Patent Term Adjustment Traps for Practitioners to Avoid

Patent Term Adjustment (PTA) is a statutory right established by the American Inventors Protection Act of 1999 and currently codified in 35 U.S.C. § 154. PTA provides additional days of patent term that are granted to patentees to compensate for administrative delays at the U.S. Patent and Trademark Office (USPTO). When a patent is granted, the USPTO applies a complex framework of rules to (1) determine the period of patent term adjustment (37 CFR 1.703); (2) reduce the period of adjustment for applicant delay (37 CFR 1.704); and (3) govern the issuance and challenging of PTA (37 CFR 1.705). The application of these rules is subject to shifting judicial precedent and their strict application creates “traps” which can subvert congressional intent. For example, companies can lose PTA for simply filing an Information Disclosure Statement. On the other hand, actions that would normally be discouraged (such as filing a Request for Continued Examination) have become important tools to protect PTA.

The recent Allergan v. MSN Laboratories and In re Cellect LLC decisions have cast renewed focus on PTA and its interaction with nonstatutory obviousness-type double patenting. Despite this focus we sometimes lose sight of the nuts and bolts of PTA and treat the PTA rules as a secondary consideration. However, the nuts and bolts of PTA are becoming increasingly important as the USPTO backlog becomes larger. In fact, based on the current pendency times, more than half of the pending patent applications are likely accruing PTA because they have yet to receive a first action and more than 14 months have passed. The USPTO reports that only 32% of pending applications received a first action within 14 months. Applicants are entitled to this extra term and thus we must be super vigilant to avoid unnecessary delays that will reduce the period of PTA.

Unfortunately, the current state of PTA law often arbitrarily punishes applicants for taking actions that do not actually cause delay. The following hypothetical scenarios explore examples of situations in which the current PTA rules fail both the applicant and USPTO by punishing actions that are meant to facilitate efficient patent prosecution. These are just two of over a dozen examples that come to mind. Practitioners should learn the PTA traps and periodically review their portfolios to identify potential issues.

Example 1: The Information Disclosure Statement Trap

The United States is in the minority of countries which require applicants to submit prior art to the Examiner during prosecution. The reason for this position is well stated in 37 CFR 1.56(a) which provides that a “patent by its very nature is affected with a public interest” and that “the public interest is best served, and the most effective patent examination occurs when, at the time an application is being examined, the Office is aware of and evaluates the teachings of all information material to patentability.” Both the duty of candor and the PTA rules emphasize “effective” and “efficient” patent prosecution, however, the PTA rules can severely punish applicants for fulfilling their duty of candor. The rule should be adjusted to avoid this trap.

Put yourself in the shoes of a patent practitioner who received new prior art after (s)he responded to a Restriction Requirement. Logically your first instinct  may be to provide the prior art as an IDS. However, if the application is (or later will be) entitled to PTA, that IDS filing will likely provoke a reduction of term under 37 CFR 1.704(c)(8) as a “supplemental reply.” We saw this outcome in Gilead Scis., Inc. v. Lee, 778 F.3d 1341 (2015) where the applicant lost 57 days of PTA for filing an IDS with two double patenting references after responding to a Restriction Requirement. Notably, several rejections were raised in the next Office Action that were not related to the newly provided references, so an Office Action was going to be issued either way. The direct result of this decision is very inefficient because the best practice to avoid the reduction of PTA for a “supplemental reply” is to wait it out and file the IDS after receiving the next Office Action. If the next action is a Notice of Allowance, the applicant must then file a Request for Continued Examination to file the IDS. Any rule that motivates the filing of an RCE after allowance to save PTA wastes the time of the USPTO and bottlenecks an already overworked Office.

There are some safe harbors for filing IDSs as supplemental responses, however, their applications are far too limited. For example, if an IDS is filed within thirty days of receiving a new reference from a Patent Office and that IDS is limited to only the “new reference” then there is no reduction to PTA (see 37 CFR 1.704(d)(1)). However, this safe harbor doesn’t always provide enough time for the reference to be communicated to counsel or for it to be translated. The safe harbor also fails to protect the submission of any additional information that the new reference brings to the applicant’s attention (such as related art). To make things even more complicated, the safe harbor certification also uses a different time period than the certification to avoid fees for new prior art (three months to avoid the fee but thirty days to save PTA) which is a distinction that appears to fulfill no purpose other than punishing new practitioners and applicants who get stuck in the trap.

The safe harbor also fails to provide an avenue to submit new prior art that the practitioner finds in an updated search, prior art that is provided by the applicant, or even prior art that is provided by an adversarial party. Instead the current rules encourage the applicant to wait to provide this information until receiving the next Office Action.

The reader may be able to think of additional safe harbor rules to allow the filing of relevant information that isn’t currently protected, but any expansion of safe harbor is just a Band-Aid. Instead we need to take a step back and discuss whether an IDS is a supplemental response at all and more fundamentally whether the filing of an IDS can ever constitute a failure “to engage in reasonable efforts to conclude prosecution of the application.”  35 U.S.C. § 154(2)(C)(i).

The USPTO does not have substantive rule making authority, so the rules must be procedural in nature and closely comply with the statute. In this case the relevant statutory provision is 35 U.S.C. § 154(2)(C) (emphasis added):

(C) Reduction of period of adjustment.—

(i)The period of adjustment of the term of a patent under paragraph (1) shall be reduced by a period equal to the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.

(ii)With respect to adjustments to patent term made under the authority of paragraph (1)(B), an applicant shall be deemed to have failed to engage in reasonable efforts to conclude processing or examination of an application for the cumulative total of any periods of time in excess of 3 months that are taken to respond to a notice from the Office making any rejection, objection, argument, or other request, measuring such 3-month period from the date the notice was given or mailed to the applicant.

(iii)The Director shall prescribe regulations establishing the circumstances that constitute a failure of an applicant to engage in reasonable efforts to conclude processing or examination of an application.

The Federal Circuit in Gilead and Supernus considered the “supplemental” nature of IDS filings under the Chevron test and concluded that applicant delay “could include a supplemental IDS.” See Supernus v. Iancu, 913 F.3d 1351, 1357 (Fed. Cir. 2019). The court has not yet had the opportunity to reconsider the supplemental response rule after the Supreme court’s decision in Loper Bright which struck down Chevron deference. In a post Loper Bright world it is worth challenging the USPTO’s categorization of IDS filings as a “supplemental response.” Are IDS filings  a failure to “engage in reasonable efforts to conclude prosecution of the application”? I think not.

Example 2: Correcting Too Much

Another inefficiency that is promoted by the current PTA rules is the limited safe harbor for amendments filed under 37 CFR § 1.312 (“312 amendment”). After the Supernus decision, the USPTO amended the PTA rules to no longer deduct PTA for several circumstances where the applicant could take no action to conclude prosecution. These rule changes were favorable to applicants and included a change in 312 amendment practice. In particular, 37 CFR 1.704(c)(10) was amended to no longer consider 312 amendments an applicant delay as long as the amendment is only directed to amendments that were expressly requested by the USPTO.

Under the current rule the applicant is punished for taking a careful look at the application and correcting errors before issuance. Let’s put back on our hypothetical patent practitioner shoes and consider the following situation. You are handling an important application for your client and receive a Notice of Allowance after a significant period of Patent Office delay. You are discussing continuation strategy with the client and a month later, before you pay the issue fee, you receive a Notice to File Corrected Application Papers identifying printing errors in the specification that require correction. While preparing a corrected specification you identify additional printing errors that were not included in the notice. Do you correct these additional errors? What if the Examiner called you instead of issuing a formal notice?

Unfortunately, under the current rules you will sacrifice over a month of patent term in this hypothetical fact pattern if you move forward with the additional corrections. You are left with a catch-22 where the most efficient action would be correcting everything in one paper while the action that preserves your client’s statutorily guaranteed patent term adjustment requires additional work (for example, calling and asking the Examiner for another notice). Worse, if the Examiner calls you to request the amendments, you risk your client’s PTA by negotiating the amendments by phone and subsequently filing a 312 amendment instead of receiving a written notification. This rule is truly a trap for practitioners.

The amended version of 37 CFR 1.704(c)(10) is superior to the prior version. I applaud the Patent Office’s quick action in 2020 to amend the rules in view of Supernus and relax several delay periods in the favor of applicants. However, we have now had a few years to work within the amended rules and 37 CFR 1.704(c)(10) could be improved by granting safe harbor for all 312 amendments after receiving a Notice to File Corrected Application Papers. The rule should also be less punishing to applicants who file a voluntary 312 amendment to fix errors that they identify without notification from the Patent Office. Ultimately, we all want patents to be error free, strong, and valid.

Let’s Fix it Together

I hope the reader finds these limited examples helpful in considering ways to improve the Patent Term Adjustment framework. Patent law is a very complicated area of law with many “gotcha” mistakes that can cost applicants significant sums of money and lost research time. We, the patent community (including applicants, lawyers, patent agents, judges, the Patent Office, and even the general public), should work together to incrementally improve our system and find and fix rules that are not working as intended. When considering ways to improve the patent system, the patent term adjustment rules should not be forgotten!

Be sure to join the author and other panelists on October 29 at IPWatchdog’s Life Sciences Masters 2024, to learn more about this topic. Register to attend here.

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