Patent Term Adjustment: Erroneous and later Withdrawn Restriction Requirement Still Counts as a Section 132 Notice

 

By Dennis Crouch

Pfizer v. Lee (Fed. Cir. 2016) [PfizerLee Opinion]

In this case, the Federal Circuit has refused Wyeth’s (now Pfizer’s) plea for more patent-term-adjustment (PTA).[1]

The basic issue is involves the “A-Delay” category of patent term adjustment that provides for term adjustment when the PTO fails to issue its first office action within fourteen months from the application filing date.

Here, the patent examiner’s first qualifying action was a restriction requirement mailed in August 2005.  However, after a discussion with Wyeth’s attorneys, in February 2006 the examiner withdrew the restriction requirement and issued a corrected version.

The question then is whether the original restriction requirement qualifies to cut-off the A-Delay even though it was later withdrawn as insufficient.

The term adjustment statute indicates that A-Delay will stop accruing once the USPTO  “provide[s] at least one of the notifications under Section 132.”[2]  Section 132(a) in turn provides:

Whenever, on examination, any claim for a patent is rejected, or any objection or requirement made, the Director shall notify the applicant thereof, stating the reasons for such rejection, or objection or requirement, together with such information and references as may be useful in judging of the propriety of continuing the prosecution of his application.

In prior cases, the court has offered some guidance as to when Section 132 is met.  In particular, the court has held that the notice does not have to present a winning argument or overwhelming factual evidence.  Rather, the rule is simply that the notice must be sufficient to permit the applicant to recognize the grounds for rejection/objection.[3]  In Chester v. Miller, the Federal Circuit wrote that Section 132 simply requires that the applicant “at least be informed of the broad statutory basis for [the rejection of] his claims, so that he may determine what the issues are on which he can or should produce evidence.”

Coming back to the facts of this case: The failure of the original restriction requirement divided the 100+ claims into twenty one distinct groups, but the restriction requirement failed to expressly categorize of the six dependent.  On appeal, the Federal Circuit found, despite the examiner’s error, that the mailing was still sufficient to meet the notice requirement.

Here, the examiner’s detailed descriptions of the 21 distinct invention groups outlined in the examiner’s initial restriction requirement were clear, providing sufficient information to which the applicants could have responded. Indeed, the applicants never challenged the content of the invention groups defined by the examiner. And, significantly, the examiner’s defined invention groups remained identical between the two restriction requirements. Viewed as a whole, the restriction requirement provided adequate grounds on which the applicants could “recogniz[e] and seek[] to counter the grounds for rejection.” Chester. Therefore, because the examiner clearly defined to the applicants the invention groups available for election and further prosecution, the applicants were placed on sufficient notice of the reasons for the examiner’s restriction requirement.

As for the six claims whose classifications were omitted from the initial restriction requirement, Wyeth could have taken direction for their classification from the fact that their respective independent claims were each included in the initial restriction requirement. Here, the dependent claims would naturally have been classified in a subset of the invention groups to which the claims they depend from belong.[4]

The PTO’s position is somewhat strengthened by its own MPEP statements that a restriction requirement which fails to classify all of the claims still counts as providing a section 132 notice.

The majority opinion was written by Judge O’Malley and joined by Judge Dyk.  Judge Newman wrote in dissent — arguing that this was a case of clear error by the examiner and should not count as a proper notice.  If Judge Newman is correct, Wyeth would been within its rights to simply sit on its hands not respond until the USPTO issued its notice of abandonment.

= = = = =

Coming out of this case (and others), we know that even a very low quality mailing from a patent examiner will be counted sufficient notice and thus force a response on threat of abandonment.  Where a procedural error exists, the best practice action then is to quickly contact the examiner and identify the error.   Here, Wyeth waited until four days before the deadline to respond.

= = = = =

[1] The case involves U.S. Patent No. 8,153,768 that issued from U.S. Patent Application No. 10/428,894.

[2] 35 U.S.C. § 154(b).

[3] Chester v. Miller, 906 F.2d 1574 (Fed. Cir. 1990).

[4] In a footnote, the Federal Circuit suggests that failure to classify and independent claim could possibly fail the notice requirement of Section 132.

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

48 thoughts on “Patent Term Adjustment: Erroneous and later Withdrawn Restriction Requirement Still Counts as a Section 132 Notice

  1. Deep thoughts from David Boundy, the patent world’s super-serious and self-promoting “expert” on administrative law:

    The practice of the PTO is equally simple: when the requirements of law collide with the PTO’s collecting of fees and generating counts for bonuses, the law can go to hell.

    David, does your magnificent theory explain why the PTO has, for so many years now, granted so many incredibly junky computer-related patents? Or does the PTO’s “lawlessness” operate uniformly in one direction (i.e., an “anti-applicant” direction)?

  2. Re: “If Judge Newman is correct, Wyeth would been within its rights to simply sit on its hands not respond until the USPTO issued its notice of abandonment.’
    ? I don’t see any basis for that. Newman’ short dissent is presumably just about not getting a further patent term extension when what the PTO calls a “first action” to stop the 14 month clock is nothing but a defective restriction requirement with no prior art or any other actual rejections.

    As has been complained about for years, the PTO has been playing the following game for years: (1) Issue any restriction requirement. (2) Applicant has to petition from that. (3) PTO Petitions Office delays response to petition until applicant is forced to accept restriction requirement or face abandonment.

    1. Paul,

      The typical response has been to accept the restriction, but with traverse and maintaining one’s rights.

      Then later (as David Boundy goes in very nice detail below), a decision taking into account many different factors can be made as to how to proceed.

      I have never been “trapped” in petition-purgatory as you (correctly) note that the petition system lacks accountability for timely reply.

      1. Yes, as I said, one is effectively forced to respond with a restriction acceptance, removing claims. Of course it is always done “with traverse.” But that is meaningless unless agreement to the recombination of restricted out claims can be achieved before the requisite expense of divisional applications or the abandonment of those restricted out claims becomes necessary. Of course since divisionals require little attorney effort, and the additional PTO fee payments are by the clients, and those claims in divisionals in response to a restriction requirement avoid double patenting rejections for unamended claims, they are welcomed by many patent attorneys.

        1. But that is meaningless unless agreement to the recombination of restricted out claims can be achieved before the requisite expense of divisional applications or the abandonment of those restricted out claims becomes necessary

          I do not see the calamity that you seem to want to present with your reply here.

          You can either “win” on your traverse, or you cannot.

          If you are saying that such should not even be forced onto an applicant (if the restriction practice were properly p0liced and administered by the Office, then yes I agree fully with you) – my point here though was solely that your initial lament of “must engage” in the (equally inept) petitions process was not accurate.

  3. I wish people would think about (or seek (my?) help) on the administrative law issues before going to the Federal Circuit.

    There’s an easy argument here. It is well established that when an agency acts contrary to its own manual, the resulting action is “illegal and of no effect.” Vitarelli v. Seaton, 359 U.S. 535, 545 (1959); Certain Former CSA Employees v. Dep’t of Health and Human Services, 762 F.2d 978, 984 (Fed. Cir. 1985) (action in violation of agency’s own regulation is “illegal and of no effect”); see also Webster v. Doe., 486 U.S. 592, 602 n. 7, 603–04 (1988) (the CIA concedes that if its regulations cover agency action, then the agency’s failure to follow those regulations can be challenged under the APA, and where regulations do not, constitutional due process may provide further procedural protections).

    Essentially every restriction requirement I’ve received in the last ten years has short-cut requried MPEP procedures — especially in 3620/3680/3690, examiners cut sentences out of the MPEP form paragraphs, make up their own language so they can skip over required showings, use form paragraphs that were long ago withdrawn, cheat, cheat, cheat, count inflation, scam, scam, scam.

    If this restriction was like most of the ones I’ve received, then the winning argument is that the examiner acted outside the authority delegated by the PTO — this was not a restriction requirement, but a frolic of a rogue employee.

    1. There’s also likely a dead-winner under the Paperwork Reduction Act. Because the Office of Patent Examination Policy and Office of General Counsel have been so haphazard in observance of rulemaking procedure, the PTO lacks authority to penalize any member of the public. The applicability of the PRA to this case would turn on specific facts, but there’s a high likelihood of a winning argument here.

      1. Great posts David.

        Hey, maybe there is a patent law blog out there that would do a good story on your restriction views. Do you know of any? I heard that Gene Quinn will publish helpful articles like that.

    2. It’s a rare guy that has expertise in patent prosecution and administrative law.
      I don’t think the restriction requirement was contrary to any PTO manual: I think it was just wrong, and only in that sense was it “contrary to the manual.”
      Are you suggesting that any office action with a defect, such as overlooking one of the claims, or misperceiving prior art, is “illegal and of no effect”? Most office actions I have ever received have been wrong, in the sense that I eventually show the examiner why the claims are allowable. Does that mean I don’t have to answer? I would like to answer, just for the billables, but if I don’t have to answer, maybe I’ll go home early.

      1. Depends on the nature of the defect.

        If a regulation or PTO guidance says “The examiner must thus-and-so, the Office Action must explain this-and-that, and such-and-so must be supported by evidence,” then silence (or cutting sentences out of a form paragraph, giving explanation when evidence is required, etc.) is an error cognizable under the procedural law.

        Such violations of procedure are void ab initio, and arguably not agency action at all. The PTO delegates only so much authority and discretion to an examiner, and when the examiner goes outside those bounds, well, that’s the examiner going rogue — in the law of agency or torts, a “frolic.” It is not an action by an agent on behalf of a principal.

        If the law says an examiner must this-and-so, this-and-that, and such-and-so, and the examiner puts something on paper but it’s wrong, that’s an error under substantive law. It’s an agency action, and it goes through the appropriate review process, generally the Board.

        That, of course, is the law. The practice of the PTO is equally simple: when the requirements of law collide with the PTO’s collecting of fees and generating counts for bonuses, the law can go to hell. If the procedural omission underlies a rejection of claims, then neither the Board nor petitions folks will review such issues — both insist that it is the province of the other. The Board cites appropriate authority, and is correct. The Office for the Institutionalization of Graft, Promotion of Cheating, Whitewashing of Responsibility, and Extortion of Counts — aka the Office of Petitions — will give you the biggest pile of horse hocky you’ve ever seen.

    3. David, there are good reasons why more patent attorneys and clients do not even try to seriously legally fight the numerous defective PTO restriction requirements [besides the attorney costs of doing so]. See, e.g., 4.1.1 above. Others reasons can be added, such as the fact that many companies like to brag to stockholders about their total number of patents, and are happy to boost that total with multiple divisionals. Also, the ability to keep divisionals, like continuations, pending years longer than parent applications by not filing them until just before the parent issue date, thus being able [in the U.S., not in the EPO] to add or extensively amend very different claims many years later to cover later launched products of others “from the catbird seat.” All perfectly legal in the U.S., which has no “late claiming” restrictions on applications, just a 112 spec support requirement, and the PTO discourages rejections on that basis.

      1. Of course some restrictions are good — but (at least in the computer fields where I practice most) most are bad.

        The most-concrete error I hear from attorneys is comparing the cost of arguing a restriction against a filing fee. That’s the wrong base of comparison. At the very least, compare the attorney fee cost to the end-to-end cost of a second set of filing, issue, maintenance, and management fees.

        And it also helps to know how to argue successfully to get the restriction withdrawn, without shooting self in substantive foot. That’s a much longer topic

        1. Ah, yes, Mr. Boundy – a longer topic – but a much, much better one than the typical chumming ones presented here.

          I would LOVE to see the more substantive views that you might be willing to share.

  4. On a practice note, how does it make sense to file 144 claims, while expecting (probably intending to provoke) a restriction requirement? Wyeth paid 3K in excess claim fees, which they lost when they canceled claims in response to the restriction requirement. Wouldn’t it make sense to file the separate inventions in separate applications (that 3K would have covered four filing fees), or at least hold 80 or 90 dependent claims back?

    1. 1. One EXPECTS to get the examination one pays for.

      2. If the Examiner requires a restriction, he is declaring that the inventions are distinct and not obvious in light of one another.

      1. Nope. ONE expects to get a restriction requirement and piss away all the excess claim fees. The $750 filing fee Wyeth paid gets them examination of one invention, and ONE knows that. I am wondering if there is some benefit, beyond charitable donation to the PTO, to pay excess claim fees in this situation.

    2. Only an examiner’s restriction, not an applicant’s own “voluntary restriction,” can bring an application within the safe harbor against double patenting of § 121.

      1. David: That could have been done with 21 claims and $18, and did not require 144 claims and $3000, yes?
        And, to get your full protection for twenty other inventions, don’t you have to file twenty divisionals before the first patent issues? If you are going to file a series of only 3 continuations, as Wyeth did in this case, you only get §121 protection for the first continuation. Wyeth did not care much about §121.
        So, since it seems that not even Wyeth wants to pay for twenty divisionals, why would they still want to waste 3K on excess claims?
        By the way, I often provoke restriction requirements for exactly the reason you cite, but I don’t need 144 claims to do it, and never get authorization to file divisionals on ALL the claim groups identified by the Examiner.

    3. I think filing 144 claims is ridiculous, but as pointed out below sometimes it is done for the express purpose of generating a restriction requirement to allow for the filing of divisional applications that will not be subject to double patenting rejections, and thus the “must be commonly owned to be enforced” requirements of a terminal disclaimer, along with the requirement to disclaim any additional patent term.

      In 90% of my cases, I stick with the 20/3 that comes with the filing fee. Sometimes a restriction requirement is a good thing (e.g. the apparatus will be made and sold by us, but the method will be practiced by somebody else, and can be licensed to them). If I do get a restriction, I almost always go back and look through the case and add claims to unclaimed subject matter, or simply represent the original dependent claims with new dependencies (e.g. serially off each other, as opposed to all back to the independent claim) to prevent the examiner from claiming in an advisory action that certain combinations of features or dependent claim present new issues. I paid for examination of 20 claims and I get examination of 20 claims.

      1. AAA JJ I paid for examination of 20 claims and I get examination of 20 claims.

        The restriction requirement is part of what you paid for. Just fyi.

        1. I don’t think that anyone has a problem with a restriction requirement as “being part of what was paid for” – when the restriction is proper.

          In case you hadn’t noticed, the topic here is improper restrictions (and the inherent danger in self-restricting).

          Further, given KSR, restriction practice should have greatly reduced itself, and yet….

          1. “anon” I don’t think that anyone has a problem with a restriction requirement as “being part of what was paid for”

            I don’t either.

            Are the voices in your fillings making any other arguments you want to “decimate”?

            1. ^^^ Great “ecosystem” Prof.

              Malcolm, once again you attempt to parse a comment of mine and reply with nothing but banality.

              R E A D the entire comment. Then, if you have nothing constructive to add, and only find yourself reaching to your short script, just stop.

      2. AAA JJ and Mr. Non-Oblivious —

        The number of claims depends on the value of the invention, how much risk there is of prior art, how many different ways I have to characterize the invention based on the art I know of today, various combinations of imports, exports, various contributory/induced infringement scenarios, replacement or repairable parts, various stages in the flow of commerce (though that is much less important after Quanta Computer in 2008), an ambiguity in the law that requires claims on both sides of the bet (say hello to the AIA), etc.

        Pharma inventions are generally high value patents. 144 claims may be unusual, but we don’t have enough facts to know whether it was irrational at the time they were filed. Wyeth is pretty sophisticated, I doubt that the decision was made without thinking.

        I’ve filed quite a few over-100-claim applications over my career. When the commercial reality calls for it, I get a confirm from my client first, but never shy away from it. In fact, I’m working on one this week — 8 different inventions, each of which will need at least 2, perhaps 4 independent claims, plus appropriate dependent claims…

        1. OK, so you intend to provoke a restriction for 8 inventions over 16 claims, so you need 13 excess independent claim fees. If you already plan to file 7 divisionals before issuance (awesome), that makes sense if §121 is more important than budget. But why add the other 80-some dependent claims before breaking out the divisionals? Why not pick the favored first claim set, flush that out with dependents, and hold the rest back to avoid the big gift to the PTO? Cut out 60 dependent claims and you save $4800 in claim fees, and that will cover three of the necessary divisionals. (I am assuming that your dependents are not multiple dependents, in which case the excess claim fees, and subsequent charitable donation t the PTO, would be much higher).
          That way, you get the benefit of the restriction/divisional and save money to help fund your divisional program.

          1. Who said I intend to provoke a restriction requirement? I plan to structure the claims to make the application restriction-proof. But as you suggest, in such cases, I delay adding many of the dependent claims until I’m over that bridge.

            1. I’m curious to it when it publishes.
              I assumed you would want to provoke a restriction requirement because I think I would in the types of cases I handle.
              Good luck with it.

          2. There are many many reasons to keep an application together, to traverse restriction requirements (there are exceptions too, but many reasons!):

            (a) Costs (after dividing, the group of applications will have higher filing fees, more issue fees, more maintenance fees, more hassle in managing more cases).

            (b) Delays in issuance (if you have to restrict, the restricted claims will issue at least 18 months later than the other claims).

            (c) Reduction in patent term (you lose 14 months of patent term adjustment for the time until the divisional application comes up for first examination).

            (d) The longer the application is pending and the more different claims pending, the greater the opportunity to amend the claims to track competitors’ products.

            (e) Likewise, the longer the application is pending and the more different claims pending, the greater the opportunity to retailor the claims to track evolution of your client’s own commercial product.

            (f) Loss of patent term adjustment: Almost always, the first patent in a family has the greatest accumulation of patent term adjustment, but daughter cases will have close to zero. If you keep all claims together, all claims benefit from that longer term. These are the facts of Wyeth,

            (g) Keeping more claims together usually delays final rejection, which in turn usually increases patent term adjustment.

            (h) If the restricted claims are very similar (for example, some examiners will restrict between method and apparatus “twins” of each other), and one set of claims issues, and you present the other claims in a divisional, and the examiner rejects the second set of claims, you now have bad dents and tarnish on the claims in the parent issued patent, and no meaningful way to fix it.

            (i) Substantive risks of inconsistent arguments (at the very least, you will have to make arguments in the later cases that you could not have foreseen during prosecution of the earlier cases)

            (j) Division of claims increases risks of prosecution history estoppel and disclaimer of broader claim scope.

            I try hard to keep almost all of my multi-invention cases undivided.

            1. David, because there is only one royalty for a patent regardless of how many claims are infringed, and this extends to continuations for which there is a double patenting rejection a terminal disclaimer filed, one is somewhat foolish in not viewing a restriction requirement as a godsend. This permits multiple patents that can be asserted where each patent may result in a damage award independently of any other patent. The same is not true if these claims remain in a patent after a restriction requirement is traversed.

              1. Absolutely true, but only when it’s true. which is true much less often after Quanta.

                Restrictions require careful thought. The
                possibility of multiple licensing has to be balanced against the certainty of additional costs of the division.

                Also, the value of the royalty is not fixed in stone–efficient market economic theory says that the value of the royalty should be identical whether the claims are in a single patent or split (which says something about efficient market hypothesis!)

  5. “. Here, Wyeth waited until four days before the deadline to respond.”

    The deadline to respond is 30 days from the mailing date is it not?

    Given mailing time, docketing time etc. and the byzantine nature of reviewing/arguing a 21 way restriction requirement, I don’t think “waited until four days before the deadline” is a deserved characterization.

      1. Wyeth contacted the examiner only four days before the unextendable six month deadline (one-month + five-month extension)

        I wonder why they waited so long. That’s a rather expensive response to a restriction requirement.

        1. Don’t know – don’t care – and importantly, should NOT matter.

          I would hazard a guess that counsel kept the client informed all along (but that would be just a guess).

      2. Correct me if I am wrong, but any delay by the applicant within the allotted time to respond is NOT included in any PTA calculation anyway, right?

        If this is so, drawing attention to any delay within the allotted time is not on point. What else does such attention do, but imply some “wrongness” on the part of the applicant?

        So while Les may have made a point about some of the conditions that might necessitate delay, the initial point in your post Professor – and your response to Les – still smack of some non-existent “wrong.”

        If the allotted time is “too much,” then change the allotted time. Implying as you attempt here to say that waited “soooo long” (while still within the allotted time window) is a subtle – but no less present – “thumb on the scale.”

        1. “anon” : drawing attention to any delay within the allotted time is not on point. What else does such attention do, but imply some “wrongness” on the part of the applicant?

          Meet “anon”. He’s really sensitive.

          LOL

          1. Being “sensitive” has nothing to do with anything.

            Other than that, what exactly is the point of your post? Do you think that I misspoke?

            Have anything on point to add?

            Thought not.

        2. From the PTO:
          “The patent term adjustment provisions of the American Inventors Protection Act of 1999 also provide that patent term adjustment is reduced by a period equal to the period during which an applicant failed to engage in reasonable efforts to conclude prosecution of the application. 35 U.S.C. § 154(b) expressly provides that with respect to patent term adjustment under 35 U.S.C. § 154(b)(1)(B), an applicant is deemed to have failed to engage in reasonable efforts to conclude processing or examination of the application for the cumulative total of any period in excess of three months taken to respond to any Office action or notice.”

          1. Those selfsame reductions were in place prior to the AIA, Paul.

            That is not – and never was – time that was at issue in desiring the Office to “correct” PTA calculations.

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