Novartis AG v. Kappos (D.D.C. 2012)

by McDonnell Boehnen Hulbert & Berghoff LLP

[author: Donald Zuhn]

District Court for the District of Columbia SealIn an opinion issued earlier this month, Judge Ellen Segal Huvelle of the U.S. District Court for the District of Columbia determined that Novartis AG and Novartis Vaccines and Diagnostics, Inc. had not satisfied the 180-day limitation of 35 U.S.C. § 154(b)(4)(A) for timely challenging patent term adjustment (PTA) determinations of the U.S. Patent and Trademark Office with respect to nineteen of twenty-three patents at issue, and further, that the 180-day limitation should not be equitably tolled.  For three of the four patents for which Novartis had timely challenged the Office's PTA determinations, the District Court adopted the rationale in Exelixis, Inc. v. Kappos, and for the lone remaining patent, the Court determined that the Office erred in not applying the Federal Circuit's decision in Wyeth v. Kappos.

NovartisIn July 2010, Novartis brought suit against U.S. Patent and Trademark Office Director David Kappos under 35 U.S.C. § 154 and the Administrative Procedure Act (APA), alleging that the Patent Office improperly determined the amount of patent term adjustment to which eleven of Novartis' patents were entitled (see "Novartis Challenges USPTO's Interim Procedure for Requesting PTA Recalculations").  In its complaint, Novartis argued that the Patent Office improperly refused to apply the Federal Circuit's decision in Wyeth v. Kappos to patents granted prior to September 2, 2009 (which the opinion refers to as the Wyeth claim).  Novartis also challenged the Patent Office's interpretation of the effect of filing a Request for Continued Examination (RCE) on the determination of B Delay (which the opinion refers to as the RCE claim).  The District Court subsequently consolidated the instant case with three other Novartis cases that raise similar issues, bringing the number of Novartis patents at issue in the consolidated action to twenty-three.

With respect to Novartis' Wyeth claim, the opinion notes that the Patent Office's method of determining the extent of any overlap between A Delay (PTA accrued as a result of the Office's failure to take certain specified actions within fixed windows of time) and B Delay (PTA accrued as a result of the Office's failure to issue a patent within three years of the filing of the application) changed in response to the Federal Circuit's decision in Wyeth v. Kappos.  In particular, the Federal Circuit determined that A Delay and B Delay should be aggregated so long as that aggregation did not require counting the same calendar day twice.  Following the Federal Circuit's decision in Wyeth, the Office announced that it would implement the Court's interpretation of A/B Delay overlap for patents issued on or after March 2, 2010, and that it would permit recalculation of PTA for patents issued within 180 days of the Office's announcement.

With respect to Novartis' RCE claim, the opinion notes that the Office has promulgated two rules (37 C.F.R. §§ 1.702(b) and 1.703(b)) interpreting the proper calculation of B Delay under § 154(b)(1)(B).  The effect of these rules is that patentees cannot accrue B Delay for time consumed by an RCE, regardless of when the RCE was filed, and that the "time consumed by" an RCE includes all of the time from the filing of the RCE to the issuance of the patent.

In assessing the Office's determination of PTA for each of the twenty-three Novartis patents at issue, the opinion begins by noting that challenges of the Office's PTA determinations are governed by 35 U.S.C. § 154(b)(4)(A), which provides that:

An applicant dissatisfied with a determination made by the Director under paragraph (3) shall have remedy by a civil action against the Director filed in the United States District Court for the District of Columbia within 180 days after the grant of the patent.

(In a footnote, the opinion indicates that for complaints filed on or after September 16, 2011, the U.S. District Court for the Eastern District of Virginia now has jurisdiction over actions under 35 U.S.C. § 154(b), a change brought about by passage of the Leahy-Smith America Invents Act.)  For three of the twenty-three Novartis patents at issue (U.S. Patent Nos. 7,807,155; 7,968,518; and 7,973,031), the Office acknowledged that Novartis' complaints were timely filed.  However, the Office argued that for the remaining patents, Novartis' complaints were filed more than 180 days after those patents were issued, and therefore, that Novartis was foreclosed from seeking additional PTA for those patents.  Novartis countered that the 180-day limitation of § 154(b)(4)(A) did not apply to its claims because § 154(b)(4)(A) applies to determinations "under paragraph (3), and therefore only applies to determinations of A Delay.  According to Novartis, determinations of B Delay and A/B overlap can be challenged within the general six-year statute of limitations set forth in the APA (28 U.S.C. § 2401(a)).

In siding with the Patent Office with respect to the 180-day limitation of § 154(b)(4)(A), the District Court states that:

In addition to being consistent with the plain meaning of the statute, [the Patent Office's] interpretation avoids absurd results.  Congress clearly intended to include strict controls on judicial review of PTA determinations.  Under Novartis' interpretation, only Pre-Issuance Determinations [i.e., determinations of A Delay] would be subject to those controls, while the final, complete PTA determinations that accompany an issued patent would not.  Instead, a patentee would have 180 days in which to challenge the calculation of A Delay but six years in which to challenge B Delay and A/B Delay Overlap.

However, while agreeing with the Office on this issue, the District Court disagreed with the Office that Novartis was foreclosed on all of the remaining patents at issue.  In particular, the Court noted that Novartis had filed a petition for PTA reconsideration for U.S. Patent No. 7,470,792 within two months of issuance, as required under 37 C.F.R. § 1.705(d), and had filed a complaint within 180 days of the Office's denial of reconsideration (but more than 180 days after the patent issued).  In response to Novartis' argument that the 180-day limitation period should have been tolled by its filing of a petition for reconsideration, the District Court determined that "[b]ecause the Court holds that the general tolling rule applies, and because Novartis filed its complaint with respect to the ’792 patent within 180 days after the denial of its petition for reconsideration, Novartis' claim with respect to that patent was timely filed."

Novartis next sought equitable tolling of the 180-day limitation of § 154(b)(4)(A) for the remaining nineteen patents at issue.  With respect to its Wyeth claim. Novartis argued that it lacked knowledge of this claim until the Federal Circuit's decision in Wyeth v. Kappos changed the law with respect to A/B Delay overlap, and therefore, that the 180-day limitation should have been equitably tolled until the Office's January 20, 2010 announcement that it would not seek further appellate review of the Federal Circuit's Wyeth decision.  With respect to its RCE claim, Novartis argued that because no court had ruled on the viability of this claim (prior to Exelixis, Inc. v. Kappos), the statute of limitations had not yet begun to run for that claim.

The District Court, however, found Novartis' arguments to be unpersuasive and determined that "the facts in this case do not justify the application of the equitable tolling doctrine to Novartis' nineteen untimely complaints."  Explaining that "[e]quitable tolling is available to a petitioner who has been diligent in pursuing his rights, but for whom some extraordinary circumstance stood in the way and prevented timely filing," the Court noted that "Novartis was free to raise the same issues that Wyeth and Abbott Laboratories raised in their lawsuits within the 180 days after their patents were granted," and stated that "contrary to Novartis' argument, a change in law is not such an extraordinary circumstance as to justify the application of equitable tolling."

Turning to the four patents for which PTA determinations were found to have been timely challenged, the opinion notes that three of the patents concern the same issue decided by the Eastern District of Virginia in Exelixis, Inc. v. Kappos, namely "whether § 154(b)(1)(B) requires that, or even addresses whether, any PTA be reduced by time attributable to an RCE where, as here, the RCE is filed after the expiration of the three year guarantee period specified in that statute."  After discussing the decision in Exelixis, the Court noted that it found "Judge Ellis' well-reasoned opinion to be persuasive," and "therefore adopt[ed] his rationale for concluding that the PTO's interpretation [of the statute] is contrary to the plain and unambiguous language of § 154(b)(1)(B), and that it contravenes the structure and purpose of the statute."

For the lone remaining patent -- the '792 patent -- the District Court determined that the Office "erred in not applying either this Court's or the Federal Circuit's Wyeth decision."  The Court noted that the '792 patent issued on December 30, 2008, two months after the District Court decision in Wyeth, that Novartis sought reconsideration of its PTA determination in February 2009, based in part on the District Court's Wyeth ruling, and that the Office nevertheless declined to apply the Wyeth method of calculating overlap to the '792 patent.  The Court stated that "[t]his was erroneous," and that the Office "abused its discretion by refusing to calculate Novartis' patent consistently with the method adopted in Wyeth"

Novartis AG v. Kappos (D.D.C. 2012)
Memorandum Opinion by Judge Ellen Segal Huvelle


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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