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Abraxis Bioscience, LLC v. Kappos

United States District Court, District Circuit

January 8, 2014

ABRAXIS BIOSCIENCE, LLC, Plaintiff,
v.
HONORABLE DAVID KAPPOS, in his official capacity as UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, Defendant.

MEMORANDUM OPINION

BERYL A. HOWELL, District Judge.

The plaintiff Abraxis Bioscience, LLC, brought this lawsuit against David Kappos, in his official capacity as Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office ("USPTO"), seeking a judgment that the patent term adjustment ("PTA") for United States Patent No. 7, 820, 788 ("'788 patent") be increased by at least 122 days from the 199 days awarded by USPTO, for a total PTA of at least 321 days or, alternatively, 323 days. Pending before the Court are the parties' cross-motions for summary judgment. See Pl.'s Renewed Mot. Summ. J. Re PTA for Patent 788 ("Pl.'s Mot."), ECF No. 20; Def.'s Cross-Mot. Summ. J. and Opp'n Pl.'s Renewed Mot. Summ. J. Re PTA for Patent 788 ("Def.'s Opp'n"), ECF No. 21.[1] For the reasons explained below, the USPTO's Motion for Summary Judgment is granted and the plaintiff's Renewed Motion for Summary Judgment Regarding the Calculation of Part B Delay for the United States Patent No. 7, 820, 788 is denied.[2]

I. BACKGROUND

A. Legal Framework

The plaintiff challenges the USPTO's interpretation of a statutory provision at 35 U.S.C. § 154(b)(1)(B)(i), which governs the determination of PTA when the patent applicant files a request for continued examination ("RCE"), as authorized by 35 U.S.C. § 132(b), more than three-years from the filing date of the patent application. Since a fundamental tenet of statutory construction is to examine the challenged text in context, an overview of the legal framework for determining a patent term is necessary. See United States v. Ali, 718 F.3d 929, 937 (D.C. Cir. 2013) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) ("It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.") (internal quotation marks omitted)).

United States patent law originates from a constitutional grant of authority to the Congress "[t]o promote the Progress of Science and useful Arts, by securing for a limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." U.S. CONST. art. I, § 8, cl. 8; see also Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 5 (1966) (references to "useful Arts" and "Discoveries" creates the right to patent protection). The brevity of this Patent Clause belies the complexity of defining the scope of the "exclusive Right" of inventors to their discoveries. At the outset, inventors do not automatically hold patent rights to their inventions. See 35 U.S.C. § 111. Inventors must submit applications to the USPTO for review and assessment whether a patent should issue. See 35 U.S.C. § 131. Upon issuance, the patent term in the United States was, until 1994, seventeen years, beginning from the date the patent was issued. See Act of March 2, 1861, ch. 88, § 16, 12 Stat. 246, 249 (codified as amended at 35 U.S.C. § 154). In order to harmonize the U.S. patent laws with those of America's leading trading partners, Congress amended this regime in 1994 to adjust the term of a patent from seventeen to twenty years, beginning from the date the application was filed. See Uruguay Round Agreements Act ("URAA"), Pub. L. No. 103-465, 102 Stat. 4809 (codified as amended at 35 U.S.C. § 154(a)(2)); Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1547 (Fed. Cir. 1996) (noting that the "purpose of URAA was not to extend patent terms, although it had that effect in some cases").

Despite the addition of three years to the patent term in the URAA, measuring the patent term from the patent application filing date, rather than the date of patent issuance, could consume "some of the effective term of a patent... by the time it takes to prosecute the application." Wyeth v. Dudas, 580 F.Supp.2d 138, XXXXXXXXX (D.D.C. 2008). To mitigate the effect of administrative delays on the patent term, Congress provided in the URAA for patent term extensions of no more than five years due to (1) "interference delay or secrecy orders, " under 35 U.S.C. §§ 135(a) and 181, respectively, or (2) appellate review. URAA § 532, 108 Stat. at 4984. These periods of patent extension were not only subject to a five year cap, but also to other limitations. For example, any period of extension was required to be reduced "by any time attributable to appellate review before the expiration of 3 years from the filing date of the application" and "for the period of time during which the applicant for patent did not act with due diligence." Id. (originally codified at 35 U.S.C. § 154(b)(3)(B) & (C) (1994)). USPTO was authorized to determine when the applicant failed to act with due diligence. Id.

Both the bases for extensions of patent terms and the limitations on those extensions were further refined in 1999 with passage of American Inventors Protection Act of 1999 ("AIPA"). AIPA included, as Subtitle D of Title IV, the "Patent Term Guarantee Act of 1999, " which provided for the patent term adjustment that is at issue here. See AIPA, Pub. L. No. 106-113, §§ 4401201202, 113 Stat. 1501, 1501A-557 (1999) (codified, as amended, at 35 U.S.C. § 154(b)). While the five year cap on any PTA imposed by the URAA was eliminated, other limitations were retained in slightly different form. The key provisions of AIPA and implementing regulations implicated by the plaintiff's challenge to the USPTO's PTA calculation are summarized below.

1. Patent Term Adjustments Under AIPA

The AIPA amendments, inter alia, authorized "guarantee[d]" adjustments to the patent term in three circumstances set out in section 154(b)(1); imposed "limitations" on those adjustments in section 154(b)(2); and outlined the "procedures for patent term adjustment determination[s]" in section 154(b)(3). 35 U.S.C. § 154(b)(1), (2) & (3). The interplay among these guarantees, limitations and determination procedures provide significant interpretative fodder for the parties in this litigation.

a. PTA "Guarantees" in Section 154(b)(1)

The statute frames the three circumstances extending the patent term as "guarantees" designed to guard against diminution of a patent term due to enumerated administrative delays during consideration of the patent application. First, to "[g]uarantee [] prompt patent and trademark office responses, " a patent term is extended one day for each day that the USPTO fails to meet certain examination deadlines. 35 U.S.C. § 154(b)(1)(A) ("Part A"). For instance, most notably for purposes of the instant case, the patent term is extended under Part A for each day the issuance of the patent is delayed "due to the failure of the [USPTO] to... issue a patent within 4 months after the date on which the issue fee was paid... and all outstanding requirements were satisfied." Id. at § 154(b)(1)(A)(iv). This provision provides the USPTO with a 4-month "grace" period to issue a patent after issue fee payment before days begin to be counted as Part A delay.

Second, to "[g]uarantee [] no more than 3-year application pendency, " the patent term is extended one day for each day after the 3-year period after the application filing date "due to the failure of the [USPTO] to issue a patent within 3 years after the actual filing date of the application." 35 U.S.C. § 154(b)(1)(B) ("Part B"). The extension of the patent term authorized under Part B does "not includ[e]" five enumerated time periods (set out in three clauses). These five time periods are described, in clauses (i) and (ii), as "any time consumed by" the applicant's RCE under section 132(b), and proceedings under sections 135(a), 181, or appellate review, id. at § 154(b)(1)(B)(ii) and (ii); and, in clause (iii), as "any delay in" application processing requested by the applicant, "except as permitted by paragraph (3)(C), " id. at § 154(b)(1)(B)(iii).[3]

The USPTO's interpretation of both subparagraph (B) and its clause (i) are the focus of the instant dispute. Section 154(b)(1)(B) provides in pertinent part:

(B) Guarantee of no more than 3-year application pendency.-Subject to the limitations under paragraph (2), if the issue of an original patent is delayed due to the failure of the [USPTO] to issue a patent within 3 years after the actual filing date of the application... in the United States..., not including-
(i) any time consumed by continued examination of the application requested by the applicant under section 132(b);
(ii) any time consumed by a proceeding under section 135(a), any time consumed by the imposition of an order under section 181, or any time consumed by appellate review by the Patent Trial and Appeal Board[4] or by a Federal court; or
(iii) any delay in the processing of the application by the [USPTO] requested by the applicant except as permitted by paragraph (3)(C), the term of the patent shall be extended 1 day for each day after the end of that 3-year period until the patent is issued.

Id.

The Federal Circuit in Wyeth v. Kappos, 591 F.3d 1364 (Fed. Cir. 2010), addressed the calculation of Part B delay within the framework of section 154(b), noting that each period of delay in Parts A, B and C "has its own discrete time span whose boundaries are defined in section 154(b)(1), " with "a start and an end." Id. at 1369201270. "[A] violation of the "B guarantee... begins when the PTO fails to issue a patent within 3 years after the actual filing date of the application in the United States'" and "[i]t ends when the patent is issued.'" Id. at 1369 (quoting section 154(b)(1)(B)). The court rejected USPTO's "strained interpretation" that "B delay can occur anytime after the application is filed, " and made clear that "[t]he period of delay' under the express language of the B clause therefore runs from the three-year mark after filing until the application issues." Id. at 1370 (emphasis in original); see also id. ("the language of section 154(b) does not even permit B delay to start running until three years after the application is filed") (emphasis in original).

Third, to "[g]uarantee [] adjustments for delays due to derivation proceedings, secrecy orders, and appeals, " the patent term is extended one day for each day that a "proceeding, order, or review, as the case may be, " under sections 135(a), 181 or an appeal, is pending. 35 U.S.C. § 154(b)(1)(C) ("Part C"). Thus, these specific periods of delay excluded from the PTA determination under Part B when they occur three years after the filing of an application, are expressly restored to the patent term under Part C.[5]

b. PTA Limitations in Section 154(b)(2)

PTA is subject to several limitations laid out in section 154(b)(2). The limitation pertinent to the instant case is that any PTA set out in paragraph 1, which sets forth the three patent term "guarantees" under Parts A, B and C, is limited to the "extent [those] periods... overlap" but not to "exceed the actual number of days the issuance of the patent was delayed." 35 U.S.C. § 154(b)(2)(A).[6] In considering the proper construction of the limitation set out in section 154(b)(2)(A), the Federal Circuit in Wyeth rejected the USPTO's practice, ostensibly to avoid "double-counting" when "A delays cause' B delays, " 591 F.3d at 1370, of computing the adjustment using "either the greater of the A delay or B delay... but never combin[ing] the two, " id. at 1368. Instead, the court made clear that the limitation in section 154(b)(2) operates to ensure that when overlapping periods occur, "no such day [is] counted twice, " id. at 1371.

c. PTA Determination Procedures in Section 154(b)(3)

In order to implement the patent term "guarantees, " Congress provided the USPTO with an express grant of authority to "prescribe regulations establishing procedures for the application for and determination of patent term adjustments." 35 U.S.C. § 154(b)(3)(A). The determination of how much PTA has accrued is made by the USPTO and communicated to the patent applicant at the time the patent issues. 35 U.S.C. § 154(b)(3)(B).

2. RCE Proceedings

The AIPA amendments permitted, for the first time, a patent applicant to request continued examination of an application after the USPTO had issued a final notice of rejection or notice of allowance of the claim by submitting an RCE. See 35 U.S.C. § 132(b); 37 C.F.R. § 1.114(b). As the USPTO explains, an "RCE is not a new patent application; it merely continues the examination of the same application" and, consequently, "retains (1) the filing date of the underlying application and (2) the amount of patent term adjustment that the underlying application accrued due to delays by the USPTO during the examination." Def.'s Opp'n at 122012 13 (citing Changes to Implement Patent Term Adjustment Under Twenty-Year Patent Term, 65 FR 56, 366 (Sept. 18, 2000) ("Final Rule") (discussing § 1.704(c)(11)). An RCE may include "an information disclosure statement, an amendment to the written description, claims, or drawings, new arguments, or new evidence in support of patentability, " 37 C.F.R. § 1.114(c), but may not "introduce new matter into the disclosure of the invention, " 35 U.S.C. § 132(a). An RCE is initiated at the applicant's request and, therefore, "any time consumed" by an RCE is excluded from Part B delay, which is designed to compensate for administrative delay attributable to the agency. See 35 U.S.C. § 154(b)(1)(B)(i).

3. Challenged USPTO Regulations

Following notice and comment, the USPTO promulgated two final rules interpreting the proper calculation of PTA under section 154(b)(1)(B). First, 37 C.F.R. § 1.702(b) describes the USPTO's interpretation of the grounds for PTA due to the agency's failure to take certain actions within specified time frames. Specifically, this regulation provides that "the term of an original patent shall be adjusted if the issuance of the patent was delayed due to the failure of the Office to issue a patent within three years after the date on which the application was filed..., but not including: (1) [a]ny time consumed by continued examination of the application under 35 U.S.C. § 132(b)." 37 C.F.R. § 1.702(b)(1). This regulation also provides that "any time consumed by" proceedings under sections 135(a), 181 and appellate review are similarly "not included." Id. at (b)(2)-(4).

The second regulation, 37 C.F.R. § 1.703(b), specifies the beginning and end dates of the periods for which there are grounds for PTA. Thus, while § 1.702(b)(1) provides that time consumed by an RCE is excluded in determining Part B delay, § 1.703(b) details how that excluded time is determined. Specifically, the time consumed by an RCE is described as "(1) the number of days, if any, in the period beginning on the date which a request for continued examination of the application... was filed and ending on the date the patent was issued. " 37 C.F.R. § 1.703(b)(1) (emphasis supplied). As reflected in § 1.703(b)(1), the USPTO considers the "time consumed by" RCE examination, whether filed before or after the three-year statutory deadline, to be the time period from the date the RCE is filed until the issuance of the patent. In other words, the USPTO construes section 154(b)(1)(B)(i) to command that if the applicant is successful in obtaining patent approval after an RCE, no matter whether the RCE is filed before or after the three-year statutory deadline, no Part B delay is accrued from the time the RCE is filed until the issuance of the patent. Def.'s Opp'n at 13 ("The USPTO has determined that the time consumed by examination of an RCE includes every day the RCE is pending before the USPTO from the filing date of the RCE until the date of issuance of the patent"); see also Exelixis, Inc. v. Kappos, 906 F.Supp.2d 474, 480 (E.D. Va. 2012) (" Exelixis I ") ("[I]n the PTO's view, any time consumed by an RCE is subtracted from the PTA awarded under subparagraph (B), regardless of when the RCE is filed"). By contrast to the patent issue end date for an RCE filing, regulation § 1.703(b) provides that the "time consumed by" proceedings under sections 135(a), 181 and appellate review is measured from the date the proceeding is instituted until the date the proceeding is terminated, secrecy order is removed "or the date of the last decision" in an appeal." 37 C.F.R. § 1.703(b)(2)-(4).

B. Patent Term Adjustment for the '788 Patent

The plaintiff filed the application for the '788 patent on October 26, 2006, as a continuation application of a prior application filed in 2003. Pl.'s Statement of Undisputed Facts in Supp. of its Mot. for Summ. J. Regarding Calculation of Part B Delay ("Pl.'s Facts") ¶ 1, ECF No. 20-2; Pl.'s Mem. of P. & A. in Supp. of its Renewed Mot. for Summ. J. Regarding Calculation of Part B Delay ("Pl.'s Mem.") at 8, ECF No. 20-1; Def.'s Statement of Material Facts Not in Genuine Dispute ("Def.'s Facts") ¶ 1, ECF No. 21-1.[7] Three years after the initial application, on October 26, 2009, the application was still pending. Over two months later, on December 31, 2009, the examiner issued a final rejection of the application, rejecting all pending claims as being unpatentable. Pl.'s Facts ¶ 14; Def.'s Facts ¶ 3. At this point, the plaintiff had several options, "including: abandon[ing] the application, request[ing] an interview with the [e]xaminer, fil[ing] a request for continued examination, fil[ing] a continuation or continuation-in-part application, or appeal[ing] the final rejection." Def.'s Opp'n at 5. Any continuation or continuation-in-part application filed by the plaintiff at that point would have been treated as a newly-filed application, resulting in loss of all the PTA that had previously accrued. Id. ( citing 37 C.F.R. § 1.704(c)(11)). Filing an RCE, however, would permit continued examination of the same application and the concomitant retention of all previously accrued PTA. See id.

The plaintiff met with the examiner and, subsequently, on April 14, 2010, filed an RCE that narrowed the scope of its claims. Pl.'s Facts ¶ 11; Def.'s Facts ¶¶ 420125; see also Def.'s Opp'n at 6 ("[T]he Examiner suggested that the broad claims be amended' to overcome the prior art, " which advice the plaintiff followed when it "narrowed the scope of the claims as the Examiner ha[d] suggested.") (internal citation and quotations omitted); id. at 18 ("Abraxis... substantially amended its claims during the pendency of the RCE to obtain a determination of patentability by the USPTO"). Indeed, the plaintiff's RCE filing indicates that the plaintiff amended four claims ( i.e., Claims 2, 13, 24 and 25), added one new claim ( i.e., Claim 26) and withdrew twenty-one of the original twenty-five claims. Pl.'s Mot., Ex. 6 ("Pl.'s RCE Filing"), Part 1, at 220123, ECF No. 20-8. On June 1, 2010, the examiner concluded that the plaintiff was legally entitled to a patent and sent a notice of allowance. Pl.'s Facts ¶ 10; Pl.'s Mot., Ex. 7 ("Notice of Allowance and Fee(s) Due"), ECF No. 20-10. On June 3, 2010, the plaintiff paid the requisite issue fee and filed a petition, pursuant to 37 C.F.R. §1.705(b), seeking a patent term adjustment under Part A and Part B. Pl.'s Mot., Ex. 8 ("Part B - Fee(s) Due"), ECF No. 20-11; Pl.'s Mot., Ex. 9 ("Application for Patent Term Adjustment under 37 C.F.R. 1.705"), ECF No. 20-12. Summarized below are the evolving patent term adjustments given to the '788 patent leading up the instant litigation and pending cross-motions for summary judgment.

1. Original Patent Term Adjustment

On October 26, 2010, the USPTO issued the '788 patent. Pl.'s Facts ¶ 14. At that time, the USPTO determined that the patent was eligible for a 23-day patent term adjustment under Part A[8] and a 169-day patent term adjustment under Part B.[9] Pl.'s Mot., Ex. 13 at 2 ("Patent Term Adjustments"), ECF No. 20-16.

On April 15, 2011, the plaintiff filed the instant suit, alleging that the USPTO improperly calculated the patent term adjustment for the '788 patent under both Parts A and B. Compl. ¶ 20. In particular with respect to Part B, the plaintiff claimed entitlement to a 316-day PTA, contending that the "time consumed by" the RCE under § 154(b)(1)(B)(i) does not extend from the date on which an RCE is filed to the date that the patent is issued, as set forth in 37 C.F.R. § 1.703(b), but rather extends from the date on which an RCE is filed to the date that the USPTO issues a notice of allowance. Id. ¶¶ 31, 39. In the alternative, the ...


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