The Federal Circuit recently handed down a significant decision related to patent term adjustment in Supernus Pharmaceuticals, Inc. v. Iancu, Case No. 2017-1357 (Fed. Cir. January 23, 2019), stating that a patent applicant should not be penalized for delays by the applicant that were impossible to avoid. This article explores that decision and its implications.

Background

In 1995, as part of joining the World Trade Organization, Congress made patents expire twenty years from the filing date of the application or the earliest United States non-provisional application from which priority was claimed.¹ Four years later, Congress attempted to discourage delay in the patent application process by passing a complex statute for “patent term adjustment” ("PTA"). The United States Patent and Trademark Office ("PTO") was given the authority to add to the term of a patent to account for delays in prosecution caused by the PTO.² The PTO was also given the authority to reduce the PTA to account for delays caused by the applicant, described as time during which “the applicant failed to engage in reasonable efforts to conclude prosecution of the application.”³ In addition, the statute authorized the PTO to define by regulation what “a failure to engage in reasonable efforts” means.⁴

Those regulations are found in 37 C.F.R. §1.704, entitled “Reduction of period of adjustment of patent term.” One of the provisions of those regulations is that “Submission of a supplemental reply or other paper … after a reply has been filed” will reduce the amount of PTA by “the number of days, if any, beginning on the day after the date the initial reply was filed and ending on the date that the supplemental reply or other such paper was filed.”⁵ Because the PTO was expressly given the authority to make regulations that define “failure to engage in reasonable efforts,” courts generally will defer to the PTO when considering that question.

The Case: Supernus Pharmaceuticals v. Iancu

Recently, however, the Federal Circuit found an exception to the PTO’s regulatory authority, overturning a PTA reduction in Supernus Pharmaceuticals, Inc. v. Iancu. PTO regulations allow an applicant to file an Information Disclosure Statement ("IDS") to meet the applicant’s duty of candor and good faith during prosecution. However, an IDS filed at certain times can cause the PTO to reduce the amount of PTA. The relevant time in Supernus is the period after the filing of a request for continued examination ("RCE") and before the issuance of the first office action after the RCE.⁶

Supernus filed an RCE in U.S. Patent Application No. 11/412,100, and after further prosecution, the claims were allowed, resulting in issuance of U.S. Patent No. 8,747,897 (the ’897 patent). But between the RCE filing and next office action, Supernus learned of an opposition filed against a corresponding European patent application and submitted an IDS informing the PTO of the opposition and related documents. When the PTO issued the ’897 patent, the PTO calculated a PTA amount based on PTO-caused delay, but then reduced the PTA amount by 646 days, corresponding to the time between the RCE filing and the IDS filing. Supernus disagreed.

Supernus requested reconsideration of the PTA calculation by the PTO. The PTO refused to change the amount of PTA reduction based on 37 C.F.R. § 1.704(c)(8), concluding that any submission of an IDS document after the filing of an RCE was not a reasonable effort to conclude prosecution, because the IDS filing could cause an examiner to have to repeat examination of the application. Supernus appealed to the U.S. District Court for the Eastern District of Virginia, calling the regulation arbitrary, capricious, and contrary to the PTA statute, and arguing that Supernus should be entitled to at least the 546-day time between its RCE filing and the date the European Patent Office (EPO) notified Supernus of the opposition.⁷ Supernus lost on summary judgment, with the District Court determining that Federal Circuit precedent prohibited Supernus’s statutory interpretation and arguments. So Supernus appealed to the Federal Circuit.

Impossibility Trumps the Regulation, According to the Federal Circuit

Upon taking the case, the Federal Circuit reviewed the PTO’s PTA decision in accordance with the Administrative Procedures Act (APA), which states that courts should set aside an agency’s actions if found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” One problem for Supernus was that the Federal Circuit had already reviewed the § 1.704(c)(8) regulation in Gilead Scis., Inc. v. Lee, 778 F.3d 1341 (Fed. Cir. 2015). The Federal Circuit found the regulation, which reduces PTA because of the potential for delay in prosecution “irrespective of whether such delay actually occurred,” a reasonable interpretation of the [PTA] statute.”

The facts in Supernus were not in dispute, but the significance of those facts on PTA was. The parties agreed that Supernus could not have filed the IDS before receiving the notice of the opposition from the EPO. The Federal Circuit found that Gilead did not foreclose Supernus’s statutory interpretation argument, because Gilead “simply did not address” the current issue. Unlike Gilead, the issue was not whether a mere potential delay in prosecution was sufficient to allow reduction in PTA, or whether an actual delay was required. Instead, the issue was whether Supernus’s delay in filing the IDS was a “failure to engage in reasonable efforts to conclude prosecution.”

The Federal Circuit found that “PTA cannot be reduced by a period of time during which there is no identifiable effort in which the applicant could have engaged to conclude prosecution.” The Federal Circuit reasoned that such a PTA reduction would not be “equal to the period of time during which an applicant fails to engage in reasonable efforts,” emphasizing the “equal to” phrase. Because filing the IDS was impossible before the EPO notified Supernus of the opposition, the Federal Circuit decided that reducing PTA for the time before notification would render the PTA statute’s “reasonable efforts” language superfluous. The PTO’s interpretation of the statute would “unfairly penalize applicants, fail to incentivize applicants not to delay, and fail to protect applicants’ full patent terms,” and would therefore exceed the PTO’s statutory authority. Therefore, the Federal Circuit refused to defer to the PTO’s interpretation of the regulation and the phrase “reasonable efforts” in those circumstances, reversed the District Court’s summary judgment order, and remanded the case back to the District Court.

The Broader Picture

Supernus holds that time during which an applicant could not have taken an action may not be counted against PTA. While that time in Supernus was related to 37 C.F.R. § 1.704(c)(8), the court’s ruling was not limited to that regulation. For example, 37 C.F.R. § 1.704(c)(9) allows a PTA reduction for the time between an original office action and the mailing date of a supplemental office action or notice of allowance when the applicant submits a paper after a decision by the Patent Trial and Appeal Board less than one month before the mailing of the original office action or notice of allowance. A PTA reduction because of an IDS filed during that time that was impossible to file earlier, like the one filed by Supernus, should also be considered improper. Nor is the ruling in Supernus limited to the filing of an IDS. Any late filing that could not have been filed earlier should no longer be considered a failure to engage in reasonable efforts to conclude prosecution, based on Supernus. The extent of this “impossibility” exception is yet unknown, but the clear advice to practitioners is to give careful consideration of mitigating circumstances in view of Supernus. Practitioners may also want to review prior PTA decisions, to make sure their clients were not penalized for delays that under Supernus are now reasonable.