Ambiguity is in the Eye of the Beholder: Exelixis v. Kappos
I never promised you any money.
The words could not be plainer: “I never promised you any money.” The meaning is clear and unambiguous, right? Ask six people to read the sentence, however, each in turn emphasizing the first, second, third, fourth, fifth, or sixth word, and you’ll quickly agree that multiple meanings are possible from even this simplest of sentence constructions. “I never promised you any money” (she did, but I didn’t); “I never promised you any money” (your sister, maybe, but not you); “I never promised you any money” (a return favor maybe, but no cash). You get the idea.
In Exelixis v. Kappos, the District Court for the Eastern District of Virginia (decided November 1, 2012) interpreted statutory language from 35 U.S.C. that is considerably more complex and convoluted than the example provided above. Not to be over-matched, however, the court concluded that the language of 35 U.S.C. § 154(b)(1)(B) is “clear, unambiguous, and in accord with both the statute’s structure and purpose.” The court considered whether the statute requires that an applicant’s patent term adjustment (PTA) be reduced by the time attributable to a request for continued examination (RCE) where the RCE was filed more than three years after the patent application filing date. Among other things, the statute guarantees that the USPTO will grant a patent, if any, within three years or the term will be adjusted accordingly.
Of course, the devil is in the details. Exelixis and the PTO butted heads over the meaning of “not including.” Does “not including” refer to antecedent language (“issue a patent within three years”) or to language that follows items (i) through (iii) (“the term of the patent shall be extended one day for each day after the end of the three-year period”)? Section 154(b)(1)(B), subsections (i) through (iii) describe delays due to patent interferences, secrecy orders, appellate review, continued examination requests, or delays requested by applicant.
Exelixis’s theory was that time consumed by the events enumerated in § 154(b)(1)(B)(i) through (iii) did not count in the measurement of the three years from filing to grant of a patent. Thus, the time it took to prosecute a case after filing an RCE should be tacked onto the patent term, which had already passed the three-year mark when the RCE was submitted.
In contrast, the PTO argued that the time consumed prosecuting an RCE cannot be used to adjust the patent term. In its view, an RCE is a delay attributable to the applicant, not the PTO, so the term should not be extended.
The court sided with Exelixis. Judge T.S. Ellis, III (not to be confused with The Waste Land poet T.S. Eliot) wrote:
“In summary, the plain and unambiguous language of subparagraph (B) requires that the time devoted to an RCE serves to toll the running of the three year clock, if the RCE is filed within the three year period; subparagraph (B) does not address RCE’s filed after the running of the three year period nor does it require that the time consumed by an RCE filed after the running of the three year clock be deducted from the PTA. Put simply, RCE’s have no impact on the PTA after the three year deadline has passed and subparagraph (B) clearly provides no basis for any RCE’s to reduce PTA; instead, RCE’s operate only to toll the three year guarantee deadline, if, and only if, they are filed within three years of the application filing date. Thus, the PTO erred in construing subparagraph (B) to the contrary. In doing so, the PTO, in essence, construed subparagraph (B) to punish the applicant for filing the RCE.”
37 C.F.R. § 1.703(b)(1) confirms the PTO interpretation of the statute by indicating that it is the “period of adjustment” that does not include any number of days between a request for continued examination and the date a patent issues. However, the court dismissed any possible counterargument on that basis. It explained that the agency was entitled to no deference because the statute is “clear and unambiguous” and the conflicting regulation would improperly impact substantive rights.
The court pointed to 35 U.S.C. § 154(b)(2)(C), titled “REDUCTION OF PERIOD OF ADJUSTMENT,” which identifies certain behaviors of the applicant considered dilatory and unworthy of term adjustment, such as when the applicant fails to “engage in reasonable efforts to conclude prosecution of the application.” It reasoned that because RCEs were not included in § 154(b)(2)(C), RCEs should not be considered applicant delay.
Interestingly, the court did not analyze 35 U.S.C. § 154(b)(1)(C), titled “GUARANTEE OR ADJUSTMENTS FOR DELAYS DUE TO INTERFERENCES, SECRECY ORDERS, AND APPEALS.” This section reinserts some (but not all) of the guarantees carved out by § 154(b)(1)(B). Thus, Section 154(b)(1)(B) indicates that the term adjustment will not be extended by time needed to resolve issues caused by interferences, secrecy orders, appellate review, continued examination requests, or delays requested by applicant. Immediately thereafter, however, the guarantees related to interferences, secrecy orders, and appellate review are eligible for a term adjustment under § 154(b)(1)(C). In other words, the reason that no term adjustment is available in section 154(b)(1)(B) for these delays is because they’re going to be covered in the next paragraph, Section 154(b)(1)(C). The term adjustments of section 154(b)(1)(C) make sense because an applicant should not be penalized if, e.g., an interference is declared and the applicant is ultimately is entitled to priority, or an appeal is needed and the applicant ultimately prevails. In a perfect world, the applicant would have been awarded a patent without the delay caused by these proceedings.
What about the two situations excluded by § 154(b)(1)(B) and not “reinserted” in § 154(b)(1)(C)? Any delay “requested by the applicant” (§ 154(b)(1)(B)(iii)) is clear enough; the patent term should not be extended when the applicant causes the delay. That leaves the RCE of § 154(b)(1)(B)(i). When an applicant files an RCE, he or she concedes that the case is not in condition for allowance. Either the claims need to be amended or evidence of patentability needs to be presented (e.g., by affidavit). If the case were allowable, an appeal would have been in order rather than an RCE. The law protects an ultimately successful appellant, but it will not shield an applicant who could have put the case in condition for allowance but failed to do so before a final Office action.
Given the decision, how many applicants will now complain that they have been “unjustly penalized” for filing an RCE after the three-year pendency window? Moreover, what prevents an unscrupulous applicant from adopting a “submarine” strategy of filing RCEs (as needed) to get beyond the three-year window, thereby triggering a promise of potentially endless term adjustment?
In sum, I disagree that 35 U.S.C. § 154(b)(1)(B) is free of ambiguity—there is plenty here. Because of that ambiguity, the court should have deferred to the agency’s expertise and looked to other sources, such as 37 C.F.R. and the M.P.E.P. for clarification. The court acknowledged that 37 C.F.R. § 1.703 supports the PTO’s reading of Section 154. If I were Vegas-bound, I’d wager that the PTO will seek–and win–a reversal at the Federal Circuit. But remember: I never promised you any money.
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