February 2014
Federal Circuit Modifies the Method for Calculating B-delay in Patent Term Adjustment
| Judges: Newman, Dyk, Taranto (author) |
| [Appealed from D.D.C., Judge Huvelle] |
In Novartis AG v. Lee, Nos. 13-1160, -1179 (Fed. Cir. Jan. 15, 2014), the Federal Circuit held that the PTO was partly correct but partly incorrect in its interpretation of 35 U.S.C. § 154(b)(1)(B) for how to calculate patent term adjustment (“PTA”). The Court also affirmed the district court’s ruling that Novartis AG’s (“Novartis”) request for redetermination of PTA under 35 U.S.C. § 154(b)(3) and (b)(4) was untimely with respect to some patents. For the patents in which the request for redetermination was timely filed, the Court partly reversed the judgment regarding PTA and remanded for redetermination in accord with its ruling.
Novartis filed lawsuits claiming that the PTO erred in determining the PTA for twenty-three patents. The claims for nineteen of those patents were filed more than 180 days after the PTO denied reconsideration of the PTA determination. Of the four patents whose claims were filed within 180 days of the PTO decision denying relief, Novartis challenged the PTO’s interpretation of § 154(b)(1)(B), which guarantees no more than three-year application pendency, referred to as “B-delay,” for three patents, and sought a redetermination of PTA under Wyeth v. Kappos, 591 F.3d 1364 (Fed. Cir. 2010), for one patent. After considering cross-motions for SJ, the district court ruled that, under § 154(b)(4), the claims filed more than 180 days after the PTO decision were untimely, and Novartis appealed this ruling with respect to fifteen patents. Of the four timely claims, the district court ruled that the PTO’s interpretation of § 154(b)(1)(B) for three of those claims was contrary to law and found in favor of Novartis’s interpretation of how to calculate B-delay. The PTO Director cross-appealed this ruling. Neither party appealed the district court’s ruling that one of the patents should have its PTA recalculated in accord with Wyeth.
Turning to Novartis’s contention that the 180-day period prescribed by § 154(b)(4)(A) for challenging a determination applies only to the PTA determination made under § 154(b)(3)(B)(i)—which by its terms only refers to a determination at the time a notice of allowance issues, not to the final PTA determination—the Federal Circuit found this interpretation unreasonable because it focuses on clause (b)(3)(B)(i) and ignores the broad language of several other provisions in paragraph (b)(3). According to the Court, other clauses in paragraph (b)(3) “plainly cover the final adjustment announced at issuance, not just a provisional adjustment announced at allowance.” Slip op. at 10. The Court explained that “[t]he only reasonable construction is that the (b)(3)(B)(i) command regarding transmittal with a notice of allowance is itself implicitly limited to determinations that can be transmitted at that time,” which the Court preferred over Novartis’s proposed construction. Id. at 10-11.
The Federal Circuit also rejected Novartis’s two additional arguments that its challenges 180 days after a PTO decision should be allowed as timely. First, the Court determined that equitable tolling of paragraph (b)(4) was unavailable to Novartis because it did not pursue its rights, but instead waited for another party, Wyeth, to establish the legal standard that it sought to assert. Second, the Court held that Novartis could not challenge the 180-day time bar as an uncompensated taking under the Fifth Amendment. According to the Court, Novartis’s own failure to comply with the filing deadline prevented the award of PTA, and the Fifth Amendment does not compensate an entity that neglected to preserve its rights.
“The better reading of the language is that the patent term adjustment time should be calculated by determining the length of the time between application and patent issuance, then subtracting any continued examination time (and other time identified in (i), (ii), and (iii) of (b)(1)(B)) and determining the extent to which the result exceeds three years.” Slip op. at 14.
The Federal Circuit then ruled on the two aspects of B-delay determination under § 154(b)(1)(B)(i) challenged by the parties for the three timely asserted patents. First, the Court rejected Novartis’s argument that once three years have passed since the application filing date, all time until the issue date must be added as B-delay, even if continued examination is requested after that date. Instead, the Court agreed with the PTO’s position that no PTA is available for any time consumed by continued examination, regardless of whether the request was filed before or after three years from the application filing date. The Court noted “the textual fact that there is no time-of-initiation restriction on the processes identified in the exclusions” of clauses (b)(1)(B)(i), (ii), and (iii), id. at 13, and concluded that the better reading is that PTA should be calculated by determining the length of time between application and issuance, subtracting any continued examination time (and other time identified in (b)(1)(B)(i), (ii), and (iii)), and determining the extent to which the result exceeds three years.
Addressing the second issue, the Court agreed with Novartis “that the ‘time consumed by continued examination’ should be limited to the time before allowance,” and should not include the time between allowance and issuance unless later examination actually occurs. Id. at 15. The Court reasoned that time from allowance to issuance would count toward the PTO’s three-year allotment in a case not involving a continued examination, and there was no basis for distinguishing a continued examination case. The Court concluded that under § 154(b)(1)(B)(i), “[a]n ‘examination’ presumptively ends at allowance, when prosecution is closed and there is no further examination on the merits in the absence of a special reopening [of prosecution].” Id.
Although the PTO identified several circumstances in which an applicant may resume examination after allowance, the Federal Circuit concluded that such circumstances are exceptional and can be accounted for in the adjustment when they occur. The possible existence of such exceptional cases does not demand a general rule excluding time between allowance and issuance from the B-delay determination under § 154(b)(1)(B)(i).
Accordingly, the Court affirmed the district court’s untimeliness finding pertaining to Novartis’s claims directed to fifteen patents, partly reversed the judgment as to PTA for Novartis’s three timely patents, and remanded for redetermination of the proper PTA.
