United States: New Math Does Not Add Up For Patent Office's Patent Term Adjustments

Patent owners may now enjoy longer patent terms after a recent Federal Circuit ruling¹ which determined that patent owners had been shortchanged by how the U.S. Patent and Trademark Office ("Patent Office") had calculated adjustments to patent terms to compensate for Patent Office caused delays in issuance of a patent. The U.S. Patent Statutes² guarantee patent term extensions if the Patent Office causes a delay by failing to meet certain response deadlines.³ The statutes⁴ also guarantee patent term extensions if the Patent Office fails to issue the patent within three years after filing a patent application. Specifically excluded in the statutes, however, are compensating extensions for "overlap" between the two types of delays, as well as delays caused by the applicant.⁵ According to the Patent Office calculation ("Patent Office new math"), the calculation period for both types of delays began when the patent application was filed, not after three years. Thus, applying the Patent Office new math "overlap" could occur at any time after filing. In Wyeth, the Federal Circuit disagreed with the Patent Office's new math; and while giving patent owners potentially more time to claim patent term extensions, also gave the Patent Office a lesson in math and statutory construction.

At issue in Wyeth was the meaning of "overlap" as found in 35 U.S.C. § 154(b). Wyeth argued the Patent Office misconstrued the "overlap" to wrongly truncate patent term extensions for U.S. Patent No. 7,179, 892 ("'892 patent") and U.S. Patent No. 7,189,819 ("'819 patent"). The '892 patent was delayed for 610 days by Patent Office prosecution delays, 345 days by the Patent Office not issuing the patent within three years, and 148 days by the applicant. Of the 610 days of Patent Office prosecution delays, 51 days took place more than three years after the application was filed. The '819 patent was delayed by the Patent Office for 336 days by Patent Office prosecution delays, of which 106 days were after the three year mark, and 827 days for not issuing the patent within three years. The applicant caused 335 days of delay for the '819 patent.

The statute⁶ directs the Patent Office to draft regulations establishing procedures for determining patent term adjustments. The Patent Office promulgated 37 C.F.R .§ 1.703(f) which sets forth that delays caused by not issuing a patent within three years may occur as soon as the application was filed, not upon expiration of three years. As guided by Section 1.703(f), the Patent Office calculated patent term adjustments by selecting the greater of either the Patent Office caused prosecution delays or period of time beyond three years and then subtracting applicant delays.

Using the Patent Office new math method, the Patent Office calculated patent term adjustments of 462 days for the '892 patent as follows:

[(610 days for patent prosecution delays caused by the Patent Office) – (148 days for delays caused by applicant) = (462 days of patent term extension)].

The Patent Office calculated the patent term adjustment of 492 days for the '819 patent as follows:

[(827 days for patent prosecution delays caused by the Patent Office) – (335 days for delays caused by applicant) = (492 days of patent term extension)].

Under the Patent Office new math method, consideration of overlap was construed to exclude the shorter of: (1) days of Patent Office prosecution delays, or (2) days of Patent Office delay causing the patent to issue more than three years after filing. As such, not included in the Patent Office calculation was a value representing days of overlap.

Unhappy with the patent term adjustments calculated by the Patent Office using their Patent Office new math method, Wyeth petitioned the Patent Office director for reconsideration.⁷ When the petition was denied Wyeth filed a lawsuit in the United States District Court for the District of Columbia,⁸ Wyeth sought an order from the District Court directing the Patent Office to calculate an alternative adjustment term. Wyeth countered the Patent Office new math by arguing that "overlap" only arose when delays occurred attributable to both prosecution delays caused by the Patent Office and the Patent Office failing to issue a patent within three years of the filing date of the patent application, and thus the patent term adjustment calculus should consider each type of delay.

Under Wyeth's proposed method, and the prevailing method, patent term adjustments should be calculated as follows:

Patent Extension Term = [(Patent Office prosecution delay) + (Patent Office delay causing the patent to issue more than three years after filing) – (overlap) – (applicant delay)].

Note Wyeth's proposed method totals both (1) days of prosecution delay caused by the Patent Office, and (2) days of Patent Office delay causing patent issuance more than three years after the patent filing date. Because both types of delay are considered, Wyeth's method deducts overlap days, i.e., days of delay classified as both Patent Office prosecution delay and Patent Office delay causing the patent to issue more than three years after the filing date of the patent application.

Using the Wyeth method the patent term adjustment would then be 756 days for the '892 patent calculated as follows:

[(610 days for patent prosecution delays caused by the Patent Office) + (345 days for the Patent Office not issuing the patent within three years) – (51 days for the length of time the Patent Office did not issue the patent after three years from its filing date) – (148 days for delays caused by applicant) = 756 days of patent term extension].

A patent term extension of 722 days for the '819 patent using the Wyeth method is calculated as follows: [(336 days for patent prosecution delays caused by the Patent Office) + (827 days for the length of time the Patent Office did not issue the patent after three years from its filing date) – (106 days for "overlap") – (335 days for delays caused by applicant) = 722 days of patent term extension].

In the District Court proceeding,⁹ the Patent Office argued that its interpretation was based on language in the statute that the adjustment "shall not exceed the actual number of days the issuance of the patent was delayed."¹⁰ The Patent Office argued that under Wyeth's proposed method, Patent Office prosecution delays inevitably lead to delays which made the patent issue more than three years from the filing date, thereby duplicating compensation for the delays. According to the Patent Office, the patent owner would receive a "benefit" rather than a "compensation."¹¹ The Patent Office further cited Chevron v. Natural Resources, 467 U.S. 837 (1984) to support an assertion that statutory interpretation by the Patent Office should be given deference.

Both sides filed motions for summary judgment. The District Court agreed with Wyeth noting the Patent Office only had authority to issue procedural rules and not substantive ones, thereby rejecting the notion of affording the Patent Office the Chevron deference. The Court further stated that even if the Chevron deference was available, the statute was not ambiguous and its plain meaning contradicted the Patent Office's interpretation.¹² The District Court addressed the unjust compensation argument by stating Congress could have capped patent terms in the statute had Congress intended this meaning. The District Court further iterated that if unintended results occurred from the statute, it was Congress' problem to correct.

On appeal, the Federal Circuit applied similar reasoning used by the District Court to dispatch the Patent Office's arguments. Like the lower court, the Federal Court found the 35 U.S.C. § 154(b) language unambiguous, specifically with regard to "periods of delay" and "overlap." The Federal Circuit reasoned because each period of delay has a discrete time span with defined boundaries, no "overlap" happens unless the Patent Office violations occur at the same time. The Federal Circuit further determined the delays caused for not issuing a patent within three years could not occur until after three years from filing and concluded no overlap can occur between the two types of delay until three years after filing of the patent application.

The Federal Circuit also addressed the unfair compensation issue by citing legislative history from a 1994 amendment to 35 U.S.C. § 154(b).¹³ From the legislative history, the Federal Circuit concluded that the statutory language provides a minimum 17 year term for patents but provides no maximum time cap for patent terms. Concurring with the District Court's determination that the Patent Office should receive no Chevron deference, the Federal Circuit concluded the statutory language sets an unambiguous rule for determining "overlap" for patent term adjustments.

On February 1, 2010, the Patent Office responded to the Wyeth ruling by announcing an upgrade (http://www.uspto.gov/patents/law/notices/2010.jsp) to Patent Office computer systems that calculate patent term adjustments and implementation of interim procedures for revising patent term extensions.¹⁴ Under the interim procedures, patentees now have 180 days after patent issuance to request reconsideration of a patent term extension, instead of the previous two month time period. The interim procedures, however, only apply to patents that issue prior to March 2, 2010. Although the interim procedures temporarily waive government request fees, patentees must specify recalculation is requested in view of Wyeth. A request form (PTO/SB/131 (01-10)) prepared by the Patent Office is available online at http://www.uspto.gov/forms/index.jsp#business.

Patent owners may want to consider auditing all patents that have been issued within the past 180 days to identify where patent term extensions may have been warranted but not granted. Patent owners now have Federal Circuit guidance for conducting an accurate independent assessment and Patent Office authority to obtain entitled patent term extensions.

Footnotes

1 Wyeth v. Kappos, ___F.3d ___, (Fed. Cir. 2010) WL 27184.

2 See, e.g., 35 U.S.C. § 154(b).

3 A delay under 35 U.S.C. § 154(b)(1)(A) occurs if the Patent Office does not notify the applicant of any Patent Office action taken on the application within 14 months from filing. Patent Office actions include application rejections, objections, or notices of allowance. A delay under 35 U.S.C. § 154(b)(1)(A) also occurs if within four months the Patent Office does not: respond to an applicant's response or appeal, act on an application at the direction of the Board of Patent Appeals and Interferences, or issue a patent after issue fee payment.

4 35 U.S.C. § 154(b)(1)(B).

5 Delays under 35 U.S.C. § 154(b)(1)(B) may be reduced by time taken by an applicant requested continued examination, an interference, a secrecy order, an appeal for the Board or a Federal Court, or applicant caused delay. Adjustments for delay caused by an interference, secrecy order, and appellate review by the patent board or a Federal Court are available under "paragraph C" of the Statutes. Extension term limitations also exist if the applicant disclaims a term of the patent or delayed prosecution for failing to use reasonable efforts during prosecution.

6 35 U.S.C. § 154(b)(3).

7 Per 35 U.S.C. § 154(b)(3), applicant is provided one opportunity to request reconsideration of the patent term adjustment, the time period for making the request is two months and not extendable. 37 C.F.R. § 1.705(d) and (e).

8 The remedy for applicants dissatisfied by the director's determination of patent term adjustments is to file suit in the United States District Court for the District of Columbia within 180 days after the grant of the patent.

9 Wyeth v. Dudas, 580 F.Supp.2d 138 (D.D.C. 2008).

10 35 U.S.C. § 154(b)(2)(A).

11 Wyeth 580 F.Supp.2d at 142.

12 Id. at 141-42.

13 H.R. Rep. No. 106-464, at 125 (1994).

14 75 Fed. Reg. 5043.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.