District Court Upholds USPTO Patent Term Adjustment Deduction for Information Disclosure Statement

15 October 2013 PharmaPatents Blog

In Gilead Sciences, Inc. v. Rea, the U.S. District Court for the Eastern District of Virginia upheld the USPTO Patent Term Adjustment (PTA) rule that provides for a PTA deduction when an applicant files a “supplemental reply or other paper” after a reply has been filed. In the case at issue, the applicant had filed an Information Disclosure Statement (IDS) after filing a response to a Restriction Requirement. The court upheld the USPTO’s PTA calculation that charged the applicant 57 days of delay for that submission.

Patent Term Adjustment

The PTA statute (35 USC § 154(b)) was created to compensate for delays in the patent examination process that can eat away at the effective term of the patent, now that patent term is measured from the earliest U.S. priority date rather than the patent grant date. The statute provides “guarantees” against different types of USPTO delays, and requires a day-for-day deduction of Applicant delays against USPTO delays.

“A” delay accrues when the PTO fails to act in accordance with set time frames (such as issuing a first Office Action within 14 months, issuing a second action or allowance within 4 months of a response, and issuing a patent within 4 months of the Issue Fee payment).

“B” delay accrues when the PTO fails to issue a patent within three years of the actual filing date of the patent application.

“C” delay accrues when the application is involved in an interference or appeal, or is subject to a secrecy order.

The PTA statute also provides for a deduction from PTA “equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application” (35 USC § 154(b)(2)(C)) and expressly delegates to the USPTO the authority to “prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application.”

In this case, Gilead challenged one such regulation–37 CFR § 1.704(c)(8)–as arbitrary, capricious and contrary to law.

The Prosecution History

The relevant events in the prosecution history of the application at issue are outlined below:

February 22, 2008 — application filed

November 18, 2009 — restriction requirement issued

February 18, 2010 — response to restriction requirement filed with IDS

April 16, 2010 — additional IDS filed (57 days after the February 18, 2010 submission)

May 13, 2010 — substantive office action issued

The USPTO awarded 651 days of PTA for its “A” delay and “B” delay, but deducted 57 days of “applicant delay” for the IDS filed April 16, 2010.

The PTA Challenge

Gilead challenged the interpretation of 35 USC § 154(b)(2)(C) set forth in 37 CFR § 1.704(c)(8):

Circumstances that constitute a failure of the applicant to engage in reasonable efforts to conclude processing or examination of an application also include the following circumstances, which will result in the following reduction of the period of adjustment set forth in § 1.703 to the extent that the periods are not overlapping:

*****

(8) Submission 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, in which case the period of adjustment set forth in § 1.703 shall be 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;

In particular, Gilead argued that the rule was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law and in excess of statutory jurisdiction, authority, or limitation,” because it provides for a PTA deduction even if the reply does not actually cause any delay in the examination process.

The District Court Decision

The district court decision was rendered by Judge Liam O’Grady, who conducted a two-step analysis under Chevron:

  1. Determining whether Congress has spoken to the precise question at issue.
  2. If not, determining whether the USPTO’s interpretation and application of the statute are permissible.

The court found that Congress had not spoken to the precise issue at hand, and that the USPTO’s interpretation was permissible.

While Gilead argued that the USPTO rule impermissibly penalizes actions that do not cause delay, the court found that the statute focuses “on whether the applicant’s efforts were reasonable, not whether the outcome of those efforts caused actual delay.” The court found that the USPTO had demonstrated that the conduct encompassed by § 1.704(c)(8) “interferes with the Office’s ability to process an application,” such as the examiner’s need to receive all relevant information before completing examination. The court also pointed to the four-month “A” delay clock that runs against the USPTO to issue an office action once a reply is filed, finding that filing a supplemental reply interferes with the USPTO’s ability to meet that deadline.

The court also noted that § 1.704(d) permits an applicant to file an IDS without incurring a PTA penalty under § 1.704(c)(8) if the items submitted were recently cited by the USPTO or a foreign patent office. The court found that this rule avoids a PTA deduction “when an applicant promptly provides an IDS” containing such information, and saw no need to provide similar protection “when an applicant sits on material information in its possession … with no good excuse for having done so.”

Although Gilead had raised other policy arguments against the rule, the court stated that it was not required to address them under the Chevron framework:

Even if this Court believed Gilead’s interpretation is more reasonable than the USPTO’s, Plaintiff would still fail. …. Gilead can only succeed by showing that the USPTO’s interpretation is unreasonable. …. Gilead has fails to do so.

Discouraging Prompt Disclosure 

As Gilead pointed out in its original PTA petition, applying § 1.704(c)(8) to an IDS submitted after a response to a restriction requirement and before a substantive office action is issued discourages prompt disclosure of potentially relevant information. That is because Gilead would not have been charged with a PTA deduction if it waited to submit the IDS until after the substantive office action was issued (although it would have had to pay a $180 fee). Also, if no restriction requirement had been issued, Gilead could have submitted its IDS without penalty up to the date the office action was issued. Penalizing applicants who submit IDSs sooner rather than later seems to undermine the USPTO’s goals of promoting quality examination and compact prosecution.

Update On Exelixis

The Federal Circuit has scheduled oral argument in the Exelixis PTA cases for November 5, 2013.

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