District Court Invalidates USPTO Interpretation of Patent Term Adjustment RCE Carve-Out

by Foley & Lardner LLP

[author: Courtenay C. Brinckerhoff]

In a decision issued November 1, 2012 in Exelixis, Inc. v. Kappos, the U.S. District Court for the Eastern District of Virginia has found that the USPTO’s interpretation and application of the “RCE carve-out” provision of the Patent Term Adjustment (PTA) statute is contrary to law. Although I wrote about some “RCE carve-out” challenges just last week, the decision here reaches an even broader interpretation of the statute.

Under the district court’s interpretation, 35 USC § 154(b)(1)(B)(i) only comes into play if a Request for Continued Examination (RCE) is filed within the three-year period from the application’s filing date. Under this interpretation, a significantly greater number of patents may be entitled to significantly greater PTA awards. It is too early to know whether the USPTO will appeal this decision. In the meantime, patent holders with affected patents may wish to consider pursuing additional PTA in a Request for Reconsideration filed with the USPTO or in a district court proceeding, if the deadline for pursuing such an action has not passed.

Patent Term Adjustment

The PTA statute (35 USC § 154(b)) was created to compensate for delays in the patent examination process that can eat away at the effective term of the patent, now that patent term is measured from the earliest U.S. priority date rather than the patent grant date. The statute provides “guarantees” against different types of USPTO delays, and requires a day-for-day deduction of Applicant delays against USPTO delays.

“A” delay accrues when the PTO fails to act in accordance with set timeframes (such as issuing a first office action within 14 months, issuing a second action or allowance within 4 months of a response, and issuing a patent within 4 months of the Issue Fee payment).

“B” delay accrues when the PTO fails to issue a patent within three years of the actual filing date of the patent application.

“C” delay accrues when the application is involved in an interference or appeal, or is subject to a secrecy order.

The RCE Carve-Out

The filing of an RCE can impact the PTA award for B delay under 35 USC § 154(b)(1)(B)(i), which provides:

(B) GUARANTEE OF NO MORE THAN 3-YEAR APPLICATION PENDENCY.- Subject to the limitations under paragraph (2), if 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 USPTO’s interpretation of the RCE carve-out is set forth in 37 CFR § 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 under 35 U.S.C. 111(a) or the national stage commenced under 35 U.S.C. 371(b) or (f) in an international application 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 ….

Under the USPTO’s interpretation, once an RCE is filed, the patent no longer accrues “B” delay, although it might still accrue “A” delay and/or “C” delay.

The Question Presented

As characterized by the district court, Exelixis raised the following question:

Whether 35 § 154(b)(1)(B) requires that an applicant’s PTA be reduced by the time attributable to an RCE, where, as here, the RCE is filed after the expiration of AIPA’s guaranteed three year period.

The district court found that the statute’s “plain language neither addresses nor requires” that PTA be deducted under those circumstances.

(Exelixis also challenged the RCE carve-out on narrower grounds, as I have written about previously.)

The District Court’s Analysis

The district court reviewed the historical context of the PTA statute–the transition to a patent term measured from the application’s filing date and Congressional intent to compensate applicants for USPTO delays. The court also reviewed the patent prosecution process, and noted that RCEs can be a normal step.

Against this backdrop, the court considered the statutory language. The court presented the relevant language as follows:

Subject to the limitations under paragraph (2), if 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 court reasoned:

Simply put, the goal of this subparagraph, as its title indicates, is a “Guarantee of no more than 3-year application pendency.” It accomplishes this goal 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 the patent after the three year clock, less any tolling, runs out.

As understood by the district court, the “not including” portion of subparagraph (B) … 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.” Rather, the statute’s “second calculation is simply a day for day addition to the PTA for every day beyond the end of the three year clock until the patent issues.”

The district court found that this interpretation is not only “compelled” by the plain language of the statute, but also comports with its “structure and purpose.” In this regard, the court found it significant that the statute does not treat the filing of an RCE as “applicant delay” that warrants a PTA reduction under §154(b)(2)(C). The district court therefore could not support the USPTO’s interpretation, which ”in essence construed subparagraph (B) to punish the applicant for filing the RCE,” rather than treating RCE’s as a “valuable tool in the patent prosecution process.”

The district court noted that under this reading, the statute “does not address the filing of an RCE after the expiration of the three year clock.” Rather, the statute “makes clear that once the three year clock has run, PTA is to be awarded on a day for day basis regardless of subsequent events.” The court explains that, under the PTA statute, “RCE’s are something for which the three year clock should be tolled, but not something that reduces the PTA.”

The USPTO’s Arguments

The district considered and rejected the following USPTO arguments:

First, the PTO argues that a proper reading of subparagraph (B) requires the insertion of the word “then” prior to the phrase “not including” that is followed by (i), (ii), and (iii). According to the PTO, inserting the word “then” at that point allows subparagraph (B) to be read so that time consumed by an RCE is deducted from the day for day remedy for the PTO’s failure to meet the three year guarantee deadline. The short and dispositive answer to this argument is that the word “then” does not appear in the statute and the PTO’s insertion of the word in its reading is not a construction of the provision but rather a re-writing of it.


Next, the PTO argues that its construction of subparagraph (B) deserves Skidmore … deference. …. Again, the short answer here is that Skidmore deference is unwarranted, when, as here, the statute is unambiguous. [The court also noted that the USPTO's interpretation would not have been entitled to Chevron deference because the statute is not ambiguous.]


Finally, the PTO argues that its reading of subparagraph (B) avoids absurd results. Under the PTO’s view, the plain language of subparagraph (B) may lead to disparate treatment of some similarly situated applicants, depending on whether the applicant files the RCE before or after the expiration of the three year period. But such disparities arise only at the margins and the Federal Circuit rejected similar arguments in Wyeth ….

Thus, the court held:

The plain and unambiguous language of subparagraph (B) requires that the time devoted to an RCE tolls the running of the three year clock if the RCE is filed within the three year period. And, put simply, RCE’s have no impact on PTA if filed after the three year deadline has passed

No Sympathy for USPTO Delays

In several places in its opinion, the district court notes that the USPTO itself can solve many of the problems it alleges will arise under the court’s interpretation by examining applications earlier, so that an RCE (if necessary) would be filed before the three-year clock has run. While I disagree with some of the court’s specific suggestions for forcing earlier RCE filings, I welcome the court’s reminder that the filing of an RCE more than three years after the application’s filing date more often than note stems from the USPTO delays that the statute was intended to address.

Addressing the RCE Backlog

Lurking behind this decision is the significant backlog that applications endure after an RCE has been filed. Internal USPTO policies, including the “count” system for quantifying examiner production and the docketing system for prioritizing examiner workloads, disincentivize the examination of RCEs with notable effects. According to the USPTO’s Data Visualization Center, the average delay from an RCE to the next office action is the highest it has ever been (at 5.6 months as of August 2012) and has been climbing steadily for the past two years. (Anecdotally, it is not unusual for RCE to experience delays of one year or longer, depending on the technology center and examiner workload.) Not surprisingly, the backlog of RCEs awaiting continued examination also has been growing steadily, from just over 42,000 in August 2010 to just shy of 100,000 in August 2012 (99,274 as reported by the USPTO).

Although USPTO officials recently have indicated that they are working to address the RCE backlog, these numbers show that the problem is growing with every day of USPTO delay. While Director Kappos is rightfully proud of the reduced number of new applications awaiting examination, until the RCE backlog is addressed, it appears that the USPTO may be shifting applications from one category to another, without completing its mandate to fully examine applications and grant patents that could help promote innovation and stimulate the economy.


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.

© Foley & Lardner LLP | Attorney Advertising

Written by:

Foley & Lardner LLP

Foley & Lardner LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.