Intra-Cellular Therapies, Inc. v. Iancu (Fed. Cir. 2019)

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Last week, in Intra-Cellular Therapies, Inc. v. Iancu, the Federal Circuit affirmed a decision by the U.S. District Court for the Eastern District of Virginia affirming a determination by the U.S. Patent and Trademark Office of Patent Term Adjustment (PTA) for U.S. Patent No. 8,648,077.  In affirming the District Court's grant of summary judgment in favor of the USPTO, the Federal Circuit concluded that the USPTO's determination of applicant delay was based on a permissible interpretation of statute and proper reading of the regulations.

During prosecution of the application that issued as the '077 patent, the USPTO issued a final Office action in which no claims were allowed, and the Examiner repeated the same § 103 rejections from the previous non-final Office action (and also presented new objections).  Intra-Cellular responded on the three-month deadline, continuing to dispute the § 103 rejection using the same arguments that were previously found unpersuasive by the Examiner, and amending the claims to address other objections and rejections (including adding a new claim).  The USPTO then issued an Advisory Action indicating that Intra-Cellular's after-final response failed to overcome the § 103 rejection for "reasons of the record" (despite overcoming certain other rejections and objections).  In the Advisory Action, the Examiner also suggested amending or cancelling certain claims to overcome the outstanding § 103 and § 112 rejections and new formality objection.  Twenty-one days after filing its unsuccessful first response to the final Office action, Intra-Cellular filed a second response in which it overcame all outstanding rejections and objections by adopting the Examiner's suggestions and cancelling or amending every rejected or objected to claim based on the Examiner's positions.  The USPTO issued a Notice of Allowance, and the '077 patent was issued.

In calculating PTA for the '077 patent, the USPTO determined that the extra 21 days it took Intra-Cellular to file a successful response after the three-month deadline for responding to the final Office action constituted applicant delay.  In particular, the USPTO determined that even though Intra-Cellular filed a response to the final Office action on the three-month deadline, that response did not constitute a proper "reply" under § 1.704(b).  Intra-Cellular filed a complaint in the District Court for the Eastern District of Virginia seeking judicial review of the USPTO's PTA determination.  The District Court granted summary judgment in favor of the USPTO, pointing out that "nothing in the plain language of the statute indicates that 'reasonable efforts to conclude prosecution' should be read to include an incomplete submission which fails to place the application in condition for allowance, but in some manner advances it closer to allowance."  Intra-Cellular appealed the District Court's decision to the Federal Circuit.

Judge Chen, writing for the Court, begins by noting that 37 C.F.R. § 1.704(b), which provides that "an applicant shall be deemed to have failed to engage in reasonable efforts to conclude processing or examination of an application for the cumulative total of any periods of time in excess of three months that are taken to reply to any notice or action by the [Patent] Office making any rejection, objection, argument, or other request . . . " (emphasis in opinion), is relevant to the appeal.  Thus, according to § 1.704(b), if an applicant takes longer than three months to file a "reply" to an Office action, applicant delay will accrue.  Judge Chen notes, however, that § 1.704(b) does not define what constitutes a proper "reply" for cutting off applicant delay.  The opinion then looks to the "backdrop of long-existing regulations governing patent prosecution practices," including 37 C.F.R. §§ 1.113(a) and (c), 1.114(b) and (c), and § 116, which establish that a "final" Office action marks the end of normal prosecution as of right, that an examiner is not obligated to engage in further examination and review of a patent application or applicant arguments after a final Office action is issued, and that an applicant has restricted options for responding to a final Office action.

With respect to the dispute before the Court, the opinion indicates that it concerns whether a particular period of 21 days, following the three-month deadline for responding to a final Office action, counts as applicant delay, and whether the District Court erred in upholding the agency's determination that Intra-Cellular's first response did not constitute a proper "reply."  This determination hinged in part on the USPTO's interpretation of statutory text, and in reviewing an agency's statutory interpretation, a court does so by applying the two-step framework established in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

In Step 1 of its Chevron analysis, the Court asks whether a statute's plain terms directly address the precise question at issue.  Here, the opinion refers to 35 U.S.C. § 154(b)(2)(C)(i) and notes that:

The precise question at issue is whether an applicant submission, filed after a final Office action, that continues to argue the merits of the examiner's rejection, without good cause, constitutes a "fail[ure] to engage in reasonable efforts to conclude prosecution" such that applicant delay would accrue under the PTA statute.

Intra-Cellular argued that because its first after-final submission addressed each outstanding objection and rejection to the claims made in the final Office action, this submission constituted a bona fide attempt to advance prosecution, thus constituting "reasonable efforts to conclude prosecution" under a plain reading of the PTA statute.  However, the opinion points out that "Intra-Cellular's reading appears to be in tension with the fact that it no longer had the right to continue debating the merits of the rejection once the final Office action issued in this case."  Nevertheless, the Court concluded that "[w]hen read in the context of the overall statutory scheme, . . . the language of the PTA statute does not answer the question of what type of action by an applicant constitutes 'reasonable efforts to conclude prosecution' for purposes of responding to a final Office action" (emphasis in opinion).

Moving to Step 2 of its Chevron analysis, the Court asks whether the USPTO's answer to the precise question at issue is based on a permissible construction of the statute.  With respect to this question, the Court concluded that "it is permissible to interpret an after-final submission that merely continues to argue the merits of an examiner's final rejection as a 'fai[lure] to engage in reasonable efforts to conclude prosecution' such that such an applicant submission would not stop the accrual of applicant delay under the PTA statute."  The opinion adds that "[w]hile § 1.704(b) does not explicitly define 'reply,' that does not mean that any type of submission by the applicant, no matter how flimsy or superficial, necessarily qualifies as a 'reply' for purposes of stopping accrual of applicant delay."  Moreover, the opinion explains that:

Intra-Cellular's proposed interpretation of "reply" under § 1.704(b) as any bona fide attempt to address all rejections and objections in an Office action is impermissible because it incorrectly applies the standard for a compliant "reply" to a non-final Office action as set forth in § 1.111 to the reply to a final Office action at issue here [emphasis in opinion].

The opinion also points out that "under Intra-Cellular's interpretation, an applicant would be allowed to continue to liberally argue and make amendments without accruing applicant delay as long as it addressed all outstanding issues in the final Office action," which "would give the applicant the benefits of an RCE (which re-opens prosecution) without the concomitant PTA reduction that comes with an RCE."

The opinion concludes by rejecting Intra-Cellular's arguments against the permissibility of the Patent Office's PTA determination, including that the USPTO's PTA determination violates the Court's holdings in Gilead Scis., Inc. v. Lee, 778 F.3d 1341 (Fed. Cir. 2015), and Pfizer, Inc. v. Lee, 811 F.3d 466 (Fed. Cir. 2016); that the USPTO's reading of the generic recitation of "reply" in § 1.704(b) to mean a "reply in compliance with § 1.113(c)" constituted "unfair surprise"; and that the USPTO's interpretation conflicts with the USPTO's promotion of various after-final "pilot" programs that encourage applicants to engage in further prosecution after a final Office action.  The Federal Circuit therefore determined that the USPTO's determination of applicant delay was supported by a permissible reading of the PTA statute, and found that the District Court did not err in granting summary judgment in favor of the USPTO.

Intra-Cellular Therapies, Inc. v. Iancu (Fed. Cir. 2019)
Panel: Circuit Judges Wallach, Chen, and Hughes
Opinion by Circuit Judge Chen

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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