What Does It Tell Us About the Relationship between the Court and the Agency?
By Kevin E. Noonan --
The Federal Circuit last week affirmed the D.C. District Court's decision contradicting the Patent Office interpretation of 35 U.S.C. § 1.54(b) regarding patent term adjustment (see Patent Docs report). This decision is worthy of some thought regarding the status and nature of the Federal Circuit's supervisory role over Patent Office rules and decisions, and what motivates the Office when it interprets and implements the patent statutes.
The almost plenary nature of the Federal Circuit's supervisory role over the Patent Office was severely limited by the Supreme Court's Dickinson v. Zurko decision ten years ago. The Court held that the Federal Circuit's review of factual determinations by the Patent Office was governed by the Administrative Procedures Act, wherein such decisions were reviewed for substantial evidence. Until today, the only other opportunity for the Federal Circuit to opine on the scope of Patent Office authority was in Tafas v. Doll, where a divided panel found that the infamous claims and continuation rules were procedural in nature and thus within the scope of 35 U.S.C. § 2(b). In the Tafas decision, only Rule 78 (limiting the number of continuations that could be filed even in currently-pending applications) was held to be outside the scope of Patent Office authority, because it was in direct conflict with 35 U.S.C. § 120. However, this decision was mooted by joint motion between the Office and GlaxoSmithKline to have the panel opinion vacated.
The Federal Circuit's decision in Wyeth was written by the next Chief Judge (Judge Rader) and joined by a senior status judge (Judge Plager) and the newest member of the Court (Judge Moore), joining together the past, present, and future of the Federal Circuit bench. In affirming the District Court, the panel agreed with that lower court's succinct characterization of the problem with the Patent Office's approach: "[t]he problem with the PTO's interpretation is that it considers the application delayed under [the B guarantee] during the period before it has been delayed" (emphasis in original). The panel held that under the plain meaning of the statute, the "B" delay period cannot begin until three years after an application's filing date, and thus any "A" delay prior to that date cannot overlap with "B" delay and must be added to it in determining the proper length of any patent term adjustment.
The panel focused on the change in interpretation made by the Office in 2004, where the term "period of adjustment" was changed to "period of delay" in the rule (37 C.F.R. § 1.703(b)) implementing the statute. For applications entitled to periods of "B" adjustment, the Office interpreted the rule to define "overlap" of the "A"-delay and "B"-delay periods to extend from the filing date, rather than from 3 years after the filing date. As a consequence, beginning in 2004 the Office chose the greater of the "A" delay period or the "B" delay period in determining the length of the PTA period, and defined any "A" delay within the first three years after filing as overlapping (and thus not available for patent term adjustment).
While certainly not particularly noteworthy in outcome, the decision hies back to the time when the Federal Circuit was assertive in deciding "what the law is" when it comes to the patent statute. There is not a single citation in the opinion to a Supreme Court case on substantive patent law, and the panel forthrightly asserts its interpretation of the statute and its authority to make this determination in the face of a contrary view by the Office.
From the Office's perspective, it may be instructive to assess the reasons behind its parsimonious interpretation of the rule. According to the panel opinion, the plain language of the statute, as well as the legislative history, evinced a Congressional intention to restore to patent holders term lost as a result of the change in U.S. law implementing the provisions of the GATT treaty. The legislation implementing the patent provisions of the GATT treaty changed the term of a U.S. patent from 17 years from grant to 20 years from its earliest priority date. (The opinion quotes the legislative history, that "[t]hus, no patent applicant diligently seeking to obtain a patent will receive a term of less than the 17 years as provided under the pre-GATT standard; in fact, most will receive considerably more," citing H.R. Rep. No. 106-464, at 125 (1994) (emphases added).) Despite this clear evidence that the purpose of the statute requires an expansive reading, the Office chose (four years after the fact) to implement the rules so that patentees would not receive the benefit of "considerably more" patent term adjustment, by deciding to choose between the greater of the length of "A" delay and "B" delay, rather than adding both types of delay together and subtracting any "A" delay periods that occurred more than three years after the patent filing date (i.e., during the "B" delay period as interpreted by the Court).
Of course, the initial impetus for the Office's interpretation can be understood as a bureaucratic response intended to reduce the extent to which the Office could be criticized for delay in granting patents and prolonged patent application pendency. Under the statute, "A" delay periods are the direct result of Office failure to meet the timing requirements for promulgating a first substantive Office Action, for responding to Applicant's amendments and arguments submitted in response to Office Actions, and to issue a patent timely after payment of the issue fee. These periods are set by statute, not by the Office, and thus are not amenable to adjustment by the agency in response to changed conditions. Indeed, the Office argued that the statute was based on the average patent prosecution pendency times -- about 25 months -- that existed at the time the statute was enacted into law. The panel rejected this contention, saying there was no basis for this interpretation in the language of the statute.
In view of the timing of the Office's change in its interpretation of how the statute should be implemented, one would do well to remember the sea change the Office experienced during this period. Spurred by the influx of patent applications relating inter alia to the Human Genome Project and of business method patents as a result of the Court's State Street decision, the number of patents pending, and the pendency times for those applications, escalated rapidly in the 2000-2004 time period. This formed the beginnings of the infamous "backlog" of pending applications that motivated productive (large increases in patent examiner hiring) and unproductive (the claims/continuations rules) responses by the Office. Under these circumstances, the amount of "A" delay accumulating during the first three years of patent pendency also rapidly escalated: the Office simply did not have the resources to handle the increased number of applications according to the statutory timetable. Also during these years (2000-2004), Congress continued to raid Patent Office coffers to fund other government programs (including, inter alia, two wars and a large increase in national security-related expenditures in response to the 9/11 tragedy). Thus, it was understandable (if not justifiable) that the Office bureaucracy would believe that patent term adjustment due to "A" delay was a reflection on its inability to timely prosecute pending applications, and to interpret the statute in a way that would minimize the contribution of "A" delay periods to patent term adjustment times.
There is also a political aspect to the Office's decision to reduce PTA by effectively eliminating "A" delay during the first three years of application pendency. The years between 2000-2004 coincided with several studies (notably, by the Federal Trade Commission and National Academies of Science) that identified problems and inefficiencies with the U.S. patent system. In addition, commentators, academics, and the "high technology" community joined in this chorus, contending that the U.S. patent system was "broken" and in need of reform (allegations that prompted the perennial and so far unsuccessful efforts in Congress to pass patent reform legislation). Also during this time, Jon Dudas became Director, politicizing the Office (recall for example allegations of improper influence by the Canadian government on the NTP v. RIM case and re-examination of the NTP patents) and fostering an "us against them" stance regarding patent practitioners (and their clients, to a large extent). Under these circumstances, the political motivation to reduce patent term was strong, thus avoiding yet another ground for critics to castigate Office personnel (and more importantly, management) for inefficiency and incompetence. This motivation also appears to have been sufficient to provide an understandable (if reprehensible) basis for an interpretation of the statute so totally contrary to its plain language.
But all that has changed, of course, with the installation of Director Kappos (evidenced for example by cancellation of the claims and continuation rules and abandonment of the appeal of Tafas v. Kappos to the en banc Federal Circuit, among other things). That sentiment will face a test of its veracity (or whether it is just wishful thinking) when the Office announces its response to the Federal Circuit's decision in Wyeth.