Court’s Reading of Statute Opens the Door For Extended Patent Terms for Many Applicants

By Alexandra Cavazos, Ph. D.. A member of our Patent Practice Group

 

Thanks to the Federal Circuit, longer patent terms are available for thousands of patents that have undergone prolonged examinations.

An extended term is of particular value in the pharmaceutical and biotechnology industries. Because of the high regulatory hurdles that new therapeutic molecules have to overcome, and because of the time that it takes to gain market acceptance for some new drugs, patents in these fields tend to be most valuable towards the end of their effective terms. Even a few extra days of patent term can translate into millions of dollars in sales for a blockbuster drug.

Novartis AG v. Lee centers on the interpretation of 35 U.S.C. § 154, the federal statute that awards patent applicants a day-for-day adjustment to their patent term for several kinds of USPTO-caused delays in the prosecution of their patent application. In particular, the statute guarantees applicants “no more than 3-year application pendency” but excludes “any time consumed by continued examination of the application requested by the applicant,” through a request for continued examination (RCE) (emphasis added).

The purpose of an RCE is to re-open and continue prosecution before the USPTO without having to file a new patent application. This may happen when all of an applicant’s claims have been rejected by the USPTO in a Final Office Action and the applicant wants another opportunity to amend its claims or offer evidence of their patentability. It may also happen when the applicant wishes to submit new prior art that pertains to the invention.

Prior to the Federal Circuit’s recent Novartis decision, the USPTO’s policy dictated that an RCE filing at any point during the pendency of a patent application would stop the USPTO’s three-year clock from running.

When this policy was applied to Novartis in 2010, it argued that once a Notice of Allowance was mailed to it, prosecution of the case was closed and thus the subsequent time up until the issue date of the patent was not time consumed by the RCE, but was instead time consumed by the USPTO.

In January 2014, the Federal Circuit agreed with Novartis on this point: “We reject the PTO’s view that the time after allowance, until issuance, is ‘time consumed by continued examination’ and so is excluded from adjustments given to the patentee. Such time from allowance to issuance undisputedly would count towards the PTO’s three-year allotment in a case not involving continued examination. This is no basis for distinguishing a continued examination case.”  (MORE)

Litigator’s Perspective: Winning Party in Patent Litigation Can Now More Easily Recover Attorneys’ Fees

By Brandon Scruggs. A member of our Litigation Practice Group

 

The Patent Act’s fee-shifting provision allows trial judges to award attorneys’ fees to the prevailing party in patent litigation in “exceptional cases.” Last month, the U.S. Supreme Court issued decisions in two cases on this subject, loosening the meaning of “exceptional” and requiring greater deference to a trial judge’s decision on whether to award attorneys’ fees.

In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court addressed whether the Federal Circuit had set the “exceptional case” standard too high. In Brooks Furniture (2005), the Federal Circuit had held that to qualify as “exceptional,” a patent case needed to either (1) involve “material inappropriate conduct” or (2) be both “objectively baseless” and brought in “subjective bad faith.”

The Supreme Court overruled the Federal Circuit’s standard and held that awarding attorneys’ fees is a matter of district court discretion and should be evaluated on a case-by-case basis. Justice Sotomayor, writing for the court, criticized the Brooks Furniture standard as “mechanical” and “unduly rigid.” Since the statute does not define “exceptional,” the standard should be “inherently flexible.”

The Supreme Court held that an “exceptional” case that could support an award of attorneys’ fees is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

The decision to award attorneys’ fees should be entrusted to the equitable discretion of the trial judge based on the “totality of the circumstances.” After all, who would know if a case is exceptional better than the judge who has observed the litigants’ conduct and positions for two or more years?

The Supreme Court also rejected the Federal Circuit’s requirement that an “exceptional case” must be proved by “clear and convincing evidence.” The Supreme Court noted that the statute imposes no specific burden of proof and seemed to suggest that the lower “preponderance of the evidence” standard (that is, more likely than not) may be proper. (More)

Contrary to Common Belief, Patents Can Survive Validity Challenges at the Patent Office

By John Stickevers. A member of our Patent Practice Group

The America Invents Act, which went into effect September 2012, introduced new proceedings for challenging a patent before the U.S. Patent and Trademark Office. Inter partes review (“IPR”) is one such proceeding. In the short time that IPRs have been available, more than 1000 petitions have been filed, with more than 600 petitions filed thus far in 2014 alone.

IPRs provide a new forum in which persons accused of infringement can contest the validity of patents in view of prior art. IPR proceedings are an administrative form of litigation, taking place before the Patent Trial and Appeal Board (“PTAB”) that includes written arguments, motion practice, expert testimony, depositions and oral arguments.

IPRs are labor-intensive proceedings that require an intimate understanding of patent law, a firm grasp of IPR complexities and procedures and a detailed strategy mapped out in advance. Without a strong foundation at the beginning, arguments may be lost or rendered unavailable to either the petitioner or the patent owner.

IPR proceedings have, to date, proved to be a mighty sword in the hands of defendants in patent litigations. Most of the PTAB decisions have resulted in the cancellation of all of the challenged patent claims. As of May 2014, the PTAB has instituted and decided 28 proceedings, with the petitioners enjoying better than an 80% success rate.

The length of the proceeding from the initiation of the IPR to the final oral arguments is, as mandated by the rules governing the process, a rapid twelve months. Indeed, the speed of disposition is one reason that patent defendants are increasingly likely to file IPR petitions when facing litigation. Another reason, of course, is the high rate of success so far for petitioners in IPRs that go to decision.

If you are a patent owner, all is not lost. For one thing, the PTAB allows the initiation of an IPR only when the board believes there is a reasonable likelihood that the petitioner will prevail on at least one of the challenged claims. The PTAB has reported that in more than 60 petitions the petitioner failed to meet the threshold burden of proof for instituting the IPR, while more than 70 other IPRs have resulted in a settlement favoring the patent owner.

Thus, the success of petitioners must be seen in context. Although they have won 80% of cases that have gone to decision, petitioners have failed to get out of the box in a large percentage of their challenges. The PTAB has taken up a total of 167 petitions and has not instituted 63 of the petitions. In these cases, patent owners prevail without the public fanfare of a written decision.

For example, last month, the PTAB refused to institute an IPR requested by Twitter, Yelp and Facebook for a patent owned by Evolutionary Intelligence LLC. In related decisions, the board ruled that the petitioners failed to establish a reasonable likelihood that they would prevail on at least one of the patent claims challenged. (More)