“Late” IDS Filing Limits Patent Term Adjustment (PTA)

by Dennis Crouch

Prior to 1995, the U.S. measured patent term very simply – a patent was in force for 17 years after issuance so long as the appropriate maintenance fees were paid.  Now, the U.S. has transitioned to a base term of 20-years from the filing date. With an average application pendency of about three-years, that transition has been seen as largely term-neutral.  However, Congress also created the patent term adjustment (PTA) system to increase the post-issuance term where USPTO delays have eaten-up too much of the 20-years. A major problem with the PTA statute is that it is poorly drafted – leading to major gaps and ambiguities.

For most patentees, an extra month added to a patent set to expire 15 years from now is relatively worthless.  However, there exists a subset of patentees that have good reasons to believe that the extra month may be worth millions of dollars (typically pharma).

In Gilead v. Michelle Lee (Fed. Cir. 2015), the fight focused on whether a “late” submission of an information disclosure statement (IDS) should count against the applicant’s PTA.  In its unanimous decision, the Federal Circuit affirmed the lower court holding that the PTO’s interpretation of the statute was reasonable and thus enforceable.

The relevant timeline in the case is as follows:

  • February 22 2008: Gilead files its application.
  • November 18 2009: USPTO mails a restriction requirement.
  • February 18 2010: Gilead files a responsive election.
  • April 16 2010: 57-days later, Gilead files a supplemental IDS.
  • July 29 2011: USPTO mails its notice of allowance.
  • April 3, 2012: Application issues as U.S. Patent No. 8,148,374.

The particular fight is whether that 57-days between its responsive-election and IDS filing should be counted against Gilead.

35 U.S.C. § 154(b)(2)(C) indicates that “the period of adjustment . . . 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.” The statute also gives the USPTO authority to “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.”  Taking on that role, the USPTO created did establish a rule that such a failure includes the “submission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner, after a reply has been filed.” 37 C.F.R. § 1.704(c)(8)

The IDS filing appears to squarely fall within the rule as written by the USPTO and Gilead’s challenge here is that the rule itself invalid as arbitrary and capricious.  In particular, Gilead argues that there is no indication whatsoever that the IDS filing led to any delays in prosecution.

In rejecting Gilead’s appeal, the Federal Circuit found: (1) the statute does not particularly address the IDS question but does give the USPTO authority to fill-the-gaps; and (2) the USPTO’s approach of creating an across-the-board rule is reasonable and certainly not arbitrary-and-capricious even though an applicant’s action may not have caused delay in the particular case at issue.   In this second-step of the analysis, the USPTO’s decision-making is given wide deference so that courts regularly affirm the applicability of rules that – in the view of the court – are sub-optimal.

Holding: Gilead does not get its extra 57 days of patent term.

Practice Tip: Before filing an office action (OA) response, take a few minutes to consider whether there are any supplemental IDS filings that should be included. Otherwise, you may lose patent term.

= = = = =

I should note that I avoided the genuine complexity of the PTA statute in the post above. If you really want to understand the statute then you’ll need at least an hour and several pieces of scratch paper.

23 thoughts on ““Late” IDS Filing Limits Patent Term Adjustment (PTA)

  1. 5

    So the patent covers a product with 200 million in sales. The lost PTA was valuable. The references cited in the late IDS were not material (certainly not but-for material), which we know because the patent issued. The IDS was therefore unnecessary, and should not have been filed. Is that the take-away from this case?

    Here is a practice question: Supposing your are deep enough into prosecution that you know the claims cover a valuable market, but you feel a need to file an IDS two months after responding to an office action that might result in a notice of allowance, and you can’t make the 30 day certification. Would it be permissible to call the Examiner and ask for a trivial office action (for example, an office action demanding correction of a typo in the spec), just to give you an option to file an IDS without loss of PTA? Similar strategies are used in other countries to regain the opportunity to file divisional applications (JP), or avoid double patenting issues (CA).

  2. 3

    Dennis, one might mention here that Congress apparently delegated the PTO the power to adopt rules to fill in the gaps here.

    “Congress expressly delegated authority to the PTO by granting
    authority to “[t]he Director [to] 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.” 35 U.S.C.
    § 154(b)(2)(C)(iii). As permitted by statute, the PTO
    promulgated 37 C.F.R. § 1.704(c)(8), which encompasses
    the precise situation in this case––the filing of a supplemental
    IDS after submission of a reply to a restriction
    requirement. Such broad language demonstrates Congress
    intended the PTO to employ its expertise in identifying applicant conduct demonstrating a lack of “reasonable
    efforts to conclude processing or examination of an
    application.” Id.
    Therefore, this court finds that a reasonable interpretation
    of the statute is that Congress intended to sanction
    not only applicant conduct or behavior that result in
    actual delay, but also those having the potential to result
    in delay irrespective of whether such delay actually
    occurred.”

    The case might have come out differently had not Congress expressly delegated this authority to the PTO.

    See, Scalia on the whole topic of Chevron, Scalia, Antonin. “Judicial deference to administrative interpretations of law.” Duke Law Journal (1989): 511-521. link to scholarship.law.duke.edu

    The bottom line: if a statute is not completely ambiguous and the agency is not deemed to have any special expertise in the particularly issue so that the resolution is not driven its expertise or policy choices of the executive, the construction of the statute is a matter of law for the courts to decide.

    This issue is important because the PTO is asserting Chevron across the board in interpreting the AIA. From prior art, to IPRs, to everything. Now think about THAT for a minute.

  3. 2

    DC: Before filing an office action (OA) response, take a few minutes to consider whether there are any supplemental IDS filings that should be included. Otherwise, you may lose patent term.

    The information in a supplemental IDS filing is quite often information that just became available to the applicant (e.g., as a result of prosecution of a foreign family member).

    Shaving a few weeks off the expiration date 15 or so years down the road is almost always going to take a back seat to ensuring that the duty of disclosure has been satisfied. You get the supplemental information when you get it. You file it shortly after you get it … unless you are trying to delay issuance for some reason.

    If Gilead has a decent product and they price it right, they’ll make plenty of money. No tears need be shed over these speculative “lost millions.”

      1. 2.1.1

        Dennis and Malcolm, you are incorrect. The deduction in PTA for late submission of an IDS can always be avoided. The applicant simply waits until the next time it is his turn for a substantive submission (e.g., a response to an office action. In the Gilead case, the next event after the response to restriction was allowance, so to avoid a PTA deduction, the applicant should have filed a RCE with the IDS being the reason for the RCE. Sure that stops the B delay clock, but that is going to restart anyway when the next allowance issues (see Novartis). If course the RCE delays issuance, but for pharma, typically the term at the end of the patent life is most valuable, not at the beginning when the product is not yet being sold or when the market is smaller.

        1. 2.1.1.1

          IMHO, letting concerns about a few weeks of patent term 15 years down the road trump good risk-avoidance practices is a loser’s game.

          to avoid a PTA deduction, the applicant should have filed a RCE with the IDS being the reason for the RCE. Sure that stops the B delay clock … [O]f course the RCE delays issuance

          Right there is the problem with playing seven dimensional chess. How much delay will be caused by the RCE? What other art is going to present itself to you during that delay period? Or perhaps there will be changes at the PTO that will result in a closer inspection of your case, resulting in even more delay?

          Unless you are aware of an actual problem with the claims that renders them valueless or unenforceable, the prudent option when claims are deemed allowable is to do your diligence, file a continuation/divisional and get the patent issued sooner rather than later.

          1. 2.1.1.1.1

            Malcolm,

            I can clearly see you are not a patent practitioner in the pharmaceutical arts. Such practitioners are very aware of PTA impacts and frequently take steps to avoid PTA loss, even if it means delaying patent issuance, in order to preserve accumulated PTA for the most valuable end portion of a patent’s term.

            I’m not sure what you mean by “[h]ow much delay will be caused by the RCE?” Do you mean delay to issuance? That’s easily approximated at 3-4 months if a Track 1 request is filed or longer without the Track 1 depending on the Examiner (who can be telephoned to get an estimate). If you mean applicant delay pursuant to 37 CFR 1.704(c), the answer is “none” – there is no provision that filing an RCE counts as a PTA deduction.

            You seem to be in a rush to get a patent and are scared about “[w]hat other art is going to present itself to you during your delay period.” Again, competent pharma practitioners have done their searches, know the art, and would prefer to disclose and address a problematic reference during prosecution when amendments can be made (instead of in IPR or litigation proceedings, when amendments are effectively impossible).

            Also, rushing to issue a patent and thereby truncating the most valuable terminal part of the patent term because of a perceived fear that “changes at the PTO [] will result in a closer inspection” sounds like the real “loser’s game” to me.

            1. 2.1.1.1.1.1

              Tony: I can clearly see you are not a patent practitioner in the pharmaceutical arts.

              Nice try. But PTA doesn’t rule everybody’s world. You are free to let it rule your world! Enjoy. But it doesn’t have to. And if you let it rule your world (e.g., by delaying issuance or by delaying the filing of an IDS) you are taking risks that can devalue your IP over the potential life of the patent by just as much as the potentially lost patent term might.

              You seem to be in a rush to get a patent and are scared

              LOL. No more than you are “scared” about PTA above all else.

              ’m not sure what you mean by “[h]ow much delay will be caused by the RCE?” Do you mean delay to issuance?

              Yes.

              competent pharma practitioners have done their searches, know the art, and would prefer to disclose and address a problematic reference during prosecution when amendments can be made

              The competent pharma pracititoner also knows that a clean file history is a wonderful thing and references that an Examiner might deem “problematic” are not necessarily going to be deemed “problematic” by a licensor or competitor.

              Moreover, as I already indicated, the competent pharma practioner also operates under the assumption that he/she doesn’t know everything and files a con/div to keep future options open.

              To be clear: I’m not advocating not filing an RCE after a Notice of Allowance to put additional references in front of an Examiner. I am suggesting that intentionally delaying issuance or intentionally delaying the filing of a supplemental IDS creates risks of its own. You can balance the risks however you like. I’m just saying that I’d be wary of letting PTA rules dictate your docketing.

              1. 2.1.1.1.1.1.1

                and files a con/div to keep future options open

                Sounds an awful lot like that exact same “game the system” that Malcolm accuses others of “engaging in.”

                There is no effective difference here. Future options open? Future options for what exactly…?

                I’m reminded of that one case (highlighted by a battle in Canada?) wherein the “objective physical structure” was laid out in the quantitillians of permutations, and the inventor then laid back and collected his options.

                Another non-software pharma-type case that was.

                There are bigger 101 elephants in the room (think possess utility or not)!

            2. 2.1.1.1.1.2

              Tony: Re “there is no provision that filing an RCE counts as a PTA reduction”
              Under 37 CFR 1.704(c)(12), filing a “continuing application” results in loss of all accumulated PTA. A continuing application is a continuation, divisional, or CIP per 1.53. An RCE is not a continuing application. So if you follow MM’s suggestion to file a continuation with the IDS, you lose your accumulated PTA, but if you file an RCE with the IDS, you retain your PTA. Do I have that right?
              If so, in some cases, you might have to balance the value of getting the patent issued quickly with a continuation (for example, with investors in the wings that don’t care about PTA) at the expense of PTA, or accepting the delay in issuance from an RCE to preserve the PTA (and build even more PTA?).
              Tony: Re “there is no provision that filing an RCE counts as a PTA reduction”
              Under 37 CFR 1.704(c)(12), filing a “continuing application” results in loss of all accumulated PTA. A continuing application is a continuation, divisional, or CIP per 1.53. An RCE is not a continuing application. So if you follow MM’s suggestion to file a continuation with the IDS, you lose your accumulated PTA, but if you file an RCE with the IDS, you retain your PTA. Do I have that right? And does the time it takes to address the RCE add even more to the PTA?
              If so, in some cases, you might have to balance the value of getting the patent issued quickly with a continuation (for example, with investors in the wings that don’t care about PTA) at the expense of PTA, or accepting the delay in issuance from an RCE to preserve the PTA (and build even more PTA?).
              Sometimes I think you should rush to get a patent, PTA be damned. Sometimes, I think you should preserve PTA at all costs. For some situations, you should take every extension you can, knowing that it eliminates PTA. Preservation of PTA might be the best default position.

    1. 2.2

      37 CFR 1.704 (d) excepts the “unavoidable” IDSs in some circumstances:

      (d)
      (1) A paper containing only an information disclosure statement in compliance with §§ 1.97 and 1.98 will not be considered a failure to engage in reasonable efforts to conclude prosecution(processing or examination) of the application under paragraphs (c)(6), (c)(8), (c)(9), or (c)(10)of this section if it is accompanied by a statement that each item of information contained in the information disclosure statement:

      (i) Was first cited in any communication from a patent office in a counterpart foreign or international application or from the Office, and this communication was not received by any individual designated in § 1.56(c) more than thirty days prior to the filing of the information disclosure statement; or

      (ii) Is a communication that was issued by a patent office in a counterpart foreign or international application or by the Office, and this communication was not received by any individual designated in § 1.56(c) more than thirty days prior to the filing of the information disclosure statement.

      (2) The thirty-day period set forth in paragraph(d)(1) of this section is not extendable.

    2. 2.3

      And Malcolm, your comment that Gilead will make “plenty of money” if they “price [their product] right” is quite absurd. The final days of an Orange Book listed patent, such as Gilead’s, are indeed often worth millions, so Gilead’s claimed loss is hardly speculative.

      1. 2.3.1

        Tony: Malcolm, your comment that Gilead will make “plenty of money” if they “price [their product] right” is quite absurd.

        There’s nothing absurd about the comment. It’s accurate. You seem to be deeply confused about the difference between “plenty of money” and “plenty of money plus more money”. This is type of blindness that is quite common, particularly among the wealthy.

        The final days of an Orange Book listed patent, such as Gilead’s, are indeed often worth millions

        That’s nice. I never claimed otherwise.

        I’m curious though about the term “often”. Can you tell me: what percentage of granted pharma patents are worth “millions” in its “final days”? Likewise with the percentage of patents listed in the Orange Book? Anybody know? Likewise, what percentage of granted pharma patents are worth more (adjusted for inflation) 15 years down the road as opposed to, say, three years from the time they are granted? Same question with Orange Book?

        The typical pharma patent, as we all know, isn’t functionally claimed junk that a bottom-feeder attorney can dig up and extort a huge sector of an industry with.

        1. 2.3.1.1

          Malcolm,

          I can see why Anon is frustrated by you all these years. Obviously Gilead’s patent is not a “typical pharma patent” so your comments to that effect are irrelevant. Gilead would not litigate the issue if the patent was not one that covered an FDA approved product (COBICISTAT), which it clearly is because the patent is in the Orange Book, which you could have found out if you had known what you were talking about. Sales for COBICISTAT are projected to reach $200M by 2020 and only grow from there. So, yes, the lost PTA is indeed likely worth $millions, and your implicit suggestion that it’s no big deal that Gilead lose this PTA is embarrassingly wrong and reflects a true lack of understanding of the Gilead case and the subject matter as a whole.

          Of course, you can try to deflect the inquiry by talking about “typical pharma patents” and inviting a statistical discussion of the value of pharma patents generally (information I’ll leave you to look up, since you seem to not be in the know), but I’m just trying to stay on topic, which, again, is your suggestion that Gilead can make up for the lost PTA by changing their pricing (let’s see your price elasticity data for that) and that the value of the lost PTA is merely “speculative.”

          1. 2.3.1.1.1

            Welcome to the boards Tony.

            The way not to be frustrated with Malcolm is to enjoy his usual moments of self-FAIL.

            He quite clearly seems completely oblivious to the fact that his rants paint him as so absolutely clueless to anyone that actually does know the law (and cares about the means used to get to whatever ends are desired).

            And here, you have touched upon just a light inclination of his anti-patent bent.

            But enough I daresay for you to come to the correct conclusions concerning Malcolm’s mischievous motives.

          2. 2.3.1.1.2

            Tony: your suggestion that Gilead can make up for the lost PTA by changing their pricing

            I never made that suggestion. But it sounds like a fine idea now that you bring it up.

            the value of the lost PTA is merely “speculative.”

            The value of the lost PTA is “merely speculative”, Tony. You admitted that yourself. How can it not be otherwise?

            the lost PTA is indeed likely worth $millions

            How likely? What are the assumptions that go into the calculation? I assume you know the answer because you did the calculation yourself or at least you seem to trust it.

            your implicit suggestion that it’s no big deal that Gilead lose this PTA is embarrassingly wrong

            The odds that this loss of PTA end up being meaningful to Gilead’s business in 15 years are pretty close to zero. But let’s check back in 15 years and look for that Wall Street Journal headline: “But For 1% of Patent Term Loss, Bankrupt Gilead Would Be Just Fine”. I can hardly wait.

            you can try to deflect the inquiry

            What “inquiry” are you talking about Tony? I’m not “deflecting” anything. I asked a germane question about pharma patents and Orange Book patents.

            Here’s the question again: what percentage of granted pharma patents are worth “millions” in its “final days”? Likewise with the percentage of patents listed in the Orange Book? Anybody know? Likewise, what percentage of granted pharma patents are worth more (adjusted for inflation) 15 years down the road as opposed to, say, three years from the time they are granted? Same question with Orange Book?

            You’re perfectly free to simply state “I don’t care because even it’s 0.001% the potential money 15 years down the road justifies doing everything possible to avoid any loss of any patent term, even if doing everything possible to avoid any loss of patent term creates additional risks.” Or you can use your own words (highly recommended!).

            I’m just wondering if anyone has bothered to do the math to determine the frequency at which these PTA nibbles actually do amount to “millions of dollars” lost for pharma patents.

          3. 2.3.1.1.3

            Tony: Gilead’s patent is not a “typical pharma patent” so your comments to that effect are irrelevant.

            My comment about the “typical” pharma patent was relevant to my question about the value of the typical pharma patent and the typical Orange Book pharma patent at the end of its lifetime.

            And that question is relevant to this thread for reasons that I don’t think need to be explained. But I’m happy to explain them if you want me to, Tony. I’m also happy to compare and contrast in more detail the differences between the typical pharma patent and the typical functionally claimed computer-implemented junk patent if you like.

            Certain patents do tend to become more valuable at the ends of their lifetimes but for seemingly different reasons. It’s interesting (to me anyway) and quite plainly relevant to this thread.

  4. 1

    Here’s what they did:

    “While waiting for the PTO to issue a first office
    action on the merits, Gilead filed a supplemental information disclosure statement (“IDS”) on April 16, 2010, which disclosed two other co-pending Gilead patent applications.”

    OK, CAFC, how does anyone apply this rule? How can we possibly know which IDS — which isn’t “late” by any law or rule within the US codes or CFR nor did it in any way delay the prosecution — will be subject to this rule and which IDS will not?

    Normally, I’m not against the CAFC, but this rule seems crazy and impossible to interpret in real-life prosecution.

    1. 1.1

      Really Bob? The rule is an extremely simple bright line rule that the USPTO chose for the simplicity rather than making the rule better but more complicated. It’s not at all impossible to interpret in real-life prosecution, it’s straight forward.

    2. 1.2

      Bob, the rule is relatively simple. If the applicant becomes aware of art when it is not his “turn” to file a submission to the PTO, to avoid a PTA deduction, the applicant should wait until it is his turn (e.g., responding to an office action) and then file the IDS with his submission.

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