Novartis AG v. Lee (Fed. Cir. 2014)

By Donald Zuhn --

In an opinion issued earlier today, the Federal Circuit affirmed a determination by the District Court for the District of Columbia that challenges of patent term adjustment (PTA) determinations by the U.S. Patent and Trademark Office for fifteen patents were untimely asserted by Novartis AG, Novartis Vaccines and Diagnostics, Inc., and Novartis Corporation ("Novartis").  The Federal Circuit also reversed the District Court's ruling that the Patent Office's interpretation of 35 U.S.C. § 154(b)(1)(B) was contrary to law, and remanded for a redetermination of proper PTA determinations.

As we noted in our summary of the District Court's November 2012 decision, the lower court determined that Novartis had not satisfied the 180-day limitation of 35 U.S.C. § 154(b)(4)(A) for timely challenging PTA determinations by the Office with respect to nineteen of twenty-three patents at issue, and further, that the 180-day limitation should not be equitably tolled.  For three of the four patents for which Novartis had timely challenged the Office's PTA determinations, the District Court adopted the rationale in Exelixis, Inc. v. Kappos, and for the lone remaining patent, the Court determined that the Office erred in not applying the Federal Circuit's decision in Wyeth v. Kappos.

Novartis originally brought suit against the U.S. Patent and Trademark Office Director in July 2010 under 35 U.S.C. § 154 and the Administrative Procedure Act (APA), alleging that the Office improperly determined the amount of PTA to which eleven of Novartis' patents were entitled by improperly refusing to apply the Federal Circuit's decision in Wyeth v. Kappos to patents granted prior to September 2, 2009.  Novartis also challenged the Patent Office's interpretation of the effect of filing a Request for Continued Examination (RCE) on the determination of B Delay.  The District Court subsequently consolidated that case with three other Novartis cases that raised similar issues, bringing the number of Novartis patents at issue in the consolidated action to twenty-three.

In assessing the Office's determination of PTA for each of the twenty-three Novartis patents at issue, the District Court noted that challenges to Office PTA determinations were governed by 35 U.S.C. § 154(b)(4)(A), which provided that:

An applicant dissatisfied with a determination made by the Director under paragraph (3) shall have remedy by a civil action against the Director filed in the United States District Court for the District of Columbia within 180 days after the grant of the patent.

For all but three of the twenty-three Novartis patents at issue, the Office argued that Novartis' complaints were filed more than 180 days after those patents were issued, and therefore, that Novartis was foreclosed from seeking additional PTA for those patents.  Novartis countered that the 180-day limitation of § 154(b)(4)(A) did not apply to its claims because that statute applied to determinations "under paragraph (3)," and therefore only applied to determinations of A Delay.

While the District Court sided with the Patent Office with respect to the 180-day limitation of § 154(b)(4)(A), the lower court disagreed with the Office that Novartis was foreclosed on all of the patents at issue.  In particular, the Court noted that Novartis had filed a petition for PTA reconsideration for one of the patents within two months of its issuance (as required under the applicable rules at the time), and had filed a complaint within 180 days of the Office's denial of reconsideration (but more than 180 days after the patent issued).  However, with respect to Novartis' argument that the 180-day limitation of § 154(b)(4)(A) should be equitably tolled for nineteen other patents, the District Court found Novartis' arguments to be unpersuasive, noting that "Novartis was free to raise the same issues that Wyeth and Abbott Laboratories raised in their lawsuits within the 180 days after their patents were granted."

Regarding the patents for which Novartis had timely challenged the Office's PTA determinations, the District Court noted that those patents concerned the same issue decided by the Eastern District of Virginia in Exelixis, Inc. v. Kappos, namely "whether § 154(b)(1)(B) requires that, or even addresses whether, any PTA be reduced by time attributable to an RCE where, as here, the RCE is filed after the expiration of the three year guarantee period specified in that statute."  After discussing the decision in Exelixis, the Court noted that it found "Judge Ellis' well-reasoned opinion to be persuasive," and "therefore adopt[ed] his rationale for concluding that the PTO's interpretation [of the statute] is contrary to the plain and unambiguous language of § 154(b)(1)(B), and that it contravenes the structure and purpose of the statute."

On appeal, Novartis challenged the District Court's ruling with respect to eighteen of the twenty-three patents that were before the lower court.  The District Court had dismissed Novartis' claims for fifteen of these patents as untimely asserted, and had rejected the Office's construction of § 154(b)(1)(B) for the remaining three patents.

With respect to the District Court's dismissal of Novartis' claims as untimely under the versions of 35 U.S.C. § 154(b)(3) and § 154(b)(4)(A) that applied to the patents at issue, the Federal Circuit notes that "[i]t is . . . undisputed that, for the fifteen patents, Novartis did not file suit within 180 days of denial of reconsideration [of the Office's PTA determination]."  Novartis argued, however, that the 180-day period was inapplicable because § 154(b)(4)(A) only applies to "a determination made by the Director under paragraph (3) -- or, as Novartis contended, only to the provisional PTA determination that the Office made at the time of allowance" (under the applicable rules at the time).

Finding Novartis' interpretation of § 154(b)(4)(A) to be "unreasonable," the Federal Circuit states that "[t]he applicable version of paragraph (b)(3) . . . addresses all patent term adjustment determinations, not just some."  According to the Court, Novartis' reading of the statute:

[W]ould use one provision to contradict the broad language of several other provisions and produce the senseless result that the detailed judicial-review provision of paragraph (b)(4) -- with its 180-day rule and its confinement of venue to one district court -- would apply to review only of provisional, but not final, adjustment determinations.  In the end, the statutory language on which Novartis relies is a flaw in drafting that cannot reasonably support the construction Novartis advances.

In addition to rejecting Novartis' construction of § 154(b)(4), the Court also determined that Novartis had failed to demonstrate why the 180-day rule should be equitably tolled, stating that "[a]t a minimum, nothing stood in the way of Novartis's timely pressing the very claim Wyeth pressed," adding that "[a] fortiori equitable tolling is unavailable where, as here, there is no reason even to doubt that the litigant knew the legal theory, but just waited until another person secured a favorable ruling on the theory in another case."  The Court further found no merit to Novartis' argument that its property was taken, in violation of the Fifth Amendment, stating that "[f]or the patents as to which it did not timely file suit under § 154(b)(4), it was only Novartis's failure to comply with reasonable filing deadlines that prevented it from securing any patent term adjustment authorized by Wyeth."

As for the three patents at issue for which Novartis timely challenged the Office's PTA determinations, and which involved the impact of an RCE filing on the calculation of B Delay, the Federal Circuit agreed with the Office that "no [patent term] adjustment time is available for any time in continued examination, even if the continued examination was initiated more than three calendar years after the application's filing" (in other words, for an RCE filed more than three years after the application filing date).  However, the Court agreed with Novartis "that the 'time consumed by continued examination' should be limited to the time before allowance, as long as no later examination actually occurs."  As a result of the Court's determination that the Office's interpretation of § 154(b)(1)(B) was only partly correct, the Court remanded for a redetermination of proper PTA determinations in accordance with the Court's opinion.

In view of its decision in Novartis AG v. Lee, the Federal Circuit also issued an opinion in Exelixis, Inc. v. Lee, vacating judgments by the District Court for the Eastern District of Virginia as to PTA determinations for two Exelixis patents, and remanding for a redetermination of the proper adjustments in accordance with the Court's Novartis decision.

Novartis AG v. Lee (Fed. Cir. 2014)
Panel: Circuit Judges Newman, Dyk, and Taranto
Opinion by Circuit Judge Taranto

Exelixis, Inc. v. Lee (Fed. Cir. 2014)
Panel: Circuit Judges Newman, Dyk, and Taranto
Per curiam opinion

Comments

[EG]

Don,

This ruling is hugely troubling. I'll grant that this ruling by the Federal Circuit panel regarding RCEs and/or appeals periods not adding to B period PTA is plausible based on how the PTA statute is worded. But it frankly flies in the face of the INTENT of the PTA statute to not have the USPTO "sandbag" the applicant, consume patent term, and have the applicant be unable to have recourse to recapture the patent term lost due to USPTO delay.

Most significantly, this ruling raises a HUGE practical concern that the USPTO could, for example, delay issuance of the substantive Office Action and then simply unreasonably (and improperly) frustrate the applicant into filing an RCE and/or appeal, thus stretching out the prosecution indefinitely with no PTA recourse and no legal “stick” to get the USPTO to act in a reasonable and timely fashion. For drug makers like Novartis, this ruling is especially bad.

I do hope Novartis asks for a rehearing en banc because this issue on PTA is too important to be based simply on single Federal Circuit panel of 3 judges. I'm also surprised that Newman went along with Taranto's opinion (I'm not surprised that Dyk did).

[EG]

Don,

After reviewing carefully the B period provision of the PTA statute, as well as the ED of Va opinion in Exelixis, the more I become convinced that, while this Federal Circuit panel’s reading of the B period provision is plausible, it isn't the best, or in my opinion, correct reading of it. This panel's reading is especially in conflict with the intent of the B period provision to not have patent term consumed due to delays caused by the USPTO (rather than by the applicant) in issuing the patent within 3 years of the filing date.

If you read the "not including" exclusion language of the B period provision in context, these exclusions all relate to actions taken by the applicant that will delay issuance of the patent in this 3-year window. That's very apparent from the third exclusion which relates to "any delay in the processing of the application by the [USPTO] requested by the applicant." In other words, if, for example, the applicant filed an RCE within that 3-year window, that would be treated presumptively as a "delay by applicant" that caused the patent to not issue within 3 years of the filing date. In fact, and using the example of the RCE, you might also interpret these B period exclusions to be tolled (as the Federal Circuit panel apparently did) once the RCE period ends (e.g., there is a Notice of Allowance). In sum, I agree with how the ED of VA ruled in Exelixis that these exclusions are applicable to B period PTA only when they occur within that 3-year window.

I do hope Novartis requests rehearing en banc, and that the Federal Circuit grants it. Leaving this panel ruling as it is has huge, negative consequences for patent prosecution, and is simply not how this B period provision should be properly interpreted.

[Skeptical]

There are other inherent problems in the decision.

For example, the decision stresses the point about how the legislative intent was to hold the Office accountable for its delays.

The period of time after allowance and before issue was thus excused.

But what about other times during the RCE process that the Office is STILL responsible for the delays? Those delays are not accounted for, even though such delays - if they were to happen outside of an RCE would count (which mirrors the logic used by the court).

Did the court notice this logic breakdown?

I am...

[Clark]

@ Skeptical--also if you look at how the PTO calculates PTA at present (i.e., prior to Novartis v. Lee), they dock Applicant for delay during the NOA to issue period (at least in a case that I have) if for example any petitions are filed, even though the PTO itself is not docked for any delays during this same period.

Note for anyone looking to file a Request for Reconsideration of PTA--37 CFR 1.705(b) seems to have been modified by the interim final rule "Revisions to Patent Term Adjustment" (Fed. Reg. v. 78, no.62, April 1, 2013), but I cannot find a 'final' final rule...??? Also note the online MPEP 1.705 available via the PTO website does not include the changes from the interim final rule, although I have noticed the e-version of the MPEP is out of date in a number of places. So I'm not sure exactly what rule to follow in filing a Request for Reconsideration. Then again, maybe that's the way the PTO wants it ;)

[Donald Zuhn]

Clark:

I would recommend that practitioners and applicants refer to the version of 37 CFR that is posted on the Government Printing Office website. The GPO's version of 37 CFR appears to be updated as soon as rules changes take effect.

Also, I have not been able to locate a "final rule" for the "interim final rule" that was published on April 1, 2013. Last fall, I spoke with someone at the USPTO who confirmed that the version of § 1.705 that appeared in the final rule was in effect.

Thanks for the comment,

Don