Patent Term Adjustment: A Technical Dispute with Great Financial Implications

Friday, February 1, 2013, by Seiko Okada

In 1994, the patent term was changed from “seventeen years from issuance” to “twenty years from filing” under the Uruguay Round Agreements Act.  In 1999, the patent term adjustment (“PTA”) was created under the American Inventors Protection Act to help maintain a minimum of 17 years of the actual patent term even if the Patent Office is slow in prosecution. 35 U.S.C. § 154(b)(1)(B) requires that the term of a certain patent be extended one day for each day of delay until the patent is issued when, among other things, the Patent Office fails to issue the patent within three years from filing.  The Patent Office, however, has interpreted the statute to mean that the filing of a request for continued examination (“RCE”) cuts off any subsequent accrual of patent issuance delays that can be claimed for PTA.  (When prosecution in a certain patent application is “closed,” an applicant may file an RCE for further consideration of the application.  An application is “closed” when it is under appeal at the Federal Circuit, or when the Patent Office issued a final action, a notice of allowance, or an action that otherwise closes prosecution in the application.)

Last year, Exelixis challenged the Patent Office’s interpretation of a PTA cut-off by an RCE in one of Exelixis’ cancer drug patents entitled “Phosphatidylinositol 3-Kinase Inhibitors and Methods of their Use.” On November 1, 2012, in Exelixis v, Kappos (Exelixis I), the United States District Court for the Eastern District of Virginia held that the Patent Office has been improperly calculating PTA in cases where an RCE is filed more than three years after the patent application was submitted.  The court held that “the plain and unambiguous language of [35 U.S.C. § 154(b)(1)](B) requires that . . . RCE’s have no impact on PTA if filed after the three year deadline has passed.”  Under this holding, Exelixis is entitled to a patent term that is 114 days longer than the term calculated by the Patent Office.  Considering that successful innovative (name-brand) drugs may make some several million dollar sales a day, Exelixis I seems like a victory for Exelixis and other similarly-situated innovator companies.

The story does not end here.  On January 28, 2013, the same court dealt with the same issue in another cancer drug patent of the same party, entitled “C-Met Modulators and Methods of Use” and reached a completely opposite holding (Exelixis II).  The judge who was assigned to Exelixis II “part[ed] ways with the reasoning in Exelixis I” and declined to find that the statute expressed “plain and unambiguous” congressional intent on the issue whether an RCE filed after the three-year period cuts off the accrual of patent issuance delays.  The court held that “Congress gave the [Patent Office] broad discretion to regulate how PTA is determined and RCEs are processed,” and that the Patent Office’s regulation “deserves Skidmore deference.”

The Patent Office appealed Exelixis I to the Federal Circuit on December 31, 2012.  Exelixis is also likely to appeal Exelixis II to the Federal Circuit to resolve the split in the opinions.  The ultimate resolution remains uncertain.  The Patent Office is likely to continue to reject any Exelixis-type recalculation of PTA unless and until the final disposition of the cases is reached in favor of Exelixis.

Every extra day of a blockbuster product’s patent term may equal some million dollars for the innovator company

The PTA dispute raises huge business and financial implications.  Several extra days of a blockbuster product’s patent term may mean millions of dollars of revenue, strategy changes in product marketing, licensing, or patent infringement litigation, and impacts on other important business decisions.

For now, patent holders should re-examine the PTA calculations of patents to see whether the patent is entitled to an Exelixis extension.  If so, they should file a request for PTA recalculation with the Patent Office within two months of the patent grant to reserve the right to appeal.  Of note, H.R. 6621, signed into law on January 14, 2013, eliminates the option of challenging a PTA calculation directly in a district court.  Only if a patent holder timely files a request for PTA recalculation, the patent holder may appeal the Patent Office’s decision to that request, exclusively by bringing a civil action against the Patent Office in the United States District Court for the Eastern District of Virginia within 180 days of the Office’s decision.  Patent applicants are also advised to continue to take steps to maximize PTA by strategic prosecution and by minimizing delays on applicants’ side, for example, by filing applications electronically instead of using snail mail.

The author thanks Dr. Jeff Childers  for his insightful guidance.