Late last month, the Federal Circuit handed Exela Pharma Sciences its latest defeat in litigation relating to its ANDA filing on Cadence Pharmaceuticals' injectable acetaminophen-based drug Ofirmev®, in Exela Pharma Sciences LLC v. Lee. This litigation was collateral to Exela's ANDA case against Cadence, and involved an attack on the underlying Orange Book listed patent, on the grounds that the Patent and Trademark Office had exceeded its statutory authority in granting the patent because it was not timely filed.
The patent at issue in this litigation was U.S. Patent No. 6,992,218 (the "'218 patent"), which claimed a method for producing acetaminophen (paracetamol) formulations that inhibit its decomposition to toxic by-products in aqueous solutions using a buffer and a free-radical capture agent:
1. A method for preparing an aqueous solution with an active [principle of phenolic] nature susceptible to oxidation, which is paracetamol, while preserving for a prolonged period, comprising de-oxygenation of the solution by bubbling with at least one inert gas and/or placing under vacuum, until the oxygen content is below 2 ppm, and optionally the aforementioned aqueous solution with an active principle is topped with an inert gas atmosphere heavier than air and placed in a closed container in which the prevailing pressure is 65,000 Pa maximum, and the oxygen content of the aqueous solution is below 2 ppm, and optionally the deoxygenation of the solution is completed by addition of an antioxidant.
Earlier, the Federal Circuit had affirmed a district court's findings against Exela of literal infringement, infringement under the doctrine of equivalents, and failure to show the claims were invalid by clear and convincing evidence, in Cadence Pharmaceuticals Inc. v. Exela Pharmsci Inc. Here, the question was whether the PTO had acted illegally by permitting patentee SCR Pharmatop (Cadence Pharmaceutical's licensor) to "revive" a U.S. national phase application that granted as the '218 patent that had gone abandoned for failure to be filed within 30 months of its earliest filing date. Pursuant to the provisions of 35 U.S.C. § 351 et seq., applications filed under the provisions of the Patent Cooperation Treaty (PCT) are required to enter the U.S. national phase no later than 30 months after the earliest claimed priority date, by payment of a fee and filing a paper indicating the intention to file a U.S. national phase application. It was undisputed that SCR filed its U.S. national phase application one day late, and that it had petitioned the PTO to revive the abandoned application because the delay was "unintentional." It was also undisputed that the statutory language at the relevant time read as follows:
The requirements with respect to the national fee . . ., the translation . . ., and the oath or declaration . . . shall be complied with by the date of the later time as may be fixed by the Director. . . Failure to comply with these requirements shall be regarded as abandonment of the application by the parties thereof, unless it be shown to the satisfaction of the Director that such failure to comply was unavoidable. . . . [emphasis added]
35 U.S.C. § 371(d). The Office in its implementing regulations distinguishes unintentional from unavoidable delay:
Revival of abandoned application, terminated reexamination proceeding, or lapsed patent.
(a) Unavoidable. If the delay in reply by applicant or patent owner was unavoidable, a petition may be filed pursuant to this paragraph to revive an abandoned application, a reexamination proceeding . . . , or a lapsed patent. A grantable petition pursuant to this paragraph must be accompanied by: . . .
(b) Unintentional. If the delay in reply by applicant or patent owner was unintentional, a petition may be filed pursuant to this paragraph to revive an abandoned application, a reexamination proceeding . . . , or a lapsed patent. A grantable petition pursuant to this paragraph must be accompanied by: . . .
37 C.F.R. § 1.137 (2000). Exela's argument on its face was simple: the statute required a showing (to the Director's satisfaction) that abandonment (through failure to comply by the deadline) was unavoidable, not just unintentional. Because SCR did not make such a showing (and the PTO did not require it), reviving the U.S. national phase application that resulted in the '218 patent was contrary to statute and outside the PTO's authority. Thus, Elexa argued, the patent was void ab initio (and they could not be precluded from having their ANDA granted and entering the marketplace based on this patent).
The PTO denied Exela's petition, and the company then sued in district court under the provisions of the Administrative Procedures Act. The District Court at first denied the Office's motion to dismiss under Fed. R. Civ. Pro. 12(b)(1) (lack of standing) and 12(b)(6) (failure to state a cause of action) but later granted the Office's motion based on an intervening decision by the 4th Circuit. This decision, Hire Order, Ltd. v. Marianos, 698 F.3d 136, 170 (4th Cir. 2012), held that "facial" challenges to agency action (i.e., inter alia that they are on their face outside the scope of the agency's statutory authority) must be brought within a six-year statute of limitations period under 28 U.S.C. § 2401(a), which period starts on the adoption date of the regulation. Because the Office had adopted its version of the regulation, 37 C.F.R. § 1.137 in 1982 the Court held that Elexa was barred from bringing its challenge now.
The Federal Circuit affirmed in a per curiam decision by Judges Newman and Dyk; former Chief Judge Rader had been on the panel at oral arguments but has since left the bench. The per curiam opinion focused its discussion of the issues on the availability to a third party of judicial review on a granted patent. Exela stressed the provisions of the APA codified at 5 U.S.C. § 702 for the proposition that any "person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action" should have recourse to the courts for review. In addition to the statute, Exela cited Supreme Court case law to the effect that there is a "strong presumption that Congress intends judicial review of administrative action," citing Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 670 (1986), and later, Block v. Community Nutrition Institute" 467 U.S. 340, 350–51 (1984) ("'where substantial doubt about the congressional intent exists, the general presumption favoring judicial review of administrative action is controlling.'"). Exela's best argument was that the plain language of the statute, combined with the distinctions between unavoidable and unintentional abandonment in the PTO's own regulations, was sufficient evidence that the Office had acted outside its proper scope (ultra vires) and that without judicial review SCR (and Cadence) would be able to enforce the invalid '218 patent.
The Office's argument was less substantive but more procedurally straightforward: simply, "that there is no authority for third parties to collaterally challenge the correctness of PTO revival rulings" and thus Exela's challenge must fail even if the District Court was wrong in holding that its petition was time barred.
The panel agreed, saying that they saw no evidence that Congress intended to permit third parties to challenge agency action like the one Elexa brought in this case. The opinion applied Federal Circuit law, citing Helfgott & Karas, P.C. v. Dickinson, 209 F.3d 1328, 1334 (Fed. Cir. 2000), and distinguished the precedent cited by Elexa, Morganroth v. Quigg, 885 F.2d 843 (Fed. Cir. 1989). In that case the issue was whether a patent applicant could invoke judicial review of agency action regarding revival of an abandoned application (that answer is yes), which was clearly contemplated by the APA, and was thus not controlling with regard to the question before the Court of whether a third party could invoke the APA to seek judicial review on such a question. This conclusion was amply supported, according to the opinion, by "[t]he Patent Act's 'intricate scheme for administrative and judicial review of PTO patentability determinations,' and 'the Patent Act's careful framework for judicial review at the behest of particular persons through particular procedures.'" Pregis Corp. v. Kappos, 700 F.3d 1348, 1357 (Fed. Cir. 2012).
This portion of the opinion was unsurprising. Both remaining judges penned concurring opinions and in these the tale becomes more interesting. Judge Dyk's opinion is, perhaps predictably, the less traditional one and in fact calls into question the Federal Circuit's opinion in Aristocrat Technologies Australia Pty Ltd. v. International Game Technology, 543 F.3d 657 (Fed. Cir. 2008) (curiously, a case not cited or relied upon in the per curiam opinion). In that case, the Federal Circuit ruled that "a defendant in an infringement action could not assert improper revival of an abandoned patent application as a defense in that action." While stating that "[w]e need not decide here whether Aristocrat was correctly decided," and that "the Patent Act is inconsistent with third party APA review" (thus affirming the per curiam opinion regarding the question at hand), Judge Dyk took the time to "write separately to explain why [he thinks the Court's] decision in Aristocrat was problematic."
Most of his reasoning is set forth in counterpoint to the grounds upon which the Aristocrat panel relied, which included that attacking revival of an abandoned patent application is not "literally" among the grounds for finding a patent invalid under 35 U.S.C. § 282. Judge Dyk set forth four "aspects" of the decision that in his view "warrant reconsideration":
• The Aristocrat panel did not consider whether there is a presumption of judicial review of agency action, citing Sackett v. Envtl. Prot. Agency, 132 S. Ct. 1367, 1373 (2012); Bowen, 476 U.S. at 670; Block v. Cmty. Nutrition Inst., 467 U.S. 340, 348–49 (1984); see also 5 U.S.C. § 702 (conferring a general cause of action upon persons "adversely affected or aggrieved by agency action within the meaning of a relevant statute") to support his (not expressly stated) view that there is such a presumption. Judge Dyk apparently considers this presumption to have become stronger in light of the per curiam decision in this case, because without APA or any alternative mechanism the only remaining way for a third party to base a challenge on improper revival would be as an invalidity defense in an infringement action.
• Judge Dyk also does not see this question as being "a minor procedural error in the PTO process." He cites the language of the statute for the suggestion that Congress intended there to be the consequence of abandonment for noncompliance with the statutory timeframe, and that Congress permitted the Office by statute to excuse noncompliance only under the specific circumstance when failure to timely file was unavoidable. 35 U.S.C. § 371(d)
• The Judge also sees unfairness in the current state of the law, where a patent applicant can seek judicial review of an abandonment determination under Morganroth v. Quigg while an accused infringer cannot.
• Finally, Judge Dyk believes that the Aristocrat panel erred in limiting its consideration of "nonstatutory" invalidity defenses have been used with approval by courts, citing obviousness-type double patenting, patent misuse, and the "shop rights" doctrine as "well-established defense[s] not specified in the statute.
After reciting this litany Judge Dyk noted for the record that "[i]n the future, en banc action to reconsider Aristocrat may be appropriate."
Again nor surprisingly, Judge Newman disagreed in her concurrence, expressly addressing the "concerns" raised in his concurring opinion. In her view, Aristocrat was properly decided, inter alia, because:
If any prosecution irregularity or procedural lapse, however minor, became grist for a later assertion of invalidity, accused infringers would inundate the courts with arguments relating to every minor transgression they could comb from the file wrapper. This deluge would only detract from the important legal issues to be resolved -- primarily, infringement and validity.
She also notes that not only is revival not a ground for invalidity but is also cannot be the basis for requests for reexamination, inter partes review or post-grant review, and that irregularities in prosecution (which is how Judge Newman characterizes the question of reviving an abandoned application) "becomes irrelevant after the patent has issued," citing Magnivision, Inc. v. Bonneau Co., 115 F.3d 956, 960 (Fed. Cir. 1997) and Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1324 (Fed. Cir. 2004). Supreme Court precedent is not to the contrary in her view; she cites Block v. Community Nutrition Institute, 467 U.S. 340 (1984) for the proposition that:
Whether and to what extent a particular statute precludes judicial review is determined not only from its express language, but also from the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved.
In a complex scheme of this type, the omission of such a provision is sufficient reason to believe that Congress intended to foreclose [the action].
Also relevant to Judge Newman's assessment is that Congress amended § 371(d) to remove the requirement for unavoidability.
Judge Newman ends her concurrence with uncharacteristic pique:
With all respect, my colleague errs in stating that such major substantive issues [antitrust violation, patent misuse, and shop right], each of which is a traditional defense, "cannot be so easily distinguished" from an excuse for a missed filing date. If judges cannot easily distinguish the significance of antitrust violation from a missed date, we must try harder.
These concurrences point out a developing problem with patent jurisprudence in this era. The Federal Circuit era was one characterized by increased stability in U.S. patent law. In recent times, over seemingly the entire scope of the law that stability has been eroded, primarily by the courts; e.g., see the district court's treatment of the Office's interpretation of 35 U.S.C. § 120 in Immersion Corp. v. HTC Corp. The issues Judge Dyk raises suggest that Patent Office practices of long standing will continue to come under attack; it may seem funny when Justice Kagan calls the Office "patent-happy" in open court, but it is another thing when challenges to how the Office has consistently interpreted the patent statute threatens the validity of thousands of patents. Patentees are entitled to some measure of stare decisis and settled expectations, and the Patent Office is entitled to deference (Chevron or otherwise) in support of patentees' quiet repose.
Exela Pharma Sciences LLC v. Lee (Fed. Cir. 2015)
Panel: Circuit Judges Newman and Dyk (Circuit Judge Rader did not participate in decision)
Opinion per curiam