Exela takes its Collateral Patent Challenge to the Federal Circuit

Exela Pharma Sciences, LLC v. Focarino (Lee) (Fed. Cir. 2014)

Exela is an interesting pending case before the Federal Circuit. I previously wrote about Exela’s lawsuit against the USPTO in an essays titled Suing the USPTO to Cancel Improperly Issued Patents (August 2012) and Twelve Year Old USPTO Rules Cannot be Challenged Even if They Are Only Now Hurting You (February 2013).

The patent at issue 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 permitted 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.

When Cadence sued Exela for infringement, Exela filed this collateral action against the PTO – asking the agency to cancel the improperly issued patent. The district court gave consideration to Exela’s argument but ultimately sided with the USPTO in holding that the held that the case was 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 case is now on appeal at the Federal Circuit before an interesting panel consisting of Chief Judge Rader and Judges Newman and Dyk. The case is interesting in that the USPTO has argued that its mistake here (improper revival) is one that is and should be absolutely unreviewable by any court of law. The following quote is on-point from the oral arguments.

Judge Dyk: Under Your Analysis, the PTO can act unlawfully and nobody can challenge it.

Dennis C. Barghaan on behalf of the Government: Your statement is correct.

Matthew Dowd (the less famous one) argued on behalf of Exela that the APA properly permits judicial challenges to agency conduct, such as this, that goes beyond the scope of the agency’s limited power. He writes in the brief:

This case presents the important question of when a party, who is adversely affected by a specific, unlawful agency decision, can invoke the protections of the APA. Exela filed its APA challenge shortly after being sued by the patent owner. That lawsuit is the harm directly traceable to the PTO’s ultra vires revival of the patent application. Accordingly, under the APA, Exela should be permitted to challenge the PTO’s decisionmaking.

For its part, the PTO makes two arguments: (1) The six-year statute of limitations of the APA has expired since it has been more than six years since the PTO improperly revived the patent. That argument seems to fly in the face of the statutory language of 28 U.S.C. § 2401(a) that bases the timing on the date that the “right of action first accrues.” Exela likely had no right of action (no standing) for its challenge until it was accused of infringement by the patentee. However, the PTO does have a number of precedential decisions that support its interpretation.

The second argument (2) is that, even if not time-barred, the APA provides no right of action because Congress has already explicitly determined the types of challenges that are available.

17 thoughts on “Exela takes its Collateral Patent Challenge to the Federal Circuit

  1. Malcolm cannot get it right even in this matter:

    The great Kappos made the original call

    What a schmuck. Trace back to 1997 Malcolm – was Kappos there?

    1. Trace back to 1997 Malcolm – was Kappos there?

      No. But he chose to defend the PTO’s screw up when Exela sued the PTO for their rank incompetence.

      Thanks for demonstrating my point about the endless parade of patent txxbagger hypocricy, though. I knew I could count on you.

      1. Ummm,…

        Sure. I post that you are wrong (not defending any action whatsoever) and you respond that my post vindicates your wacky crusades….

        You need professional help.

        now.

        1. I post that you are wrong

          Whatever you think you did in your little peabrain is not really interesting to anybody.

          When I wrote “the great Kappos made the original call”, I was referring to the decision to “refuse to clean up its own mess”, i.e., the decision to fight Exela, not the PTO’s bonehead decision to revive the patent.

          Should I toss in something about you “charging at the red cape of MM” in honor of your relentless stoopidity and hypocrisy? Oops, I guess I already did.

          1. No.

            You should be on point and realize that your attitude of “no one cares” is the cause of the blight you render on these boards.

            Intellectual honesty – not just for the courts.

  2. Matthew Dowd (the less famous one) argued …

    I never heard of either of them until now, but this one looks like the right person for the job. This is going to be an interesting case – it seems hard to imagine that the judiciary is going to admit that the administration’s power, even in this small area, is completely unchecked.

    1. This is going to be an interesting case – it seems hard to imagine that the judiciary is going to admit that the administration’s power, even in this small area, is completely unchecked.

      The previous argument was that the judiciary was unable to do anything about this because their hands were tied by Congress.

      Refresh my memory, LB: do you recall any of the folks, who are elsewhere hysterically flipping out about the proposed rule to require disclosure of patent ownership, making any similarly lively efforts to negate the administration’s unchecked power in this regard?

      I don’t recall that happening. I wouldn’t really expect them to do anything given that this sort of “unchecked power” turns a piece of worthless paper into a precious patent right. But I may have missed something during the recent Congressional hearings.

      Probably they were too busy figuring out which judges to impeach first.

  3. Judge Dyk: Under Your Analysis, the PTO can act unlawfully and nobody can challenge it.

    Dennis C. Barghaan on behalf of the Government: Your statement is correct.

    Okay. Here is a case where the PTO has undeniably screwed up and refuses to clean up its own mess voluntarily (the great Kappos made the original call). That screw-up results in an innocent law-abiding party being liable for who-knows-how-many-millions of dollars.

    So, where’s all the “principled” heroes on their white horses waving around their Goebbel’s quotes and shrieking about totalitarianism?

    The case is now on appeal at the Federal Circuit before an interesting panel consisting of Chief Judge Rader and Judges Newman and Dyk.

    Newman was on the original panel that wrote that crxppy Aristocrat decision in the first place. Hopefully Rader and Dyk can clean that up mess, and Newman can write one her “scathing dissents” which my canary will surely enjoy.

    1. That screw-up results in an innocent law-abiding party being liable for who-knows-how-many-millions of dollars.

      So if this collateral action doesn’t go Exela’s way, what are the chances that they’ll file suit against the US to recover whatever damages they end up owing Cadence?

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