Exelixis, Inc. v. Lee

Filing 31

MEMORANDUM OPINION in re 16 Motion for Summary Judgment and 13 Motion for Summary Judgment. Signed by District Judge Leonie M. Brinkema on 01/28/2013. (jlan)

JAN 2 8 2013
IN THE UNITED STATES DISTRICT COURT FOR THE
CLERK, U.S. DISTRICT COURT

EASTERN DISTRICT OF VIRGINIA

ALEXANDRIA, VIRGINIA

Alexandria Division

EXELIXIS,

INC., A Delaware

Corporation,
Plaintiff,
l:12cv574

v.

HONORABLE DAVID J. KAPPOS,
Secretary of Commerce for

(LMB/TRJ)

Under

Intellectual Property and Director
Of the United States Patent and

Trademark Office,
Defendant.

MEMORANDUM OPINION

Plaintiff Exelixis, Inc.

("Exelixis") has sued David J.

Kappos, the Director of the United States Patent and Trademark

Office ("PTO"), under 35 U.S.C. § 154 and the Administrative

Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq., claiming that
the PTO improperly determined the amount of patent term

adjustment PPTA") to which one of Exelixis's patents is
entitled.

Before the Court are the parties' cross-motions for

summary judgment.

For the reasons discussed below, the PTO's

Motion for Summary Judgment [Dkt. No. 16] will be granted and
Exelixis's Motion for Summary Judgment to Correct the Patent

Term Adjustment of U.S. Patent No. 8,067,436 [Dkt. No. 13] will
be denied.

I.

A.

BACKGROUND

Legal Background

An individual seeking to patent an invention must file a

patent application with the PTO, which after a period of review
determines whether to issue a patent or to reject the
application by issuing a notice of rejection.

§§ 111, 131-132.

See 35 U.S.C.

If an applicant continues to prosecute a

rejected application, the PTO can make the rejection "final"
upon a second examination.

37 C.F.R. § 1.113.

The applicant

then has the option to appeal the PTO's decision as erroneous to

the Board of Patent Appeals and Interferences,1 35 U.S.C. § 134,
or to file a Request for Continued Examination ("RCE") in an
attempt to overcome the final rejection.

An RCE must include an

accompanying fee and a "submission" such as "an information

disclosure statement, an amendment to the written description,

claims, or drawings, new arguments, or new evidence in support
of patentability," but the RCE cannot "introduce new matter into

the disclosure of the invention."

37 C.F.R. §§ 1.114(c),

1.17(e); 35 U.S.C. § 132(a).

Effective September 16, 2011, the Leahy-Smith America Invents
Act changed references to this entity from the "Board of Patent

Appeals and Interferences" to the "Patent Trial and Appeal
Board." Pub. L. No. 112-29, 125 Stat. 284. Because Exelixis
filed its Request for Continued Examination and received a

notice of allowance before that date, this Opinion will
consistently refer to that appellate body as the "Board of
Patent Appeals and Interferences."

If, upon receipt and examination of the RCE, the PTO

concludes that the applicant's claims are patentable, it sends a
notice of allowance to the applicant, who has three months to

pay an issue fee.

37 C.F.R. § 1.311.

the patent may issue.

Id^ § 1.314.

Once payment is received,

In the notice of allowance,

the PTO provides an estimate of the length of the term for which
the allowed patent will be enforceable, once it issues.

This

calculation is known as patent term adjustment ("PTA").

In 1994, Congress changed the effective term of a patent
from 17 years starting from the date the patent was issued to 20
years starting from the date the patent application was filed.

See Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat.

4809.

Concerned that under the new regime, PTO-caused delays in

processing an application could consume significant amounts of

the effective term of a patent, Congress addressed the problem
in 1999 by allowing the term of a patent to be extended (or
"adjusted") when such delays occurred.

See American Inventors

Protection Act of 1999, Pub L. No. 106-113, §§ 4001-4008, 113
Stat. 1356.

Under 35 U.S.C. § 154(b)(1), PTA "rebates" are

available through three provisions; an "A-clause" requiring
"prompt Patent and Trademark Office responses" by certain
examination deadlines, a "B-clause" providing for "no more than

[a] 3-year application pendency" between an application's filing
date and the issuance of the patent, and a "C-clause" awarding

PTA "for delays due to interferences, secrecy orders, and
appeals."

The "B-clause" is the provision at issue in this

litigation, and will be the focus of this Opinion.

By its

terms, the B-clause generally entitles a patent applicant to
expect that the PTO will not take more than three years to
examine and resolve a patent application.

If PTO examination

extends beyond the three years and the application is ultimately
granted, the applicant may be entitled to an adjustment to the

patent's term.

Such adjustment is based on a one-day extension

for each day that the PTO exceeds the three-year deadline.

There are, however, some exceptions to the B-delay
provision.

Critical to this litigation is the provision under

35 U.S.C. § 154(b)(1)(B)(i), which states that "any time
consumed by continued examination of the application requested

by the applicant under section 132(b)" (via the filing of an

RCE) does not count toward that three-year period.2

Pursuant to

2 35 U.S.C. § 154(b)(1)(B) states as follows:
(B)

Guarantee

of

no

more

than

3-year

application

pendency.—Subject to the limitations under paragraph
(2), 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 in the
United States, not including-

a congressional directive to "prescribe regulations establishing
procedures for the application for and determination of patent

term adjustments," 35 U.S.C. § 154(b)(3)(A), the PTO interpreted
that exception by engaging in notice-and-comment rulemaking and
promulgating a regulation that became effective October 18,
2000.

Under that regulation, the exception in § 154(b)(1)(B)

signifies that once an RCE is filed, whether before or after the

three-year "guaranteed" review period has passed, no further B-

delay adjustment will be made to the term of the patent.

37

(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;

(iii)

or

any

application

delay
by

the

in

the
United

processing
States

Trademark
Office
requested by
the
except as permitted by paragraph 3(C),

of

the

Patent

and

applicant

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.

The "limitations" to which the B-clause is "[s]ubject"
include PTA reductions to account for when "periods of
delay attributable to grounds specified in paragraph (1)
overlap," id^ at § 154(b)(2)(A); when part of a patent term
is disclaimed beyond a certain expiration date, id. at

§ 154(b)(2)(B); or when there is applicant-generated delay,
defined as time during which "the applicant failed to
engage in reasonable efforts to conclude prosecution of the
application," id. at § 154(b)(2)(C).

C.F.R. § 1.703(b);3 Changes to Implement Patent Term Adjustment
Under Twenty-Year Patent Term, 65 Fed. Reg. 56,366, 56,369
(Sept. 18, 2000)

(to be codified at 37 C.F.R. pt. 1).

In other

words, if an applicant files an RCE, and as a result, is
successful in obtaining approval of the application, the

patent's term is not extended for the time from the filing of
the RCE until the issuance of the patent.
B.

Factual Background

Exelixis is the owner of United States Patent No. 8,067,436
("the M36 patent") entitled "C-Met Modulators and Methods of

Use," which covers compounds that inhibit and regulate enzymes
associated with certain cancers.

The administrative record ("A.R.") documents the events

that led to the patent's issuance, which are represented
visually on the timeline4 below:

37 C.F.R. § 1.703(b) reads in pertinent part as follows:
The

period

of adjustment

under

§

1.702(b)

is

the

number of days, if any, in the period beginning on the
day after the date that is three years after the date

on which the application was filed . . . and ending on
the date a patent was issued, but not including the
sum of the following periods: (1) The number of days,
if any, in the period beginning on the date on which a

request for continued examination of the application
under 35 U.S.C. 132(b) was filed and ending on the
date the patent was issued;
4

. . . ."

The timeline is demonstrative only, and is not drawn to scale,

Notice ofRejection

FilingDate

3-year deadline
(35U.S.C. §
154(bXD(B))

5/24/07

Notice ofAllowance
7/1/11

12/23/10

5/24/10

^

Xon-Fbtal AfipUean
Rnpotat
n/11/10

AumtJmnu
.ifttr Final

.UkisnyAclton
(Retains

mat

Jetton
110110

'436 Patent
Issue Date
11/29/11

RCE filed
6/23/11

mtni

t

\

JfplktattPt^a
hrngPe*

1

\

394 days
PTO B-delay calculation

554 days
Exelkis B-delay calculation

or, alternatively:
546 days
Exelixis B-delay calculation

«

^

To summarize, the M36 patent application was filed on May 24,
2007, as a continuation of an abandoned 2006 application, which

followed an abandoned 2004 application and several provisional
applications dating as far back as September 2003.

A.R. at 1.

When it was filed in May 2007, the M36 patent application
contained 54 independent claims and 16 dependent claims.5
Over the course of the next two years, Exelixis submitted
four "Preliminary Amendments," each of which amended or

cancelled all of the original claims in its application and

proposed dozens of new claims.6

See supra at n.5.

Its last

See "Transaction History" for the *436 patent, http://portal,
uspto.gov/external/portal/pair.

6 Those Preliminary Amendments were filed on January 29, 2008,
May 13, 2008, April 22, 2009, and June 3, 2009, respectively.
See A.R. at 6-8; see also supra at n.5.

Preliminary Amendment, filed on June 3, 2009, included only
numbered claims 83 to 114 for the PTO's review.

See A.R. at 11;

see also supra at n.5.

On July 20, 2010, more than three years after the x436
patent application was filed, the PTO took its first action when

it issued a non-final rejection as to the pending claims in part
because of concern about the breadth of Exelixis's claims as to

the types of cancer the invention could potentially treat:
Claims 101-105 and 107-114 are rejected under 35
U.S.C.
112,
first
paragraph,
because.
the
specification, while being enabling for a method of
treating certain cancers such as breast, ovarian,
colorectal,
prostate,
and lung cancer,
does not

reasonably provide enablement for a method of treating
all

proliferative

disorders

or

cancers.

The

specification does not enable any person skilled in
the art to which it pertains, or with which it is most
nearly connected, to use the invention commensurate in
scope with these claims.
***

Claims 107-114 are drawn to a "method of inhibiting
proliferative
activity...",
and
treating
several
cancers, namely, stomach cancer, esophageal carcinoma,

kidney
cervical

cancer,

liver

carcinoma,

cancer,

large

bowel

ovarian
cancer,

carcinoma,
small bowel

cancer, brain cancer,
lung cancer,
bone cancer,
prostate carcinoma, pancreatic carcinoma, skin cancer,
Hodgkin's disease, or non-Hodgkin's lymphoma.
Like
claim 105, the scope of the recited method covers the
treatment for cancers of various organs, and thus, is
unduly broad.
•k "k "k

There has never been a compound capable of treating
cancer

generally,

let
8

alone

inhibiting

"preproliferative
activity
in
a
cell".
[sic]
Different types of cancers affect different organs and

have different modes of growth and harm to the body as
well
as
different
vulnerabilities.
Thus,
the
existence of such a "silver bullet" is contrary to our
present understanding in oncology.
Therefore, it is

beyond the skill of oncologists today to get an agent
to

be

effective

against

all

cancers

or

all

hyperproliferative disorders in general.

A.R.

at 15-17.

Exelixis responded on November 11, 2010, by cancelling all
but five of its previous claims, amending two of the five
remaining claims, and adding 16 new claims.

Id. at 50-61.

On

December 23, 2010, the PTO issued a final notice of rejection,
finding that the "[a]mended remaining claims and new claims have
not overcome the previous rejection of [35 U.S.C] 112/lst
paragraph (Scope of Enablement)."

IcL at 64.

The PTO

reiterated several of the reasons from its first notice of

rejection, expressing dissatisfaction with the breadth of
Exelixis's claims "that said drug would be effective to treat
any cancer."

Id^ at 66.

Three months later, Exelixis filed a

significantly leaner version of its application containing only

six claims,7 but in a June 16, 2011 Advisory Action, the PTO
again advised Exelixis that its response still "failfed] to
place this application in condition for allowance" because it

lacked "descriptive support for the cancers currently (but never
7 See supra at n.5,

originally) claimed" and "[o]nly lung cancer, ovarian carcinoma
and prostate carcinoma are seen to be described in the list of
cancers

.

.

.

."

Id.

at

70-72.

On June 23, 2011, Exelixis filed a Request for Continuing
Examination ("RCE"), which described a recent telephone
interview in which the examiner had indicated that she would be

amenable to allowing a patent for narrowed claims that referred

only to "lung cancer, ovarian cancer, and prostate cancer."

at 78 (emphasis in original).

Id.

Accordingly, Exelixis's RCE

reduced the application to four claims that referred only to
those three cancers, excising all references to other types of
cancer.

See id^ at 80-81.

Eight days later, on July 1, 2011,

the PTO issued a notice of allowance, which stated that the
application "has been examined and is allowed for issuance as a

patent" and that "[p]rosecution on the merits is closed," and

adjusted the life of the patent by 394 days to account for B-

delay.8

Id^ at 82-84, 114-15.

Exelixis paid the issue fee on

8 The PTO clarified at A.R. 114:

[T]he Office calculated the period of "B delay" as 394
days . . . based on the application being filed under
35 U.S.C. 111(a) on May 24, 2007, and the patent not
having issued as of the day after the three year date,
May 25, 2010,

and a request for continued examination

under 132(b) having been filed on June 23, 2011.
In
other words, the entire 160-day period from the date

of filing of the request for continued examination,
June 23, 2011 to the date of issuance of the patent on
November 29, 2011 was not included in the "B delay."
10

September 30, 2011, and the M36 patent issued on November 29,

2011.

Id. at 87, 99.

Exelixis twice petitioned for an increase

to the PTA that the PTO had calculated, and after its requests
were refused, it filed the Complaint in the instant civil

action, seeking an additional 160 days of B-delay PTA, or in the
alternative, an additional 152 days of B-delay PTA.
98,

IcL at 88-

100-121.
II.

DISCUSSION

At issue in this civil action are related questions of law
about the effect on B-delay PTA of filing an RCE after the

expiration of the three-year statutory "guarantee" for patent
issuance.
A.

Standard of Review

Summary judgment is appropriate where "there is no genuine

issue as to any material fact and the moving party is entitled
to judgment as a matter of law."

Fed. R. Civ. P. 56(a).

Because the parties do not contest any factual matters, this
action involves a purely legal determination as to whether the

PTO's method for calculating PTA under 35 U.S.C. § 154(b)(1)(B),

as embodied in its regulation, 37 C.F.R. § 1.703(b), is contrary
to law.

The PTO's determination of Exelixis's PTA is subject to
judicial review under the Administrative Procedure Act, see
35 U.S.C. § 154(b)(4)(A), which provides that a district court
11

shall set aside the agency's decision if it is "arbitrary,
capricious, an abuse of discretion, or otherwise not in

accordance with law."

5 U.S.C. § 706(2)(A).

An agency abuses

its discretion "where the decision is based on an erroneous

interpretation of the law, on factual findings that are not

supported by substantial evidence, or represents an unreasonable
judgment in weighing relevant factors."

Star Fruits S.N.C. v.

United States, 393 F.3d 1277, 1281 (Fed. Cir. 2005).

The Federal Circuit has decided that the PTO's regulations
are not entitled to Chevron deference, but may be entitled to
deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944).
Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir.
1996) (finding that "[b]ecause Congress has not vested the

Commissioner with any general substantive rulemaking power," PTO
regulations "cannot possibly have the 'force and effect of law'"
and "[t]hus, the rule of controlling deference set forth in

Chevron does not apply").

Skidmore deference to an agency's

regulatory interpretation "arises . . . solely from, inter alia,

the thoroughness of its consideration and the validity of its
reasoning, i.e., its basic power to persuade if lacking power to
control."

Kessler, 80 F.3d at 1550.

Specifically, the court

must analyze whether "the agency has conducted a careful

analysis of the statutory issue," "the agency's position has
been consistent and reflects agency-wide policy," and "the
12

agency's position constitutes a reasonable conclusion as to the

proper construction of the statute, even if [the court] might
not have adopted that construction without the benefit of the
agency's analysis."

Cathedral Candle Co. v. U.S.

Comm'n, 400 F.3d 1352,
B.

Int'l Trade

1366 (Fed. Cir. 2005).

Analysis

The parties agree that the effective term of the

M36

patent should be extended by the 394 days of B-delay running
from the day after the three-year statutory deadline passed

until the filing of the RCE.
positions differ.

Beyond this point the parties'

Exelixis argues that the PTO's regulation

improperly deprived it of PTA for both the 8 days between the

filing of the RCE and the notice of allowance and the 152 days
between the notice of allowance and the issuance of the patent.
Exelixis contends that it is entitled to both additional

adjustments (for total B-delay PTA of 554 days), or in the
alternative, if the time the RCE was pending is excluded, at

least the additional 152-day adjustment (for total B-delay PTA
of 546 days).

The PTO opposes both of those adjustments.

1. Time Between Filing an RCE and Notice of Allowance

No party disputes, and this Court finds, that the

unambiguous text of 35 U.S.C. § 154(b)(1)(B) clearly provides

that the filing of an RCE tolls the guaranteed three-year time
period in which the PTO is expected to resolve a patent
13

application when the RCE is filed before the expiration of that
three-year period.

Exelixis argues that the statute is limited

to that effect because it does not also state that the filing of
an RCE after the three-year period has any effect on B-delay.
Other courts to review this issue have found that argument

persuasive.

See Exelixis v. Kappos ("Exelixis I"), — F. Supp.

2d —, No. I:12cv96, 2012 WL 5398876, at *8 (E.D. Va. Nov. 1,
2012), as amended Nov. 6, 2012; Novartis AG v. Kappos, —

F.

Supp. 2d --, No. lO-cv-1138, 2012 WL 5564736, at *13 (D.D.C.
Nov. 15, 2012)

(adopting reasoning of Exelixis I).

In Exelixis

I, the court concluded that because the statute's "plain and

unambiguous language . . . does not address the filing of an RCE
after the expiration of the three year clock," then "once the

three year clock has run, PTA is to be awarded on a day for day
basis regardless of subsequent events."

2012 WL 5398876, at *6.

Therefore, the court ruled,

the plain and unambiguous language of subparagraph (B)
requires

that

the

time

devoted

to

an

RCE

toll the running of the three year clock,

serves

to

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 PTA.
Put simply,
RCE's have no impact on the PTA after the three year
deadline has passed and subparagraph (B) clearly
provides

no

instead,

RCE's operate only to toll the three year

basis

guarantee deadline,

for
if,

any

RCE's

and only if,

to

reduce

PTA;

they are filed

within the three years of the application filing date.
14

Id.

at

*7.

As in Exelixis I, the parties to this civil action also
attempt to frame legislative silence on the effect of RCEs filed

after the three-year period as evidence of deliberate intent by
Congress in favor of their respective positions.

Exelixis

highlights the omission of RCE time from the part of the statute

providing for PTA reductions,9 and the PTO underscores the
omission of RCE time from the part of the statute awarding PTA
increases.10

Drawing any inference from congressional silence is a

highly doubtful exercise.

See, e.g., Ethicon, Inc. v. Quiqq,

849 F.2d 1422, 1426 (Fed. Cir. 1988) (expressing skepticism that
an inference "can be drawn at all from silence" on the part of
Congress).

9

But the Exelixis I court's conclusion as to that

See PI. Exelixis, Inc.'s Reply Br. in Supp. of Mot. for Summ.

J. to Correct the Patent Term Adjustment of U.S. Patent No.

8,067,436 and in Opp'n to Def.'s Cross-Mot. for Summ. J. ("PL's
Reply"), at 12 (citing § 154(b)(2)).
10

See Mem. in Supp. of Def.'s Cross-Mot. for Summ. J. and in

Opp'n to PL's Mot. for Summ. J. ("Def.'s Mot."), at 18 (citing
The PTO also makes the bizarre argument that

§ 154(b)(1)(C)).

the Court should insert a "then" clause into the text of the
statute to render its syllogism more clearly consistent with the
government's position. See id. at 11-12; Reply Mem. of Law in

Supp. of Def.'s Cross-Mot. for Summ. J. ("Def.'s Reply"), at 46.

That argument is unavailing.

As written, the statute is

silent as to the effect of RCEs filed after the three-year
period on PTA, and this Court must do more than infer
legislative intent from legislative omission.
15

silence results in treating RCEs filed before and after the

three-year period in directly opposite ways; a consequence that
even that court concedes will produce "absurd results" but

nevertheless refuses to confront because of its certainty about

"the plain language of subparagraph (B)."

at *8.

2012 WL 5398876,

With all due respect to our colleague, this Court parts

ways with the reasoning in Exelixis I and declines to find that

the statute's silence as to RCEs filed after the three-year
period expresses "plain and unambiguous" congressional intent on
the issue.

To the contrary, we find that a reasonable

interpretation of the statute and its legislative history
support the conclusion that there is no reason to treat RCEs

differently based upon when they were filed, and that
accordingly, the PTO's regulation deserves Skidmore deference

because it is a "reasonable conclusion as to the proper
construction of the statute."

Cathedral Candle, 400 F.3d at

1366.

Congress gave the PTO broad discretion to regulate how PTA
is determined and RCEs are processed.

See 35 U.S.C.

§ 154(b)(3)(A) (requiring that the PTO "shall prescribe
regulations establishing procedures for the application for and
determination of patent term adjustments under this

subsection"); id^ § 132(b) (providing that the PTO "shall
prescribe regulations to provide for the continued examination
16

of applications for patent at the request of the applicant").
Although § 154(b)(1)(B) is titled a "[g]uarantee of no more than

3-year application pendency," the statute does not guarantee
that a patent application will always be resolved within three

years, as it specifically provides that certain events, such as

the filing of an RCE by an applicant, will toll that three-year
guarantee.

Any PTA available under the statute will also be

reduced by the PTO for "time during which the applicant failed
to engage in reasonable efforts to conclude prosecution of the

application."

See io\ § 154(b)(2)(C).

Congress provided an

example of what constitutes such failure - an applicant taking
"in excess of 3 months ... to respond to a notice from the

[PTO] making any rejection, objection, argument, or other
request" - and allowed the PTO discretion to delimit other

circumstances in which such a reduction would be appropriate.
See id_;_ § 154(b) (2) (C) (iii) (providing that the PTO "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"
(emphasis added)).

The PTO used its discretion to promulgate 37 C.F.R.

§ 1.703(b), the PTA regulation at issue in this litigation.
That regulation is consistent with abundant evidence of

congressional intent concerning the effect of an applicant
17

filing an RCE on the award of B-delay PTA.

Specifically,

Congress intended that an applicant should not be penalized by
delay attributable to the PTO, but should also not benefit when

the delay was "requested by" or otherwise attributable to the

applicant.11 See 35 U.S.C. § 154(b)(1)(B).

This balancing of

the equities is reflected in a legislative conference report

that discusses the award of PTA for "administrative delays
caused by the USPTO that were beyond the control of the

applicant" so as to "compensate applicants fully for USPTOcaused administrative delays" and to reward "diligent
applicants."

H.R. Rep. No. 106-464, at 125 (Nov. 9, 1999)

(Conf. Rep.).12 As the conference report unequivocally states,
RCE-triggered time "consumed in the continued examination of the

application . . . shall not be considered a delay by the USPTO."
Id. at 126 (emphasis added).

Moreover, legislators were particularly concerned about the

potential for applicants to manipulate procedural devices to

On this point, the Court concurs with the opinion in Exelixis
I, which states that "[t]he statute's purpose is to ensure that

an applicant is provided with a PTA remedy for delays in
examination and processing attributable to the PTO and to reduce
any PTA by delays attributable to the applicant."

2012 WL

5398876, at *6.

See, e.g., Lisa Seachrist, Congress Taking Initial Step Toward
Patent System Reform, Medical Device Daily (Apr. 1, 1999)
(reporting agreement between partisans on legislation that

"calls for the restoration of lost time resulting from delays in
the PTO and the courts, as long as the patent applicant isn't
the source of those delays").
18

prolong the PTO's examination.

The decision to measure the term

of a patent from the date of filing instead of the date of

issuance was at least partly motivated by fear of so-called
"submarine" patents filed by applicants who had discovered that

they could file "continuation prosecution applications" (CPAs)

to indefinitely delay the PTO's completion of its examination,
thereby keeping their applications "pending and secret until an

industry with substantial investment in the technology can be

targeted in an infringement suit."13

The RCE procedure has

13 House Panel Examines Bills on Patent Law Reforms, 51 Pat.
Trademark & Copyright J.

(BNA) 50 (1995); see also 5 Donald S.

Chisum, Chisum on Patents § 16.04 (explaining that the purpose
of the 20-year-from-filing-date patent term "was to eliminate

so-called 'submarine patents,' granted only after years, even
decades, of prosecution in the PTO by use of continuing
applications, and after the concerned industry invested in the
patented technology unaware of latent dominating patent
rights"); H.R. Rep. No. 106-464, at 125 ("Only those who
purposely manipulate the system to delay the issuance of their
patents will be penalized . . . , a result that the Conferees

believe entirely appropriate."); 140 Cong. Rec. 29,964 (1994)
(statement of Sen. Hatch) ("[B]y focusing on the date of

application rather than the date of issuance, the disruptive
tactics of some who have sought to manipulate the patent system
through the use of so-called 'submarine' patents will come to an

end."); 140 Cong. Rec. 29,608 (statement of Rep. Ballenger)

{"'Submarine patents' allow a patent applicant to delay issuing
of a patent for years-shutting down or demanding royalties from
businesses that independently develop that technology in
question."); President's Comm'n on the Patent System, "To
Promote the Progress of . . . Useful Arts" in an Age of

Exploding Technology 33-34 (1966) (recommending the change to a
twenty year patent term measured from the date of filing to
"induce the applicant to present claims promptly that he
believes patentable and avoid delaying the prosecution of the

application" by "filing continuing applications solely to delay
the start of a patent term").
19

"eclipsed" the mostly-retired CPA as the means for further

prosecution of an application after a final rejection.
on Patents § 13.03.

Chisum

Not only does an RCE permit applicants to

retain their accrued PTA (unlike the filing of a CPA, see 37
C.F.R. § 1.704(c)(12)), but there is currently no limit on the
number of times an applicant is permitted to file an RCE to
raise "new arguments" or "new evidence" after a final notice of

rejection has been issued.14

Thus, availability of unlimited

14 Recent attempts by the PTO to set such limitations have been
unsuccessful.

In 2007, the PTO administratively restricted the

number of RCEs that could be filed, permitting an applicant to
file a single RCE as a matter of right, and allowing a second
RCE to be filed in extraordinary situations if the applicant
provided an explanation for why the new amendment, argument, or
evidence presented in the RCE could not have been presented
previously.

See Changes to Practice for Continued Examination

Filings, 72 Fed. Reg. 46,716, 46,720 (Aug. 21, 2007) (to be
codified at 37 C.F.R. pt. 1) (observing that "unrestricted

continued examination practice . . . does not provide adequate
incentives to assure that the exchanges between an applicant and
the examiner during the examination process are efficient," and
that "[PTO] resources absorbed by the examination of additional
continued examination filings are diverted away from the

examination of new applications, thus increasing the backlog of
unexamined applications"). The PTO was enjoined from enforcing
the regulation by an opinion that was vacated and reconsidered

in further appellate proceedings. See Tafas v. Dudas, 541 F.
Supp. 2d 805 (E.D. Va. 2008), aff'd in part and vacated in part

sub nom. Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009), vacated

and reh'g en banc granted, 328 F. App'x 658 (Fed. Cir. 2009),
stayed, 331 F. App'x 748 (Fed. Cir. 2009). The PTO then appears
to have mooted the appeal by rescinding its own rules.

See

Tafas v. Kappos, 586 F.3d 1369, 1371 (Fed. Cir. 2009) (finding
that "the USPTO has rescinded the rules that formed the basis of

this litigation" and therefore dismissing the appeal as moot);
74 Fed. Reg. 52,686, 52,686-87 (Oct. 14, 2009) (to be codified
at 37 C.F.R. pt. 1) (stating that the rules that had been "the

subject of litigation since August of 2007 and ha[d] never taken
20

RCEs creates the potential for the very abuses that spurred

reform of the laws on patent terms in the first place.

In light

of this legislative history and legitimate, pragmatic
congressional concern, the PTO's regulation denying PTA from the
time an RCE is filed comports with "a reasonable conclusion as
to the proper construction of the statute" under Skidmore.
The PTO's regulation also avoids the absurd result of

treating an RCE filed before the termination of the three-year

period differently than one that is filed after the three-year
period.

The filing of an RCE is always done by the applicant to

newly amend or enhance an application, and is therefore

applicant-initiated delay whether filed before or after the

three-year period has run.

The regulation reasonably construes

the statute by preventing an applicant from using its control
over the initiation of "continued examination" to extend the

term of the patent.

To strike the regulation would imply that

Congress created a paradox whereby earlier-filed RCEs would

indefinitely postpone B-delay PTA as if there were applicantcaused delay, but later-filed RCEs would suddenly be treated

like PTO-caused delay and arbitrarily result in accruing PTA.

This consequence would violate the canon that "a statutory
effect" were "objectionable to a large segment of the patent
user community," and therefore "the [PTO] has decided that it is

no longer interested in pursuing the changes . . . that were the
subject of the District Court's decision").
21

construction that causes absurd results is to be avoided if at

all possible."

Timex V.I., Inc. v. United States, 157 F.3d 879,

886 (Fed. Cir. 1998)
389,

394

(citing Haggar Co. v. Helverinq, 308 U.S.

(1940)).

It is also significant that the PTO's regulation has been

in force for over a decade and was promulgated through noticeand-comment a year after Congress enacted the underlying
statute.

Cf. Cathedral Candle, 400 F.3d at 1367 (giving weight

to an agency's position because it was not "formulated belatedly
in response to litigation in this case or others, nor [was it]

inconsistent with positions the [agency] has previously taken");
Rubie's Costume Company v. United States, 337 F.3d 1350, 1358-59

(Fed. Cir. 2003) (concluding that an agency's ruling "which was
consistently applied for almost ten years and was neither a
sudden and unexpected change nor a failure to take account of

prior inconsistent interpretations, has 'power to persuade'" in
the Skidmore analysis); Baird v. Sonnek, 944 F.2d 890, 894 (Fed.

Cir. 1991) (according particular deference to an agency's
contemporaneous construction of a statute).15

15 Plaintiff argues that the PTO has "undermine[d] [its] attempt
to cast an RCE as an instrument of 'willful delay'" by
exhibiting an inconsistent position on the value of the RCE,
citing a partial quotation of a post on the public blog of PTO

Director David Kappos to imply that the PTO views the RCE solely
as a "valuable tool" in patent prosecution.

See PL's Reply at

24; PL Exelixis's Br. in Supp. of Mot. for Summ. J. to Correct
the Patent Term Adjustment of U.S. Patent No. 8,067,436 ("PL's
22

The reasonableness of the PTO's regulation is further
underscored by the facts of this litigation.

Exelixis

originally filed an extremely broad application containing 70
claims that it then unilaterally cancelled, amended, and
augmented four separate times over the course of 18 months.

When the PTO issued a preliminary rejection of Exelixis's fifth

set of claims, it explained that the claims purported to treat a

wide variety of cancers for which there was inadequate support
in the record.

In its next revision, Exelixis still did not

respond to those concerns satisfactorily because the PTO issued

a final rejection with the more summary explanation that the

Mot."), at 5. But as the PTO points out, the quoted blog post
expresses the more nuanced view that although "[t]here are many
valid reasons for filing RCEs," there are also "reasons for

filing RCE's that are less consistent with the shared goal of
compact prosecution and reduction of the USPTO backlog," which

include "presenting new claims not included in the original
application, or continuing to prosecute broad claims that were

rejected in the original case."

See Def.'s Reply at 10 n.ll

(quoting Bob Stoll, RCE Filings: The Facts, Director's Forum:

David Kappos' Public Blog (July 26, 2010, 9:17 AM), http://www.
uspto.gov/blog/director/entry/rce_filings_the_facts). Indeed,
the PTO has stated elsewhere that filing an RCE could constitute

the kind of applicant delay that is expressly penalized by 35
U.S.C. § 154(b)(2)(C).

See, e.g.. Revision of Patent Term

Adjustment Provisions Relating to Appellate Review, 76 Fed. Reg.
81,432, 81,435 (proposed Dec. 28, 2011) (to be codified at 37

C.F.R. pt. 1) (explaining, in the context of describing the
PTO's authority to define the circumstances that constitute an

applicant's failure to reasonably conclude processing of an

application, that an applicant "may delay or prevent the passing
of jurisdiction of the application to the [Board of Patent
Appeals and Interferences] by: ... (3) seeking further

prosecution before the examiner by filing a request for
continued examination under 37 CFR 1.114").
23

"[a]mended remaining claims and new claims have not overcome the

previous rejection."

A.R. at 64.16

By the time Exelixis filed

its RCE, it had reduced the application to only four claims that

finally addressed the PTO's concerns by limiting the claims to
treatment of those cancers for which the record provided

adequate documentation.

Had Exelixis initially filed a

narrowly-tailored application, rather than seeking an overlybroad patent, the extended examination would not have been
necessary.

For these reasons, the Court concludes that the

PTO's regulation denying PTA for the time period during which an

RCE is under consideration, regardless of when the RCE is filed,
is a reasonable implementation of the statute, and that under

that regulation, the PTO properly did not award plaintiff the 8
days of PTA for the time between the filing of the RCE and the
notice of allowance.

2. Time Between Notice of Allowance and Issuance

The second issue in this civil action concerns whether

Exelixis, after filing an RCE outside the three-year deadline,
is entitled to B-delay PTA for the time between the PTO's

issuance of the notice of allowance and the issuance of the
patent.

Again, the applicable statute does not address the

issue except insofar as it delegates to the PTO responsibility
Exelixis does not argue, and the facts do not suggest, that
any of the notices of rejection were improvidently issued by the
PTO or are otherwise attributable to PTO error.
24

for establishing procedures for the calculation and

determination of PTA.

See 35 U.S.C. § 154(b)(3)(A).

Exelixis argues that even if § 154(b)(1)(B) is deemed to

exclude from B-delay PTA the time between filing an RCE and the
PTO issuing a notice of allowance, the time between issuance of

the notice of allowance and issuance of the patent is
distinguishable because that time period began after the PTO had
already informed Exelixis that its application "has been

examined and is allowed for issuance as a patent," A.R. at 82,
and thus, after the period that was "consumed" by PTO review of

the RCE.

See PL's Reply at 19-25.

The PTO responds that even

after a notice of allowance issues, there remain continuing

duties on the part of the applicant and the PTO to react to any
material changes to patentability until the patent is issued.
See/ e.g., 37 C.F.R. §§ 1.313, 1.56(a).

Exelixis asserts that

those duties do not rise to the level of "continued examination"
within the meaning of the statute, and frames the work done

after a notice of allowance as purely ministerial tasks
precedent to patent issuance that are not attributable to the

applicant and are usually considered by the PTO to merit B-delay
PTA.

Specifically, Exelixis describes as inconsistent the PTO's

policy of awarding such time to an applicant who has
successfully appealed a final rejection and been granted a

notice of allowance, see id_ § 1.703(b)(4), and withholding the
25

same time from an applicant who has filed an RCE and been

granted a notice of allowance, see id. § 1.703(b)(1).

Exelixis's argument fails because applicants who file RCEs

before receiving notices of allowance are not similarly situated

with those who are granted notices of allowance without needing
RCE-prompted review.

The filing of an RCE opens a body of

proceedings that may occasion additional processing delay, but
as the PTO clearly indicated in its notice-and-comment

rulemaking over a decade ago, such delay emanates solely from an
applicant's original failure to file an application fit for a

notice of allowance.

See 65 Fed. Reg. 56,366, 56,376 (Sept. 18,

2000)("Once a request for continued examination ... is filed

in an application, any further processing or examination of the

application, including granting of a patent, is by virtue of the
continued examination given to the application . . . .").
This applicant-caused delay is incompatible with the
concept of B-delay PTA, which is fundamentally anchored to PTO-

caused delay.

See supra at Part II.B.l.

By contrast, an

applicant's successful appeal of a notice of rejection implies
no such applicant-related deficiency, but rather that the delay
resulted from error by the PTO.

Consistent with this

distinction, the PTO duly awards B-delay PTA for the
consequences of its own error - that is, for the time consumed

by the appellate review and for the processing time between the
26

notice of allowance and the issuance of the patent.
U.S.C. § 154(b) (1) (C) (iii); 37 C.F.R. § 1.703(b)(4).

See 35
Thus, when

the applicant decides not to appeal a rejection to claim error

by the PTO, but instead takes advantage of the RCE process to
further amend its application, all proceedings following the RCE
filing - including the otherwise routine processing that

directly precedes patent issuance - are "by virtue of the
continued examination given to the application," and are
ineligible for B-delay PTA.

This regulation is consistent with

the statute and will be accorded Skidmore deference.

Accordingly, the PTO's decision to deny any B-delay PTA for the
time between the notice of allowance and the issuance of the
patent will be upheld.
III.

CONCLUSION

For the reasons stated above, the PTO's Motion for Summary
Judgment [Dkt. No. 16] will be GRANTED and Exelixis's Motion for

Summary Judgment to Correct the Patent Term Adjustment of U.S.

Patent No. 8,067,436 [Dkt. No. 13] will be DENIED by an

appropriate Order to be issued with this Memorandum Opinion.
Hdi

Entered this ^8 day of January, 2013.
Alexandria, Virginia

Leonie M. Brinkema

United States District Judge

27