MVS Filewrapper® Blog: Federal Circuit Clarifies Patent Term Adjustment

The U.S. Court of Appeals for the Federal Circuit has issued an opinion that provides guidance for how Patent Term Adjustments should be calculated.

Between June 2009 and May 2011, Novartis filed four civil lawsuits against the Director of the United States Patent and Trademark Office (PTO) in the United States District Court for the District of Columbia claiming that, for twenty-three of its issued patents, the Director had improperly determined the amount of patent term adjustment (PTA).  On February 16, 2012, the district court consolidated the cases.    

Novartis claimed that the Director’s determinations of the patent term adjustment were erroneous because they were based on two mistaken interpretations of the PTA statute as it applies to an applicant’s request for continued examination (RCE).   The District Court held that for the patents where review of PTA was applicable, the Director’s determinations were incorrect, and granted Novartis the additional patent term.  On appeal, the Federal Circuit court affirmed-in-part and reversed-in-part the District Court’s ruling, concluding that Novartis was entitled to most—but not all—of the additional patent term adjustment it sought.   

The portion of the PTA statute relevant to this case is set out in in 35 U.S.C. § 154(b).  This provision states:

 

if the issue of an original patent is delayed due to the failure of the United States Patent and Trademark Office to issue a patent within 3 years after the actual filing date of the application under section 111(a) in the United States or, in the case of an international application, the date of commencement of the national stage under section 371 in the international application, not including—

(i)      any time consumed by continued examination of the application requested by the applicant under section 132(b);

(ii)     any time consumed by a proceeding  under section 135(a), any time consumed by the imposition of an order under section 181, or any time consumed by appellate review by the Patent Trial and Appeal Board or by a Federal court; or

(iii)    any delay in the processing of the application by the United States Patent and Trademark Office requested by the applicant except as permitted by paragraph (3)(C), the term of the patent shall be extended 1 day for each day after the end of that 3-year period until the patent is issued.

Novartis asserted that the PTA it was granted on its patents was incorrect because the Director erroneously interpreted this provision to provide that (1) time spent in any continuing examination, no matter when initiated by the applicant, does not count towards tolling the statute’s three year allotment, and (2) both the time from initiation of continued examination to allowance and the time from allowance to issuance do not count toward tolling the three year allotment.  The Federal Circuit agreed with the PTO on the first issue and Novartis on the second.    

In finding that the Director's first interpretation of § 154(b) is correct, the court held that the best reading of the statute is that "the [PTA] time should be calculated by determining the length of the time between application and patent issuance, then subtracting any continued examination time and determining the extent to which the result exceeds three years."   The court concluded that this interpretation is fairest to the applicant while also conforming to the statute's purpose.

In ruling for Novartis on the second issue, the court determined that there is no basis in the statute for distinguishing a continued-examination case from a case not involving a continued examination.  As a result the court held that any time between allowance and issuance should count toward the PTO’s three year allotment, regardless of whether there has been any continued examination.  

The full opinion is available here.

MVS Filewrapper® Blog: Contract Enforceability Beyond Patent Term

In Kimble v. Marvel Enterprises, the plaintiff patent owner appealed the United States District Court for the District of Arizona's decision to not extend royalty payments beyond the life of a licensed patent.  The United States Court of Appeals for the Ninth Circuit affirmed the lower court's decision.

 

In December 1990, Kimble met with an officer Marvel to discuss licensing his patent for a device that allowed a user to sling web like Spider-Man.  Marvel initially decided not to license the patent, but instead chose to manufacture an infringing product.  Kimble subsequently filed a patent infringement suit against Marvel and won a reasonable royalty of 3.5 percent.  Both parties appealed this verdict, but during the appeals process the two sides decided to settle the case, agreeing that Marvel would pay Kimble "3% of "net product sales",[which] include product sales that would infringe the Patent… [as well as] sales of the Web Blaster product that was the subject of the [initial] action."  The agreement between the two parties had no expiration date and did not include any specific time limit on Marvel's obligation to pay the royalty fee.

 

In 2006, Marvel entered into a licensing agreement with another company that would create products that infringed the patent in the initial suit.  Kimble filed another suit against Marvel, but this time for breach of contract and related claims, contending he was owed a reasonably royalty for the infringing products.  Marvel counter sued taking the position that they were not obligated to pay any royalties because the patent had expired.  The District Court granted Marvel’s motion for summary judgment, concluding that the settlement agreement between the parties was a “hybrid” and that the royalties had to end when the patent expired.  Kimble appealed the decision to the United States Court of Appeals for the Ninth Circuit.

 

In deciding the case, the Ninth Circuit focused primarily upon two Supreme Court cases: Brulotte v. Thys Co. and Aronson v. Quick Point Pencil Co., with Brulottei bearing a strong factual similarity to the present case.  In Brulottei, a patent owner licensed his patent to a company, but the license was extended beyond the life of the patent.  The company eventually stopped paying royalties and the licensor brought suit to collect the unpaid portion.  The Supreme Court held that "a patentee's use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se."  The Supreme Court reasoned that a patent is the legal right to exclude.  That right has a finite term, and "[a]fter the relevant period expires… 'these rights become public property.'"  Any attempt to extend the right to exclude would "run[] counter to the policy and purpose of the patent laws."

 

The Supreme Court in Aronson decided that "patent law did not preclude the enforcement of an agreement to provide royalty payments indefinitely where no patent had issued."  In Aronson, the petitioner licensed his product to a company.  In the agreement there was a contingency clause that stated if the petitioners patent did not issue, the company would pay a reduced royalty rather than the higher rate had the patent issued.  Because of the contingency, the Supreme Court concluded that "patent law was not a 'barrier' to the contract" in the case.

In the case at hand, Ninth Circuit explained "the rule that follows . . . is that a license for inseparable patent and non-patent rights involving royalty payments that extends beyond a patent term is unenforceable for the post-expiration period unless the agreement provides a discount for the non-patent rights from the patent-protected rate."  The agreement between Kimble and Marvel had "one royalty rate for both patent and Web Blaster rights, with no discount or other clear indication that the Web Blaster royalties were not subject to patent leverage."  The agreement contemplated "one royalty for patents" and other non-patent rights and was thus invalid per se.  As a result, the Ninth Circuit affirmed the district court's judgment.

Denial of interim patent term extension affirmed

In a decision rereleased as precedential yesterday, the Federal Circuit affirmed a district court’s denial of a preliminary injunction seeking to compel the Director of the United States Patent and Trademark Office to grant a request for an interim patent term extension under 35 U.S.C. § 156(e)(2).

Somerset Pharmaceuticals, Inc. ("Somerset") is the owner of a reissue patent that expired August 18, 2007 (at the time the appeal was heard, it was still valid).  The patent is directed towards a method of treating depression using a pharmaceutical patch that includes selegiline as an active ingredient.

Somerset filed a Patent Term Extension application under 35 U.S.C. § 156(d)(1) with the USPTO, and a subsequent request for an interim extension under 35 U.S.C. § 156(e)(2).  Somerset then filed suit seeking to compel the Director of the USPTO to act on and grant the request for interim extension.  A motion for preliminary injunction was filed consistent with the prayer for relief.  The district court ultimately denied Somerset's motion.  After filing its appeal, Somerset's application for interim patent term extension and application for patent term extension were denied by the USPTO.

The Federal Circuit affirmed, noting that it reviews the denial of a preliminary injunction for an abuse of discretion.  Citing § 156(e)(2), the court stated that "[t]his section only gives the Director the authority to extend a patent's term beyond that provided for by section 154 when the patent for which a term extension is sought 'would expire before a certificate of extension is . . . denied.'"  Because the Director had denied Somerset's application for extension, the Director had no statutory authority to issue the interim extension sought by Sommerset.  The Federal Circuit accordingly held that Sommerset had not demonstrated a reasonable likelihood of success on the merits, and affirmed the district court's denial of Sommerset's motion for preliminary injunction.

Interestingly, this is the second case in a month that the Federal Circuit has reissued as a precedential decision.  The first dealt with obviousness.

To read the full decision in Somerset Pharms., Inc. v. Dudas, click here.

Patent Term Extensions: A Leap Frog of Sorts to Set Expiration Date

In a case before the Federal Circuit, the court affirmed the district court's decision that a patent term extension under the Hatch-Waxman Act, 35 U.S.C. § 156, may be applied to a patent subject to a terminal disclaimer under 35 U.S.C. § 253. The Federal Circuit found that the language of § 156 is unambiguous and fulfills a purpose unrelated to and not in conflict with that of § 253. As a result, even though the patentee filed a terminal disclaimer, the patent term extension still applied, extending the term of the patent 1233 days. More details of the case after the jump.

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