IP Law Daily, PATENT—Fed. Cir.: USPTO’s denial of Daiichi petitions to adjust patent terms was reasonable, (Jul 2, 2015)

By Cheryl Beise, J.D.

The USPTO acted within its discretion both in prescribing rules governing patentee petitions challenging a patent term adjustment (PTA) determination and in applying those rules to deny as untimely petitions filed by Daiichi Sankyo Company, Ltd., U.S. Court of Appeals for the Federal Circuit has determined (Daiichi Sankyo Company, Ltd. v. Lee, July 2, 2015, Reyna, J.). A decision of the federal district court in the District of Columbia, granting summary judgment to the PTO, was affirmed.

Patent term adjustment statute. Under Section 154 of the Patent Act (pre-AIA version), a patent’s term could be extended for two types of delay during patent prosecution that are attributable to the PTO. The first type of delay, the “A Delay,” arose when the PTO failed to meet statutory deadlines for events that occur during prosecution. 35 U.S.C. § 154(b)(1)(A). The second type of delay, the “B Delay,” arose when the PTO was at fault for failing to issue a patent within three years after the actual filing date of the patent’s application. 35 U.S.C. § 154(b)(1)(B).

A patentee dissatisfied with the number of days restored to the term of the patent has a statutory right to both administrative and judicial review. Regarding administrative review, the PTO promulgated 37 C.F.R. § 1.705, which imposed a deadline of a two-months from the date of issuance for requesting reconsideration of a PTA determination. Alternatively, a patentee who was dissatisfied with the determination could bring an action against the Director of the PTO in the District Court for the District of Columbia within 180 days after the date of issuance.

Prior to 2010, the PTO’s practice was to restore, upon issuance, the patent term equaling the greater of the number of days of A and B Delays occurring during prosecution. However, the Federal Circuit rejected this practice in Wyeth v. Kappos, 591 F.3d 1364 (Fed. Cir. 2010). As a result of Wyeth, on February 1, 2010, the PTO adopted an “Interim Procedure” for requesting patent term adjustments. The Interim Procedure also adopted an “optional” procedure (“Optional Interim Procedure”) for patents that issued before March 2, 2010. Under the Optional Interim Procedure, patentees could file a petition for reconsideration up to 180 days after the issuance date, provided the sole basis for the request was that the patent term adjustment was made under the PTO’s pre-Wyeth adjustment calculation method. The net result was that the Optional Interim Procedure was available for patents that issued between August 5, 2009 (the earliest date of availability of the Optional Interim Procedure) and March 1, 2010. Petitions filed outside this 180-day window would be denied as untimely.

Daiichi patents. Pharmaceutical manufacturer Daiichi owned three patents that it alleged were affected by the PTO’s pre-Wyeth interpretation: U.S. Patent Nos. 7,365,205 (the ’205 patent) and 7,342,014 (the ’014 patent), and 7,576,135 (the ’135 patent). The patents cover compounds that are useful for treating tissue death due to lack of oxygen, blood clots, and other ailments. The ’014 and ’205 patents issued before August 5, 2009 and, thus, did not qualify for the Optional Interim Procedure. According to Daiichi, the PTO restored days for either the A or B Delay, but not both. Daiichi claimed that the term of each of its patents was shortened by at least 321 days under the pre-Wyeth calculation method.

Shortly after the district court’s decision in Wyeth, but before the implementation of the Interim Procedure, Daiichi filed petitions requesting reconsideration of the patent term adjustments for the ’014 and ’205 patents. Because Daiichi’s petitions were filed outside the two-month window set forth in 37 C.F.R. § 1.705(d), Daiichi concurrently filed a petition to waive the two-month window under 37 C.F.R. § 1.183. Section 1.183 allows the Director, on petition, to waive regulatory requirements in “extraordinary situations” when justice so requires.

The PTO dismissed both of Daiichi’s waiver petitions and denied both requests for reconsideration of the patent term adjustments because neither was timely filed within the required two-month window. The PTO also rejected Daiichi’s requests for reconsideration on the same grounds. The PTO explained that it did not believe Congress intended to create a scheme “under which the time period to seek initial USPTO review of a PTA determination extends beyond the” 180-day “time period provided for a dissatisfied patentee to seek judicial review” of the PTO’s adjustment determination under Section154(b)(4).

On February 12, 2010, Daiichi simultaneously filed the instant lawsuit seeking judicial review of the adjustments for all three patents under the Administrative Procedure Act (APA) and Section 154(b)(4)(A) and petitioned the PTO for recalculation of the patent term adjustment for the ’135 patent. Because the ’135 patent was granted within 180 days of the March 2, 2010 deadline, it was eligible for the Optional Interim Procedure. The district court remanded the ’135 patent to the PTO, which recalculated the patent term adjustment from 86 days to 503 days. Daiichi pointed out that this made no practical difference since the ’135 patent was terminally disclaimed over both the ’014 and ’205 patents, which were also terminally disclaimed over each other, so that none of the three patents could be enforced past the earliest date of expiration of either the ’014 or ’205 patents.

Daiichi argued the PTO violated the APA and Section 154(b) by (1) miscalculating the patent terms for the ’014 and ’205 patents and (2) refusing to reconsider its patent term adjustments in light of Wyeth. The district court rejected Daiichi’s arguments and granted summary judgment to the PTO. Daiichi appealed.

On appeal, Daiichi contended that the PTO’s denial of its requests for reconsideration of the patent term adjustments constituted an abuse of discretion and that the PTO’s disparate treatment of its patents was arbitrary and capricious.

Under the APA, an agency decision may be set aside only if it is arbitrary, capricious, an abuse of discretion, or not in accordance with the law. 5 U.S.C. § 706. The scope of review under this standard is narrow, and the reviewing court may not “substitute its judgment for that of the agency,” the Federal Circuit noted.

Requests for reconsideration. Daiichi argued that the PTO’s view that Section 154(b)(4) prevented it from recalculating patent term adjustments beyond 180 days after issuance was erroneous.

The Federal Circuit agreed with the government that the PTO did not erroneously interpret the law by determining not to accept petitions for administrative review filed more than 180 days after issuance. Rather, the PTO acted within its discretion under the statute to “prescribe regulations establishing procedures for the … determination of patent term adjustments,” 35 U.S.C. § 154(b)(3).

The court also held that the PTO acted within its discretion in denying Daiichi’s requests for reconsideration of the PTA determinations on the ground that the petitions were filed more than 180 days after the patent grant. Both decisions provided ample reasoning for considering only requests filed within 180 days of the patent grant, the court said.

Disparate treatment of patents. Daiichi also argued that the PTO’s disparate treatment of patents issued on August 5, 2009 (the earliest day on which a patent could issue and still qualify for the optional procedure) and the previous day was arbitrary and capricious. According to Daiichi, the issuance of Wyeth is no less of an extraordinary circumstance for patents issued before August 5, 2009 than it is for patents issued on or after that day. Daiichi contended the PTO has treated similarly situated patentees differently because one had a remedy and the other did not.

The Federal Circuit determined that Daiichi failed to show that the PTO treated any requests for reconsideration of patent term adjustments differently than Daiichi’s petitions. Daiichi was treated identically to all other patentees whose patents had issued more than 180-days prior to the deadline for filing a petition, and who failed to show extraordinary circumstances.

The Federal Circuit also held that the PTO’s decision to grant extensions of the administrative review period for some patents to match the judicial review period for all patents was not arbitrary and capricious. The statute allowed the Director to prescribe the time-frame for a petition at the PTO. The court noted that Wyeth did not obligate the PTO to create the Optional Interim Procedure. “The PTO simply provided an alternative, and more cost-effective, mechanism at the agency for attaining the same result,” the Federal Circuit said. “Choosing an administrative filing deadline that mirrors the judicial filing deadline, especially when it lengthens that deadline for some patentees, is neither arbitrary nor capricious.”

Equitable tolling. In a post-augment submission, Daiichi pointed to Merck Sharp & Dohme Corp. v. Lee, No. 10- 1110, (D.D.C. Nov. 6, 2014) to support its argument that the government acts arbitrarily whenever it opposes a patentee that seeks recalculation under the agency’s new calculation method for patents issued prior to the Optional Interim Procedure’s earliest qualifying date. In Merck, the government conceded that the facts of the case justified equitably tolling of the 180-day judicial review period for a patent issued prior to the availability of the Optional Interim Procedure.

The Federal Circuit explained that Merck was distinguishable because the government had contested equitable tolling on legal grounds, when it should have done so on factual grounds. There was no indication that the government, in Merck, intended its concession to have any effect beyond that particular case.

Conclusion. According to the Federal Circuit, the PTO did not act in an arbitrary and capricious manner by its consistent treatment of all patents issuing prior to the availability of the Optional Interim Procedure, its selection and use of the 180-day administrative review period, or its concession in Merck. The PTO’s denial of Daiichi’s requests for reconsideration was not based on an erroneous view of the law or otherwise arbitrary or capricious and Daiichi was not entitled to equitable tolling of the judicial review period, the court held.

The case is No. 2014-1280.

Attorneys: Daryl Joseffer (King & Spalding LLP) for Daiichi Sankyo Company, Ltd. Brian Thomas Racilla, Office of the Solicitor, USPTO.

Companies: Daiichi Sankyo Company, Ltd.

Cases: Patent FedCirNews