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Federal Circuit Finds USPTO’s PTA Reduction Rule Contrary to the PTA Statute

Andrew B. Freistein

February 25, 2019

I. Summary

By statute, the USPTO has authority to make a patent term adjustment (“PTA”) to account for delays caused by the USPTO during prosecution. See 35 U.S.C. §§ 154(b)(1)(A)-(C). However, the PTA is reduced when applicant “failed to engage in reasonable efforts to conclude prosecution of the application.” § 154(b)(2)(C). The PTA statute directs the USPTO to establish rules regulating the circumstances that constitute applicant’s failure to engage in such reasonable efforts. These rules are outlined at 37 C.F.R. § 1.704. In Supernus Pharmaceuticals, Inc. v. Iancu (Fed. Cir. Jan. 23, 2019), the court found that rule 1.704(c)(8) exceeds the statutory limitations for reducing applicant’s PTA.


II. Background

Supernus Pharmaceuticals, Inc. (“Supernus”) owns U.S. Patent No. 8,747,897 (“the ’897 patent”), which issued from U.S. Application No. 11/412,100 (“the ’100 application"), and also owns a corresponding European Patent (“the EP patent”). On February 22, 2011, during prosecution of the ’100 application, Supernus filed a request for continued examination (“RCE”) to obtain entry of a response filed after final rejection. On August 21, 2012, the European Patent Office ("EPO") notified Supernus’ European counsel that a Notice of Opposition was filed by Sandoz (“the Sandoz Opposition”) against the corresponding EP patent. On September 11, 2012, Supernus received a letter from its European counsel disclosing the Sandoz Opposition. Then, on November 29, 2012 (100 days from the date of the EPO notice of the Sandoz Opposition), Supernus filed an information disclosure statement (“IDS”) in the USPTO citing the Sandoz Opposition. Ultimately, the ’100 application issued as the ’897 patent on June 10, 2014, and the USPTO included 1,260 days of PTA on the patent.

37 C.F.R. § 1.704(c)(8) reduces PTA for the “[s]ubmission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner, after a reply has been filed”. The PTA is “reduced by the number of days, if any, beginning on the day after the date the initial reply was filed and ending on the date that the supplemental reply or other such paper was filed.” See 37 C.F.R. § 1.704(c)(8).

In calculating the PTA, the USPTO deducted 886 days for applicant delay, including 646 days under § 1.704(c)(8) for the period between February 22, 2011 (the date the RCE was filed) to November 29, 2012 (the date the IDS disclosing the Sandoz Opposition was filed).

The following figure from the Supernus decision shows the relevant parts of the USPTO’s PTA calculation.

Supernus requested reconsideration of the PTA calculation, arguing that § 1.704(c)(8) does not apply to post-RCE submissions. The USPTO denied the request for reconsideration, citing Gilead Sciences, Inc. v. Lee, 778 F.3d 1341 (Fed. Cir. 2015), which held that filing a supplemental IDS after responding to a restriction requirement is subject to a reduction under § 1.704(c)(8) because filing any information after an initial reply is filed interferes with the USPTO’s ability to process an application.

Supernus then filed a civil action in the U.S. District Court for the Eastern District of Virginia, arguing that § 1.704(c)(8) is arbitrary and capricious and contrary to the PTA statute. Supernus further asserted that out of the 646-day period of applicant delay, they are entitled to 546 days (i.e., the period between the RCE filing and the EPO notification of the Sandoz Opposition).

The district court granted summary judgment in favor of the USPTO relying on the Federal Circuit’s Gilead decision. Supernus then appealed to the Federal Circuit.

III. Issue

Whether the PTA reduction exceeded the period during which applicant “failed to engage in reasonable efforts to conclude prosecution.”

IV. The Federal Circuit’s Reversal

A. Distinguishing Gilead

The Federal Circuit reviewed the USPTO’s statutory interpretation by applying the two-step framework established in Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). Under the first step, the court asks “whether the statute’s plain terms directly address the precise question at issue.”

First, the Federal Circuit explained why Gilead involved “different facts and a different legal question.” In Gilead, a supplemental IDS disclosed two copending applications, but Gilead could have filed the IDS when responding to the restriction requirement. Gilead involved a period of time during which the applicant could have taken identifiable efforts to conclude prosecution, but did not. As a result, the “precise question” reviewed by the Gilead court was “whether a failure to engage in reasonable efforts requires conduct that actually causes delay.”

On the other hand, the court found that the Supernus case was not about whether efforts taken by Supernus, or those it could have taken, resulted in actual or potential delay. The parties agreed that Supernus could not have undertaken any efforts to conclude prosecution of the ’100 application during the 546-day period between the filing of the RCE and the EPO’s notice of the Sandoz Opposition. Accordingly, the “precise question” in the present case was “whether the USPTO may reduce PTA by a period that exceeds the ‘time during which the applicant failed to engage in reasonable efforts to conclude prosecution.’”

Accordingly, the Federal Circuit found that Gilead was not controlling.

B. Chevron

Next, the court answered the precise question in the present case by reviewing the plain language of the relevant section of the PTA statute, 35 U.S.C. § 154(b)(2)(C)(i), which states (with emphasis added):

(C) Reduction of period of adjustment.—
(i) The period of adjustment of the term of a patent under paragraph (1) shall be reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.

The court found that a plain reading of the statute shows that Congress imposed two limitations: (1) any PTA reduction must be “equal to” the period of time during which applicant failed to engage in reasonable efforts, and (2) the reduction of PTA must be tied to the specific time period “during which” applicant failed to engage in the reasonable efforts.

The court found PTA cannot be reduced by a period of time during which there is “no identifiable effort” in which the applicant could have engaged to conclude prosecution. This period of time would not be “equal to” the time during which an applicant failed to engage in reasonable efforts, but would actually exceed that time period. Accordingly, the court agreed with Supernus that there were no identifiable efforts that could have been taken in the 546-day period beginning on the date the RCE was filed (February 22, 2011) and ending on the date of the EPO notification (August 21, 2012), because the EPO notice did not yet exist during that time.

The court determined that the PTA statute addresses the precise question at issue, and the inquiry ends at the first step of the Chevron analysis. The district court’s finding of summary judgment was reversed and remanded for further proceedings.

V. Wenderoth’s Recommendations

In view of this precedential opinion, patent owners should review the PTA calculations of their patents, and consider whether any days of applicant delay were not, in fact, the result of applicant’s “failure to engage in reasonable efforts” to conclude prosecution.

A request for reconsideration of the PTA must be filed in the USPTO within 2 months of the issue date of the patent (the due date is extendable for up to 5 months with payment of an extension fee). Thus, applicants should at least consider patents issued within the last 7 months.

In addition, while this decision did not specifically address the safe harbor provision of 37 C.F.R. § 1.704(d), applicants are reminded of the importance of filing an IDS within 30 days of issuance of a U.S. or foreign Office Action in counterpart applications.

A full version of the Supernus decision is available here: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-1357.Opinion.1-23-2019.pdf