COURT: Twelve Year Old USPTO Rules Cannot be Challenged Even if They Are Only Now Hurting You

Exela Pharma Sciences, LLC et al v. Kappos et al, 12-cv-0469 (E.D. Va. 2013).  Download Exela v Kappos Dkt 55- Opinion dismissing case

I previously wrote about Exela's lawsuit against the USPTO in an essay titled Suing the USPTO to Cancel Improperly Issued Patents. The patent at issue in this case is Cadence Pharma's U.S. Patent No. 6,992,218 that covers an injectable form of acetaminophen. During prosecution the patentee failed to timely file a US national-stage application before the 30-month PCT deadline. However, the USPTO allowed the patentee to subsequently revive the case and file the national-stage application based on a pleading that the delay was "unintentionally." Exela argues that the Patent Act only permits revival in this situation when the application was unavoidable abandoned – a much more difficult standard to meet. Unfortunately for Exela, improper revival is not a cognizable defense in patent litigation. See Aristocrat Gaming v. IGT and 35 U.S.C. §282. So, when Cadence sued Exela for infringement, Exela filed this collateral action against the PTO – asking the agency to cancel the improperly issued patent.

In his original decision in the case, Judge Grady sided with Exela against the PTO's motion to dismiss – finding that the Administrative Procedures Act (APA) contemplates that parties wronged by an agency action have a cause of action to right those wrongs and that this type of lawsuit is currently the only way that an adversely affected party can take action on this issue (because it is excluded as a defense). The USPTO had argued that some of its decisions should simply not be challengeable. The court entirely rejected that untenable position. "The Court finds no support for the PTO's apparent proposition that certain agency actions should remain entirely unchecked." The district court also held that the case was not time-barred because Exela's standing only recently became ripe.

In a new decision, the district court has flipped its stance and dismissed the case as barred by the six-year statute of limitations defined by 28 U.S.C. § 2401(a) ("Except as [otherwise provided], every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues."). The basic rule applied by the court here is that the statute-of-limitations was triggered when the USPTO created its offensive rule, regardless of whether this particular plaintiff (Exela) would have had standing at that point. In 2000, the PTO finalized Rule 37 C.F.R. 1.137(b) to provide for revival of applications based on an applicant's unintentional abandonment of a PCT application. Case dismissed. Exela will almost certainly appeal with the argument that its right of action did not accrue. It will be interesting to see whether the Federal Circuit applies its own law or the law of the Fourth Circuit to this case – especially since the district court couched its decision as being required by the recent Fourth Circuit decision in Hire Order Ltd. V. Marianos, 698 F.3d 168 (4th Cir. 2012).

Challenging USPTO Rules: An important take-away from this decision is reminder of the six-year deadline for challenging USPTO rules.

17 thoughts on “COURT: Twelve Year Old USPTO Rules Cannot be Challenged Even if They Are Only Now Hurting You

  1. It seems to me that 37 C.F.R. 1.137 only applies to applications already filed in USPTO that are later abandoned, the instant application had not yet entered the national stage, it is my understanding that USPTO and the applicant should not look into 37 C.F.R. 1.137 for revival, but 35 USC 371(d), and under the unavoidable standard.

  2. Seems to me that the statue of limitations should start from the time of infringement (IMO, that is “the action”), not the timing of any (offensive) law/decision.
    The statute of limitation for robbery is “x” years from the time of the robbery, not of the passing of the law.

  3. Assuming that the district court accurately stated the holding of the Fourth Circuit (and I share TJ’s skepticism that Judge O’Grady understands the difference between “facial” and “as applied”), there’s a big fat circuit split with the D.C. Circuit.

    But I agree with Dan Feigelson, Excela’s position is barred by Aristocrat.

  4. Unless you happen to not have any – like the Myriad case, but the Justices still want to stick their fingers in the patent pie.

  5. An important take-away from this decision is reminder of the six-year deadline for challenging USPTO rules.

    Yeah … because that happens all the time in my practice.

    /sarcasm off

  6. In many common law jurisdictions, the statute of limitations begins running when the plaintiff learned of or should have learned of the harm complained of, not on the date the actual harm was committed. This is what enabled victims of child sex abuse by the church to sue so long after the fact. The latest D. Ct. decision doesn’t seem to harmonize well with this.

  7. “Unfortunately for Exela, improper abandonment is not a cognizable defense in patent litigation.” Dennis, I think you meant to say that under Aristocrat, improper *revival by the PTO of an abandoned application* is not a cognizable defense in patent litigation.

  8. Actually, forget it. Looking at the case more carefully, it is clear that the district judge doesn’t understand the difference between facial and as-applied challenges. In the Hire Order Ltd. v. Marianos case that it discusses, the plaintiffs challenged an IRS regulation that was preventing them from selling guns. This had to be a facial challenge because the plaintiffs had not sold any guns yet, so there were not facts to “apply” the regulation to.

    The Exela case is different. There is a concrete patent to which this regulation was applied. The district court simply reasoned that, because the plaintiff’s theory would apply to all cases under the regulation, it is a facial challenge. This judge doesn’t understand what a facial challenge is.

  9. Dennis, maybe you know this: why was the case dismissed with prejudice? So far as I can see, the opinion hinges on the fact that Exela made a facial challenge to the regulation. As a facial challenge, the plaintiff’s actual circumstances don’t matter and thus there is thus less reason to wait for those circumstances to occur for statute of limitations purposes.

    But I can’t see any reason why Exela couldn’t make an as-applied challenge the regulation based on the facts of this case–the mere fact that invalidating the regulation in this case would also, through the operation of stare decisis, do so for all other cases as well does not make it a facial challenge. So I don’t see why the district court did not permit Exela to amend its complaint to allege an as-applied challenge (as a side note, I also don’t understand why Exela didn’t itself allege an as-applied challenge).

  10. He seems quite stoked about the notion that maybe he’ll go to the USSC again over this.

    Did he mention anything about being abducted by aliens?

  11. Don’t sleep on them rights of action.

    In any event, for those that missed the judge newman/Dr. Chakrabarty double header PTOS meeting today, the ol’ doc is trying to use (I believe naturally occuring) bacteria to protect mice and men from cancer (it already worked in some tests on mice). He plans for a new USSC challenge when it comes to him wanting to claim a process of using a certain protein that the bacteria has that inhibits cancer (and maybe other stuff too he says, like potentially AIDS etc.) to genetically change the genetic code of a living human (yes, genetically engineered humans that are already born, like me and you) so that our body will make the protein and it will be in our blood to protect us. And then he wants to create (and patent) this thing called a germline that will pass the genes on to your kids. He of course wants to charge $$$ for every step of the proceedings (including the birthing of your kids) and so wants to patent it all, and forsees a court challenge. He seems quite stoked about the notion that maybe he’ll go to the USSC again over this.

    He also says that he is willing to genetically engineer himself first.

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