notice of allowance and issuance of the patent. Depending upon the timing of payment of the issue fee and actual issuance of the patent, this time period could potentially add upwards of 4 to 6+ months of extended patent term.

Moreover, unlike in Novartis and Exelixis, a day-for-day extension of patent term could apply to patents where an RCE was filed just prior to the three-year post-filing date, if the time period between receipt of a notice of allowance and actual issuance of the patent would bring the calculation of patent prosecution pendency past the three-year mark under 35 U.S.C. § 154(b)(1)(B).

While the findings may yet be appealed by the USPTO, patent owners should consider the following actions:

  1. If a patent application is pending and the applicant is considering filing an RCE, it may be advisable to wait to submit an RCE as close to or after the three-year mark from the application's filing date in order to maximize PTA (assuming no extensions of time are taken).
  2. If a patent application is allowed after the filing of an RCE close to or after the three-year mark from the application's filing date, it may be prudent to wait as long as possible (up to three months) to pay the issue fee—again, in order to maximize PTA.
  3. For patents that were recently issued or that will issue in the near term, patent owners should consider filing a petition requesting reconsideration of the PTA calculated by the USPTO to appropriately extend their patent term. Petitions must be filed with the PTO within 2 months from issuance.

Quick action is required to preserve the right to increased PTA; otherwise, increased PTA could be lost.7

1 Novartis AG v. Lee, No. 2013-1160 and 2013-1179 (Fed. Cir. Jan. 15, 2014) at http://www.cafc.uscourts.gov/images/stories/opinions-orders/13-1160.Opinion.1-13-2014.1.PDF and Exelixis, Inc. v. Lee, 2013-1175 (Fed. Cir. Jan. 15, 2014) at http://www.cafc.uscourts.gov/images/stories/opinions-orders/13-1175.Opinion.1-13-2014.1.PDF.

2 Exelixis, Inc. v. Kappos, 906 F. Supp. 2d 474 (E.D. Va. 2012).

3 Novartis AG v. Kappos, 904 F. Supp. 2d 58 (D.D.C. 2012).

4 See 35 U.S.C. §§ 154(b)(1)(B)(i)-(iii).

5 Novartis at 13.

6 Id. at 15.

7 Note that the Federal Circuit confirmed the finding in Novartis regarding the limited statutory period in which to pursue an appeal of PTA findings under 35 U.S.C. § 154(b)(4). The time period of 180 days after grant under § 154(b)(4) (which is tolled if a request for reconsideration is made by the applicant under § 154(b)(3)) is strictly construed by the courts. See Novartis at 9-11.

Topics:  Novartis, Patent Reform, Patent Term Adjustment, Patent Terms, Patents, USPTO

Published In: Civil Procedure Updates, Intellectual Property Updates, Science, Computers & Technology Updates

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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