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Legal Affairs : Feb 1, 2010 ( )
Court Ruling Could Lengthen Patent Term
PTO Was Found to Have Erroneously Applied Statute in Way that Shortchanged Patentees!--h2>
The Federal Circuit started 2010 on a positive note for patent holders by affirming the district court decision in Wyeth v. Dudas (affirmed as Wyeth v. Kappos) on the proper interpretation of the patent term adjustment (PTA) statute. The court determined that the U.S. Patent and Trademark Office (PTO) has erroneously interpreted the statute in a manner that shortchanges patentees by undercalculating PTA in certain circumstances.
Now that the Federal Circuit has affirmed the decision, the PTO should apply the court’s interpretation of the statute, which could result in longer PTA awards for many patents. Biotechnology patents in particular may benefit from this ruling, because of the timing and type of examination delays biotechnology applications often encounter. To maximize patent term and patent value, applicants should understand the PTA statute and take PTA into account when formulating patent strategies.
While older U.S. patents have a 17-year term measured from the grant date, patents issuing from applications filed on or after June 8, 1995, have a 20-year term that runs from the earliest effective nonprovisional U.S. filing date. The change to a 20-year patent term drove home the adverse consequences of delays in the patent examination process, as any delay in examination now shortens the effective term of the patent.
To address this problem, Congress enacted the PTA statute (35 U.S.C. § 154(b)(1)) to provide patent term adjustment to compensate for PTO delays under certain circumstances. The statute provides “guarantees” against three different types of delay:
“A” delay, 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 four months of a response, and issuing a patent within four months of the issue fee payment).
“B” delay, when the PTO fails to issue a patent within three years of the actual filing date of the patent application.
“C” delay, when the application is involved in an interference or appeal, or is subject to a secrecy order.
The statute also provides that “to the extent that periods of delay...overlap, the period of adjustment...shall not exceed the actual number of days the issuance of the patent was delayed.” The issue in the Wyeth case surrounded the interplay between A delay and B delay, and how double counting of those types of delay is to be avoided.
Since at least 2004, the PTO has taken the position that any A delay contributes to B delay, and thus “overlaps” with B delay. The PTO has explained that any failure to meet the time frames counted as A delay directly contributes to, and may result in, any failure to meet the “three-year” guarantee that is counted as B delay. Thus, according to the PTO, all A delay in effect overlaps with any B delay, and so must not be double counted. Under this interpretation, the PTO awards PTA for only the longer of its A delay or its B delay, not both.
Wyeth challenged this interpretation, arguing that A delay and B delay only overlap if the delay occurs on the same calendar day. Thus, for example, only A delay that occurs more than three years after the filing date of the application could overlap with B delay, because B delay does not begin to occur until the application has been pending for three years.
The district court agreed with Wyeth, and the Federal Circuit now has affirmed that decision. The Court determined that the clear and unambiguous statutory language provides that “no overlap happens unless the violations occur at the same time.” The Court emphasized that “before the three-year mark, no overlap can transpire between the A delay and the B delay” and that “if an A delay occurs on one day and a B delay occurs on a different day, those two days do not overlap” under the statute.
The Wyeth decision could result in additional PTA for many patents, particularly for biotechnology patents that often experience both A delay and B delay. According to the 2009 patent pendency statistics published by the PTO, patent applications in the fields of biotechnology and organic chemistry wait for an average of 22.5 months before receiving a first office action. That represents an average A delay of 8.5 months for the first action alone. While the average biotechnology application is granted in just under three years (35.1 months), many applications take longer to issue, and so also experience B delay.
As noted above, until the Federal Circuit’s Wyeth decision, the PTO would award PTA based on the A delay or the B delay (whichever was longer), but would not add A delay and B delay, even if the A delay occurred early during pendency. Now that the Court has determined that A delay and B delay should be added when determining the total PTA award, many patents that were pending for more than three years will be entitled to a longer term.
For example, if the PTO took 22.5 months to issue a first office action (an A delay of 8.5 months) and the patent issued three years and six months after its filing date (a B delay of six months), the patentee now will be credited with 14.5 months of delay under Wyeth, where the PTO previously would have credited only 8.5 months of delay (the longer of the two types of delay).
This additional patent term may be particularly valuable to biotechnology and pharmaceutical patents, which often reach their maximum value toward the end of their term. Patentees who may be affected by this decision should consider contacting counsel as soon as possible to determine whether additional PTA can be obtained.
Not all patents that take a long time to issue are awarded PTA, however. The PTA statute provides that the PTA award is “reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution.” Thus, if an applicant delays the examination process more than the PTO, the patent may not receive any PTA, even if it took much longer than three years to issue.
Applicants should be aware of the PTA regulations that define certain actions as constituting delay. For example, while applicants may not be surprised to learn that extending response periods can count as delay, they might not realize that filing a preliminary amendment shortly before the first office action is issued or filing a supplemental response can result in charges of delay.
Applicants also should be aware of the impact of certain patent strategies on PTA. For example, filing a request for continued examination (RCE) stops the accrual of any further B delay, although A delay still may accrue. On the other hand, abandoning an application in favor of a continuation application erases all delay accrued in the parent application and re-starts the clock with the continuation application filing date. Thus, if an application has accrued significant delay, applicants may want to consider filing an RCE instead of a continuation application in order to preserve that possible additional patent term.
Applicants also may wish to consider the potential impact on PTA when deciding when to file divisional or continuation applications to pursue different subject matter. While applicants often wait to file such applications until the parent application is close to grant, this may not be the best strategy if maximizing patent term is a primary concern.
The 20-year term of divisional and continuation applications runs from the parent application filing date, but the PTA clock for such applications does not begin to run until the divisional or continuation application itself is filed. If the parent application experiences significant examination delay, its term may be lengthened by the PTA statute, but the term of divisional and continuation applications will not be adjusted unless those applications also experience further delay.
Applicants also should take care when filing terminal disclaimers. Terminal disclaimers take precedence over PTA; thus, a terminal disclaimer can cut short patent term that otherwise would be lengthened by PTA.
Terminal disclaimers often are filed in applications directed to overlapping subject matter, as an expedient way to overcome an obviousness-type double patenting rejection. Applicants should keep in mind that if the later-filed application experiences examination delay, PTA cannot extend its term beyond the term of the disclaimed patent. Thus, applicants should consider arguing against obviousness-type double patenting rejections in appropriate circumstances, particularly if the rejected application already has accrued significant PTA delay, or is likely to be delayed by an appeal.
The Wyeth case also demonstrates the value of scrutinizing PTO rules and regulations to confirm that they comply with the governing statute. The PTO has admitted to other across-the-board PTA calculation errors where it was not following its own regulations, but only after a patentee challenged the PTO’s calculations. The PTA statute and regulations are complicated, and further challenges may be on the horizon.
For example, it is suggested that B delay for U.S. national phase applications should be measured from the PCT filing date, not any national phase date, in order to give full effect to the PCT requirement that “the [international] filing date shall be considered to be the actual filing date,” and the related statute that provides that “[a]n international application designating the United States shall have the effect, from its international filing date . . . of a national application . . . filed in the [PTO].”
Under this interpretation, the three-year period for B delay would run from the PCT filing date, which could be as much as 30 months before the national phase filing date, virtually guaranteeing B delay for U.S. national phase applications. It does not appear that anyone has challenged this PTO interpretation of the PTA statute.
The Wyeth decision provides additional opportunities to maximize patent term and enhance patent value by developing patent strategies that take the PTA provisions into account. Although it is possible that the PTO will request rehearing of the Wyeth decision or seek review by the Supreme Court, applicants and patentees should consider taking immediate relevant action regarding PTA and contact their patent counsel to ensure that appropriate plans are in place to take full advantage of the additional patent term that may be available.
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