Gilead Sciences, Inc. v. Lee (Fed. Cir. 2015)

Filing of IDS after Response to Restriction Requirement Constitutes Failure to Engage in Reasonable Efforts to Conclude Prosecution

By Donald Zuhn --

Last week, in Gilead Sciences, Inc. v. Lee, the Federal Circuit affirmed the decision by the District Court for the Eastern District of Virginia granting summary judgment to the Director of the U.S. Patent and Trademark Office that the Office had properly calculated the Patent Term Adjustment (PTA) for U.S. Patent No. 8,148,374.  The '374 patent, which is directed to the compound cobicistat, is owned by Gilead Sciences, Inc.

The instant appeal involved 35 U.S.C. § 154(b)(2)(C), which reduces the PTA accrued by a patent as a result of the applicant's delay during prosecution.  In particular, § 154(b)(2)(C)(i) "reduce[s the PTA] by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application" (emphasis added).  Section 154(b)(2)(C)(iii), which is also relevant, states that "[t]he Director shall prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application."

During prosecution of the application that issued as the '374 patent, the Examiner issued a restriction requirement, and Gilead responded by selecting one of four groups of claims for examination.  Fifty-seven days later, Gilead filed an IDS.  (The transaction history for the '374 patent indicates that Gilead submitted IDSs on eight other occasions -- including on the day the response to the restriction requirement was filed -- and that a non-final rejection was mailed by the Office 27 days after the IDS was filed.)  Once the '374 patent issued, the Office determined that there were 245 days of "A Delay" (PTO delay), 406 days of "B Delay" (for failing to issue patent within three years of its filing date), a reduction of 35 days for overlapping A and B Delay, and a further reduction of 57 days for applicant delay resulting from the period between Gilead's response to the restriction requirement and the subsequent IDS.

Gilead challenged the Office's PTA determination, arguing that the subsequent IDS did not cause any actual delay and therefore should not have been subtracted from its PTA.  The Office rejected Gilead's argument, countering that the subsequent IDS constituted a failure to engage in a reasonable efforts to conclude prosecution as required by 37 C.F.R. § 1.704(c)(8).  Among the "[c]ircumstances that constitute a failure of the applicant to engage in reasonable efforts to conclude processing or examination of an application," § 1.704(c)(8) provides that the "[s]ubmission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner, after a reply has been filed" shall result in the "reduc[tion of the PTA] by the number of days, if any, beginning on the day after the date the initial reply was filed and ending on the date that the supplemental reply or other such paper was filed."  The Office, therefore, considered the IDS filed after Gilead's response to the restriction requirement to be "a supplemental reply or other paper" under § 1.704(c)(8).  The District Court granted the Office's motion for summary judgment, finding that Gilead had failed to show that the Office's interpretation of § 154(b)(2)(C) was unreasonable.

On appeal, the Federal Circuit reminded that in reviewing an agency's statutory interpretation, it must apply the two-step framework established in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).  In Chevron step-one, the Court must determine whether Congress addressed the precise question at issue.  The District Court determined that the precise question at issue was whether filing a supplemental IDS after submitting a reply to a restriction requirement constitutes a failure to engage in reasonable efforts to conclude prosecution of the application.  Instead of addressing whether the District Court's determination of the precise issue was correct, Gilead argued that the statute only allowed for patent term adjustments in instances where the applicant's conduct actually delayed the conclusion of prosecution.  Gilead based this argument on its reading of the surrounding statutory language, statutory purpose, and legislative history.  The Federal Circuit, however, rejected Gilead's arguments, determining instead that "Congress has not addressed the precise question at issue in this case -- whether a failure to engage in reasonable efforts requires conduct that actually causes delay."

Proceeding to Chevron step-two, the Federal Circuit next examined whether the Office's answer to the question was based on a permissible construction of the statute, noting that "[a]t this stage of the Chevron analysis, judicial deference to an agency's construction of a statutory scheme is afforded considerable weight."  The Court first pointed to § 154(b)(2)(C)(iii), in which "Congress expressly delegated authority to the PTO by granting authority to '[t]he Director [to] prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application.'"  The Court observed that § 1.704(c)(8) "encompasses the precise situation in this case -- the filing of a supplemental IDS after submission of a reply to a restriction requirement," and therefore concluded that "a reasonable interpretation of the statute is that Congress intended to sanction not only applicant conduct or behavior that result in actual delay, but also those having the potential to result in delay irrespective of whether such delay actually occurred."  Moreover, the Court noted that:

Gilead's argument also fails because it frames the issue solely in terms of the patentee's application, without recognizing that an Examiner is required to review a significant number of applications during a limited period of time.  . . .  Although an applicant's conduct may not actually result in delaying the issuance of that applicant’s patent, such conduct may have negative externalities for other patent applicants because it could result in delaying the issuance of their patents [emphasis in original].

The Court also noted that "[b]ecause the A Delay provision of the statute penalizes the PTO if the examiner fails to respond within four months of the applicant's response to a restriction requirement, any relevant information received after an initial response to a restriction requirement 'interferes with the [PTO's] ability to process an application.'"  The Court therefore determined that "[t]he regulation is a reasonable interpretation of the statute because the filing of a supplemental IDS after an initial reply to a restriction requirement further adds to the list of documents the PTO must consider before responding to the restriction requirement," and concluded that the Office's construction of the statute was reasonable.  The Court therefore affirmed the District Court's decision granting summary judgment to the Director.

Because an Examiner is "on the clock" from the moment an application is filed or an applicant commences national stage (albeit in the latter circumstance as a result of the AIA Technical Corrections Act), and must issue an Office Action within 14 months of the filing or commencement date in order to avoid Office delay, one wonders whether the Court would consider the filing of an IDS at any point after the filing or commencement date to raise the same issues as the IDS in the instant case (and if not, whether the only difference between these two situations is the 10 additional months of examination time).  One also wonders whether the Court would consider the filing of an IDS after a response to an informalities notice (such as a Notice of Missing Parts) to raise the same issues as the IDS in the instant case (despite the possibility that the Examiner might not pick up the case for almost a year after the IDS is filed).  One further wonders how the Court might reconcile § 1.704(c)(6), which appears to require actual delay ("[s]ubmission of a preliminary amendment or other preliminary paper less than one month before the mailing of an Office action under 35 U.S.C. 132 . . . that requires the mailing of a supplemental Office action . . ."; emphasis added), with § 1.704(c)(8).  These questions, however, (as several prior questions involving the PTA rules, see, e.g., Wyeth v. Kappos, ArQule v. Kappos, Novartis AG v. Lee) must wait for another case and another day.

Gilead Sciences, Inc. v. Lee (Fed. Cir. 2015)
Panel: Circuit Judges Dyk, Wallach, and Hughes
Opinion by Circuit Judge Wallach

Comments

[Skeptical]

Elsewhere, a comment was made that one possible effective way out of this predicament was for the applicant to merely wait a cycle and submit the IDS along with a next response (or in the case of an allowance, file an RCE and the IDS).

Perhaps here with less clutter, this can be discussed.

I wonder if the seemingly effective tactic (I think the tactic WOULD work) meets the intent of "timely prosecution." To me, waiting and timely - while effective to circumvent the outcome as evidenced here, are jarringly opposite.

Thoughts...?

[Dan Organ]

@Skeptical - It seems from my reading of 37 CFR 1.97 that waiting to file an IDS may be a risky tactic depending on where you are in prosecution.

If the next action is final or an allowance, a fee AND 1.97(e) statement are required, the statement requiring that the item of information was cited or known less than 3 months ago. This means the final action/allowance must come within the short window of time between becoming aware of the item of information and the final action/allowance, which may not occur. In order to avoid running afoul of the 3 month window, you may end up having to file the IDS at 3 months, and will merely have extended your PTA reduction by waiting to file the IDS.

Alternatively, if the next action will not close prosecution, a fee OR 1.97(e) statement are required, meaning that you could potentially get away with waiting to file the IDS for as long as it takes to receive the next action, and just pay the fee. However, while that may be allowed under 1.97, it may not be so well received when looking at whether it meets the intent of "timely prosecution," as you are withholding information, if just for a short time.

[Roosevelt Franklin]

Skeptical, Dan Organ is right. This is one of those situations where the PTO has taken the statutory language and given it a life of its own that has nothing to do with the intent in passing the statute in the first place. "Wait" and "timely" don't go together in normal parlance, but they do here. If the first action after the restriction requirement had been a rejection, then Gilead would have been better off waiting for the rejection and then filing the IDS. Because of the potential difficulties that Dan O mentioned, unless you're a soothsayer the best practice is still to file an IDS within 3 months of filing the application.

[Skeptical]

Dan and Roosevelt,

Thank you for your comments.

You both seem to reflect the reality that an action in delaying the submission of information in an IDS , while perhaps not always a best strategic move, is nonetheless a perfectly viable move.

A perfectly viable move that directly on the face (in the face?) violates the intent of the rule.

Dan - you missed 1.97(b)(4) that gives you an out on the "AND" v "OR" timing. Merely file an RCE and you have a clear out to filing the IDS even if you do receive a surprise allowance. The "potential difficulties" are extremely easy to handle.

Roosevelt - I am not sure about your comment concerning the PTO taking the "statutory language" and messing with the intent. Which section of 35 USC (the statute) do you trace the sections of 37 CFR to? No, I think instead that this animal is ENTIRELY an Office animal apart from any statutory intent.

Be that as it may, any time I see a flagrant contradiction between intent and practice, I have to pause.

How to settle a seemingly obvious contradiction?

How would I judge this?

How would a federal judge look at this?

I think that the Office itself by creating such a clear out and around its own voiced "intention" has effectively neutered that intention.

Clearly, the CFR (with no actual USC to trace back to) must rest on its own words. Those words are clear in the ability - the rather EASY ability - to step around the aforementioned "intent." If it were not so intended to so easily circumvent the intent for timeliness to be such a powerful driver, the Office itself has an easy manner of making such an intent manifect - simply remove the very easy sidestep.

Since it was the Office itself that provides the very easy work-around, I must judge that the "driver" for timeliness must indeed be lax.

Of course, when one considers the lack of authority of the Office to make substantive rules affecting patent rights (See Tafas), this laxity is only reinforced. A rule, a heavy handed rule with a strict penalty of loss of rights, would be eminently challengable as beyond the authority of the Office to write in the first place. But a rule of convenience, a rule that merely appears to be "forceful" (with a very real drawback of being a trap for the unwary), is a rule that does not become a "Tafas-like" breach of authority.

To me then, the take-away is that an IDS filing is best done timely, but NEED NOT be done timely. Yes, it is best - BUT (and this is a very big but, apologies to Sir Mix-A-Lot), circumstances that raise the possibility for applicants to NOT be timely and still be able to "follow the rules" and submit an "untimely" IDS are not circumscribed. The Office does not have the authority to stop the game, but they can make it easier to choose the more "noble" path in the game.