District Court Denies Equitable Tolling, Fifth Amendment Taking in Novartis Patent Term Adjustment Case

In another significant Patent Term Adjustment (PTA) case decided last week (Novartis AG v. Kappos, Civ. Action No. 10-cv-1138 (Nov. 15, 2012)), the U.S. District Court for the District of Columbia found that Novartis could benefit from “ordinary tolling” but not “equitable tolling” in its efforts to obtain additional PTA for 23 patents. This decision by Judge Huvelle addresses several interesting issues that may arise in other PTA cases.

The PTA Issues

Novartis sought two types of additional PTA:

1. Wyeth-type PTA, based on the USPTO’s miscalculation of overlap between “A delay” and “B delay” (discussed in this article)
2. Exelixis-type PTA, based on the USPTO’s misinterpretation of the impact of filing an RCE on the availability of “B delay” (discussed in this article).

The Statutory Deadline for Judicial Review

The PTA statute provides for judicial review of PTA awards in 35 USC § 154(b)(4)(A), which states:

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.

Novartis argued that this provision relates only to challenges of a PTA award provided with a Notice of Allowance, and not to challenges of post-issuance PTA awards provided with a granted patent. The district court rejected this interpretation of the statute, noting that “[f]rom its plain language, it is clearly intended to relate to all PTA determinations, regardless of when they occur.”

Ordinary Tolling is Available

For one of the patents at issue (U.S. Patent 7,470,792), Novartis timely filed a request for reconsideration with the USPTO within two months of the grant date, in accordance with 37 CFR  § 1.705(d). After the USPTO denied the request for reconsideration, Novartis filed suit in the district court. The suit was filed within 180 days of the USPTO decision, but more than 180 days after the patent had issued.

The district court considered the USPTO’s arguments against the availability of tolling, but decided that “ordinary tolling” applies to 35 USC § 154(b)(4)(A), such that the 180-day period does not begin to run “until the agency action is final,” and is “tolled during the period of agency reconsideration.” In reaching this conclusion, the court cited the January 2012 district court decision to the same effect in Bristol-Myers Squibb Co. v. Kappos (D.D.C. 2012). (The district court denied the USPTO’s motion for rehearing in that case on September 20, 2012; the USPTO had until November 19, 2012 to appeal the decision.)

Thus, the court determined that “Novartis’ claim with respect to [the ‘792 patent] was timely filed.”

Equitable Tolling is Not Available

For 19 of the patents at issue, Novartis did not seek reconsideration at the USPTO within two months of grant, and did not bring suit in the district court within 180 days of grant. For those cases, Novartis sought equitable tolling of the 180-day period.

The court noted the general principle 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 also noted that “[t]he decision to equitably toll a statute of limitations is made on a ’case-by-case’ basis depending on the facts of the case.” The court found that Novartis was not entitled to equitable tolling for the issues raised in this case.

With regard to its Wyeth claims, Novartis argued that “it lacked knowledge of its claim until the Federal Circuit’s decision on January 7, 2010, in Wyeth changed the law,” and that before that time it had “reasonably relied on the PTO’s longstanding and consistent use of its pre-Wyeth method of calculating A/B Delay Overlap.” With regard to its Exelixis claims, Novartis argued that “because no federal court has yet ruled on the viability of this claim, the statute of limitations has not yet begun to run,” and that Novartis was not even aware of this claim until Abbott Laboratories raised the issue in its own case (Abbott v. Kappos, 10-cv-1853 (D.D.C.), filed on October 29, 2010).

The district court rejected these arguments:

In effect, Novartis’ position amounts to a contention that the statute of limitations should not begin to run until such time as a federal court has actually ruled on and upheld the very claims they seek to pursue. But of course, 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.

The court also noted that “a change in law is not such an extraordinary circumstance as to justify the application of equitable tolling.”

Novartis Cannot Benefit From the Discovery Rule

Novartis also argued that its challenges should be allowed to proceed under the “discovery rule,” which “provides that ‘a cause of action accrues when the injured party discovers—or in the exercise of due diligence should have discovered—that it has been injured.’” The court rejected this argument as “nothing more than a rehash of Novartis’ equitable tolling argument.”  The court explained further:

[A]s of the date that each patent was granted, Novartis knew the amount of PTA it had been awarded and knew what procedure the PTO had used in making that determination; all of the facts underlying Novartis’ injury were both knowable and in fact known by Novartis as of that date. Thus, the 180-day limitations period began to run on that date, and Novartis’ failure to challenge the PTA determinations within that 180-day period rendered nineteen complaints untimely.

The Fifth Amendment Takings Claims are Time-Barred or Moot

Novartis also argued that the USPTO’s “erroneous interpretations of 35 USC § 154(b)(1)(B)” had “deprived Novartis of its property interest in its patent term without compensation in violation of the Takings Clause of the Fifth Amendment.” The court quickly disposed of this argument:

With respect to the nineteen patents for which Novartis did not timely challenge the PTA determinations under § 154(b)(4)(A), this argument is untimely and cannot now be raised. Moreover, the Court need not address this argument as it relates to the remainder of Novartis’ patents [because the court has ordered the relief requested].

The Wyeth PTA Issue

The PTA at issue in the ’792 patent stemmed from the Wyeth case. Although the ’792 patent was granted two months after the Wyeth district court decision, the USPTO did not calculate PTA in accordance with that decision, and denied Novartis’ request for reconsideration. The court criticized the USPTO for ignoring the district court decision:

[T]he PTO’s refusal to apply Wyeth to the ’792 patent is contrary to well-established law. The ’792 patent was issued on December 30, 2008, a full two months after the district court opinion in Wyeth. … Novartis sought agency reconsideration of its PTA determination in February 2009, in part based on the district court’s Wyeth ruling. … In June 2009, the PTO declined to apply the Wyeth method of calculating overlap to the ’792 patent. … This was erroneous. The Supreme Court has made it clear that it is “error to refuse to apply a rule of federal law retroactively after the case announcing the rule has already done so.” James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 540 (1991). The district court’s Wyeth opinion was applied retroactively to Wyeth …. Thus, when Novartis filed for reconsideration almost five months later, the PTO abused its discretion by refusing to calculate Novartis’ patent consistently with the method adopted in Wyeth.

Will the USPTO be any quicker to follow the district court decision in Exelixis?

The Exelixis PTA Claim 

The PTA at issue in the other three patents whose challenges were not time-barred was Exelixis-type PTA, based on the USPTO’s misinterpretation of the impact of filing an RCE on the availability of “B delay.” The court discussed the Exelixis decision and stated:

This Court finds Judge Ellis’ well-reasoned opinion [in Exelixis] to be persuasive. It will therefore adopt his rationale for concluding that the PTO’s interpretation is contrary to the plain and unambiguous language of § 154(b)(1)(B), and that it contravenes the structure and purpose of the statute.

The court also noted additional arguments that have been raised by Abbott Biotherapeutics in its PTA case, Abbott v. Kappos, 10-cv-1853 (D.D.C.). In particular, the court discussed inconsistencies between 37 CFR § 1.702(b) and  37 CFR § 1.703(b) pointed out by Abbott Biotherapeutics. As explained by the court:

[I]f both regulations were to be applied as written, time consumed by an RCE would apply to both the trigger and the remedy provisions of the statute, and would effectively result in the double-counting of the “not including” clause of § 154(b)(1)(B).

The Tip of the Iceberg

The recent spate of PTA decisions is just the tip of the iceberg. A number of PTA cases remain pending before the District Court for the District of Columbia and the District Court for the Eastern District of Virginia. The Exelixis decision already has triggered similar cases, and calculation of PTA under Exelixis may raise new issues that lead to new challenges of the USPTO’s interpretation and application of the PTA statute, 35 USC § 154(b). If the Exelixis decision stands, it will cast more light on the USPTO’s RCE problem because patents will be eligible for PTA commensurate with the significant examination delays experienced after an RCE is filed.