Novartis AG v. Kappos

904 F.Supp.2d 58

NOVARTIS AG, et al., Plaintiffs,

v.Hon. David J. KAPPOS, Defendant.

Civil Action No. 10–cv–1138 (ESH).

United States District Court, District of Columbia.

Nov. 15, 2012.

Daniel James Kelly, McCarter & English LLP, Boston, MA, Mark H. Anania, Scott S. Christie, McCarter & English, Newark, NJ, for Plaintiffs.

Benjamin D.M. Wood, U.S. Patent & Trademark Office, Alexandria, VA, Fred Elmore Haynes, Mitchell P. Zeff, Carl Ezekiel Ross, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

ELLEN SEGAL HUVELLE, District Judge.

Plaintiffs Novartis AG and Novartis Vaccines and Diagnostics, Inc. (“Novartis”) have sued David J. Kappos, the Under Secretary of Commerce for Intellectual Property and the Director of the U.S. Patent and Trademark Office (“PTO”). Plaintiffs bring this suit under 35 U.S.C. § 154, and the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701 et seq., claiming that defendant improperly determined the amount of patent term adjustment to which they are entitled. Before the Court are plaintiffs' Motion for Summary Judgment and defendant's Cross Motion for Summary Judgment. For the reasons set forth below, plaintiffs' motion will be granted in part and denied in part, and defendant's motion will be granted in part and denied in part.

BACKGROUND

I. LEGAL FRAMEWORK

Prior to 1994, U.S. patents were granted for a term of seventeen years from the date the patent issued. In 1994, Congress adjusted the term of a U.S. patent to twenty years from the date the application was filed to bring the U.S. in line with other countries' patent terms. However, because the examination of a patent application often takes more than three years from filing to the issuance of a patent, this meant that many patentees received effective patent terms of less than the historical seventeen-year period. Thus, in 1999, Congress amended the Patent Act by creating patent term adjustments (“PTA”) to extend patent terms in response to unreasonable delays in the examination of a patent application. See35 U.S.C. § 154(b).

The Patent Act created several types of PTA, two of which are at issue here. First, a patentee can accrue PTA if the PTO fails to take certain specified actions within fixed windows of time. See35 U.S.C. § 154(b)(1)(A). For example, if the PTO does not issue an office action responding to a patent application within 14 months after the application was filed, the patentee will be awarded one day of PTA for every day until the first office action is issued. Id. This type of PTA is known as “A Delay.” The PTO notifies the patentee of the amount of A Delay that has been awarded when it issues the Notice of Allowance. Because the Notice of Allowance is sent well before a patent is actually granted, the determination of A Delay is known as a Pre–Issuance Determination.

A second type of PTA accrues if the PTO fails to issue a patent within three years of the filing of the application. See35 U.S.C. § 154(b)(1)(B). This type of PTA is known as “B Delay.” Specifically, § 154(b)(1)(B) provides that:

if the issue of an original patent is delayed due to the failure of the [PTO] to issue a patent within 3 years after the actual filing date of the application in the United States, 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 Board of Patent Appeals and Interferences 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.

Id.

The PTO has promulgated two final rules interpreting the proper calculation of B Delay under § 154(b)(1)(B). First, 37 C.F.R. § 1.702(b) states that the patent term shall be adjusted if the issuance of the patent was delayed due to the failure of the PTO to issue a patent within three years after the filing date, “but not including: (1) any time consumed by continued examination of the application under 37 C.F.R. § 1.703(b).” Second, 37 C.F.R. § 1.703(b) states that the period of adjustment under § 1.702(b) is to be the number of days beyond three years from the filing date, but not including the number of days between the filing of a request for continued examination (“RCE”) and the date the patent is issued. In other words, § 1.703(b) provides that: (1) patentees cannot accrue B Delay for time consumed by an RCE, regardless of when it was filed, and (2) “time consumed by” an RCE includes all of the time from the filing of the RCE to the issuance of the patent. Because B Delay accrues until the actual date of issuance, the PTO does not determine the proper amount of B Delay until the patent is granted.

After determining the proper amount of A and B Delay, the PTO must determine the extent of any overlap between the two types of delay. The method of determining A/B Delay Overlap was changed in response to the Federal Circuit's decision in Wyeth v. Kappos, 591 F.3d 1364 (Fed.Cir.2010). Prior to Wyeth, the PTO interpreted the period of B Delay to include the entire time between the filing of an application and the issuance of a patent more than three years later. Thus, if a patent took longer than three years to issue, any A Delay that occurred during the pendency of the application by definition overlapped with the period of B Delay, and was not awarded to the patentee as PTA. As the Federal Circuit explained, “[u]sing this framework, the PTO use[d] either the greater of the A delay or B delay to determine the appropriate adjustment, but never combine[d] the two.” Wyeth, 591 F.3d at 1368. In Wyeth, the Federal Circuit held that the PTO's interpretation of the overlap provision was erroneous; A Delay and B Delay should be aggregated so long as that aggregation would not require counting the same calendar day twice. See id. at 1369–70.

After the Federal Circuit's decision in Wyeth, the PTO announced that it would not seek further review of that decision and would implement the court's interpretation of A/B Delay Overlap when determining the appropriate amount of PTA for issued patents beginning on March 2, 2010. (AR166–67.) The PTO also announced that it would permit recalculation of PTA for patents issued prior to March 2, 2010, so long as the request for reconsideration was filed within 180 days of the grant of the patent. (AR170.) Thus, only patents that had been granted within the 180 days prior to that announcement were eligible for a recalculation of their PTA using the new post-Wyeth interpretation.

Because the overlap determination depends on the amount of B Delay, it is also done at the time the patent is granted. The final determination of PTA, which factors in just A Delay but also B Delay and any overlap between A and B Delay, is therefore known as an Issuance Determination.

II. PROCEDURAL HISTORY

On July 6, 2010, Novartis filed suit, alleging that the PTO had improperly calculated the amount of PTA to which eleven of its patents were entitled. (Complaint [ECF No. 1].) Novartis argued first that the PTO acted improperly in refusing to apply the post-Wyeth interpretation of A/B Delay Overlap to patents granted prior to September 2, 2009 (“the Wyeth Claim”). Second, Novartis challenged the PTO's interpretation of the effect of an RCE on the determination of B Delay (“the RCE Claim”). On February 16, 2012, this Court ordered that this case be consolidated with three other matters— Novartis v. Doll, No. 09–cv–1203, Novartis v. Kappos, No. 11–cv–0659, and Novartis v. Kappos, No. 11–cv–0821—all of which raise the same legal issues. Given the consolidation of the four cases, the PTA determinations for twenty-three of Novartis' patents are now at issue.

Plaintiffs filed a Motion for Summary Judgment on May 16, 2012. ( [Dkt. No. 35] (“Pls.' Mot.”).) Defendant then filed a Cross Motion for Summary Judgment and Opposition to plaintiffs' motion on June 18, 2012. ( [Dkt. No. 38] (“Def.'s Mot.”).) On July 18, 2012, plaintiffs filed an Opposition to defendant's Cross Motion and a Reply to defendant's Opposition to its Motion. ( [Dkt. No. 40] (“Pls.' Reply”).) And finally, on August 20, 2012, defendant filed a Reply to plaintiff's Opposition. ( [Dkt. No. 42] (“Def.'s Reply”).)

ANALYSIS

I. LEGAL STANDARDS

A. Judicial Review of Patent Term Adjustments

The APA provides judicial review of an agency action to a party who has suffered a legal wrong because of that action. 5 U.S.C. § 702. The APA gives the court authority to “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” 5 U.S.C. § 706. It further provides that the reviewing court shall set aside an agency action that is found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” or “in excess of statutory jurisdiction, authority, or limitations.” Id.

The arbitrary and capricious standard “presumes the validity of agency action, requiring [the court] to determine whether the agency has considered the relevant factors and ‘articulate[d] a rational connection between the facts found and the choice made.’ ” AT & T Corp. v. FCC, 220 F.3d 607, 616 (D.C.Cir.2000) (quoting Motor Vehicle Mfrs. Ass'n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). The court “may reverse only if the agency's decision is not supported by substantial evidence, or the agency has made a clear error in judgment.” Kisser v. Cisneros, 14 F.3d 615, 619 (D.C.Cir.1994).

B. Motion for Summary Judgment

Normally, a motion for...