Federal Circuit Rejects USPTO’s Strict Approach to Patent Term Adjustments — USPTO to Amend its Regulations

January 22, 2010

Since the mid-1990s, following amendments to the U.S. Patent Act, the United States Patent and Trademark Office has issued patents with a term of 20 years following the filing of an application.  Due to concerns that delays in prosecution would diminish the effective lifespan of a patent, Congress legislated that the term of a patent be extended if the USPTO caused certain types of delays in prosecution through no fault of the applicant.  However, the statute does not allow the adjustment to include any "periods of delay . . . [that] overlap."  Since the legislation passed, the USPTO has broadly interpreted the "overlap" limitation to include periods of delay that would not otherwise be included under a stricter interpretation, effectively granting shorter patent term extensions.

On January 7, 2010, the Federal Circuit in Wyeth v. Kappos rejected the USPTO’s interpretation and required that it follow the "unambiguous rule" described in the statute, which is explained in more detail below.  The USPTO has recently acknowledged the decision and announced that it is in the process of amending its regulations.

Background of the Statutes and Regulations

A patent is, according to the U.S. Patent Act, a "grant to the patentee . . . of the right to exclude others from making, using, offering for sale, or selling the invention."  35 U.S.C. § 154(a)(1).  All issued patents are given a "term," which is the future date when the monopoly grant expires and the invention is released to the public domain.  Prior to 1994, the term of a patent was 17 years from the date of issuance.

In 1994, Congress changed the law concerning patent terms to the current term of 20 years from the date of filing.  In order to ensure that new patent terms would still give patent holders an effective term of at least 17 years, Congress amended 35 U.S.C. § 154(b)(1) to allow extensions to the patent term if: (A) the USPTO failed to timely respond to the four statutorily enumerated actions by the applicant, (B) the USPTO issued the patent later than three years from the date of filing, or (C) the USPTO caused delay due to "interferences, secrecy orders, and appeals."  The statute provides that the patent term "shall be extended 1 day for each day" that the patent is delayed for reasons attributable to the three subsections.  However, under § 154(b)(2)(A), if "periods of delay attributable to [subsections (A) or (B)] overlap," then the adjustment could "not exceed the actual number of days the issuance of the patent was delayed."  In 2000, the USPTO promulgated 37 C.F.R. § 1.703(f), a regulation that is nearly identical in wording to the "overlap" limitation.  However, the USPTO did not detail exactly how it would calculate the adjustment.

Two Competing Calculations

Many applicants before the USPTO believed that there was an overlap only if delays attributable to subsection A ("A-delay") were also delays attributable to subsection B ("B-delay").  In other words, there would be an overlap only if the USPTO missed a deadline to respond after three years from the filing date.  For example, if a patent issued 50 days after the three year mark and there was a total delay of 30 days due to missed deadlines, 10 of which occurred after the three year mark, those 10 days would overlap under this approach.  This "cumulative approach" would add the A-delay of 30 days and the B-delay of 50 days, then subtract the 10-day overlap, giving an adjustment of 70 additional days to the patent term.

In 2004, the USPTO clarified its policy in 69 Fed. Reg. 21706 explaining that "if an application is entitled to an adjustment under [subsection (B)], [the period of overlapping delay is] the entire period during which the application was pending before the [USPTO] . . . , and not just the period beginning three years after the actual filing date of the application. . . ."  In other words, if a patent were to issue after three years, the entire period of A-delay, and not just the A-delay that occurred after the three years, would "overlap" with the B-delay.  As a practical matter, this meant the USPTO would use either the A-delay or the B-delay as the amount of days to adjust, whichever was greater.  In the previous example, this approach would lead to an adjustment equaling the B-delay, i.e. 50 days.  This approach usually resulted in an adjustment of fewer days relative to the alternative interpretation.

The USPTO’s justification for its approach stemmed from its belief that delays due to missed deadlines ultimately led to an issuance later than three years, i.e. that A-delay directly caused B-delay.  Thus, any amount of A-delay and B-delay would overlap.  The USPTO refused to use the cumulative approach as it would double-count A-delay that occurred before the three year mark.

Wyeth Requires the USPTO to Use the Cumulative Approach

Despite the USPTO’s justification for its method of calculating patent term extensions, the Federal Circuit unanimously rejected its approach, finding that the first clause in the "overlap" limitation of § 154(b)(2)(A) is "clear, unambiguous," and requires the cumulative approach.  Wyeth v. Kappos, No. 09-1120, slip op. at 13 (Fed. Cir. Jan. 7, 2010).  According to the statute, the limitation is triggered when "periods of delay attributable to the grounds specified in [subsection (A) and (B)] overlap."  35 U.S.C. § 154(b)(2)(A).  The Wyeth opinion explained that a period of A-delay occurs after the missed deadline until the USPTO response is given, while a period of B-delay occurs after the three year mark until the patent issues.  The opinion stated it was "clear that no ‘overlap’ happens unless [the periods] occur at the same time."  Wyeth, slip op. at 8.  Thus, under the statute, there exists an overlap only when delays caused by missed deadlines occur after the three year mark, which is the interpretation that leads to the cumulative approach described above.

The panel emphasized that the language of § 154(b)(1)(B) "does not even permit [a B-delay] to start running until three years after the application is filed," contradicting the USPTO’s interpretation that overlapping delays could occur any time after the filing date.  Wyeth, slip op. at 8.  While the court shared some of the USPTO’s concerns about double-counting, given the statute’s lack of ambiguity, it could not "take upon itself the role of correcting all statutory inequities." Id. at 10.

Chevron Deference Not Entitled

Under Chevron v. NRDC, a reviewing court must defer to a government agency’s interpretation of a statute if: 1) the statute is ambiguous, and 2) the agency’s interpretation of the statute is reasonable.  See Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837 (1984).  In Wyeth, the Federal Circuit found that the USPTO’s interpretation was not entitled to deference under Chevron, as the language of the statute "sets an unambiguous rule."  Wyeth, slip op. at 13.  Thus, Chevron‘s first condition was not met.

What to Do Going Forward

Following the Wyeth opinion, the USPTO announced that it is in the process of amending its regulations to conform with the Federal Circuit’s decision.  In the meantime, the USPTO reminds patent holders who are dissatisfied with a patent term adjustment determination that they are statutorily required to seek review within 180 days of their patent’s issuance.  The USPTO has not indicated whether it will review adjustments if requested after 180 days of issuance.  Clients whose patents are about to issue or whose patents were recently issued should consider whether an additional extension to the patent term is warranted given these new procedures for calculating patent term extensions.

Gibson, Dunn & Crutcher LLP 

Gibson, Dunn & Crutcher’s Intellectual Property Practice Group is available to assist in addressing any questions you may have regarding these issues.  For further information, please contact the Gibson Dunn attorney with whom you work or any of the following practice group co-chairs

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Wayne Barsky – Century City (310-557-8183, [email protected])
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