Court Opinion

ID: 2789424
Source: CourtListenerOpinion
Date Created: 2015-03-26 16:01:13.297505+00
Date Added: 2024-06-11T11:55:24.725944
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                 ______________________

     EXELA PHARMA SCIENCES, LLC, EXELA
    PHARMSCI, INC., EXELA HOLDINGS, INC.,
              Plaintiffs-Appellants

                            v.

        MICHELLE K. LEE, Deputy Director,
         U.S. Patent and Trademark Office,
                  Defendant-Appellee

       CADENCE PHARMACEUTICALS, INC.,
              SCR PHARMATOP,
                   Intervenors
             ______________________

                       2013-1206
                 ______________________

   Appeal from the United States District Court for the
Eastern District of Virginia in No. 12-CV-0469, Judge
Liam O'Grady.
                ______________________

                Decided: March 26, 2015
                ______________________

    MATTHEW JAMES DOWD, Wiley Rein, LLP, Washing-
ton, DC, argued for plaintiffs-appellants. Also represent-
ed by CLAIRE JOY EVANS; CLARENCE EDWARD POLK, JR.,
Exela Pharma Sciences, LLC, Ashburn, VA; ANTHONY H.
SON, Andrews Kurth, LLP, Washington, DC.
2                         EXELA PHARMA SCIENCES, LLC    v. LEE

    DENNIS C. BARGHAAN, JR., Office of the United States
Attorney for the Eastern District of Virginia, Alexandria,
VA, argued for defendant-appellee. Also represented by
DANA J. BOENTE; NATHAN KELLEY, Office of the Solicitor,
United States Patent and Trademark Office, Alexandria,
VA.

    RICHARD P. BRESS, Latham & Watkins LLP, Washing-
ton, DC, argued for intervenors. Intervenor Cadence
Pharmaceuticals, Inc., also represented by GABRIEL BELL,
Washington, DC; STEPHEN P. SWINTON, San Diego, CA;
MARC NATHAN ZUBICK, KENNETH G. SCHULER, Chicago, IL.
Intervenor SCR Pharmatop represented by CHARLES A.
WEISS, Holland & Knight, LLP, New York, NY.
                ______________________

         Before NEWMAN and DYK, Circuit Judges. ∗
    Concurring opinion filed by Circuit Judge NEWMAN
        Concurring opinion filed by Circuit Judge DYK
PER CURIAM.
    This appeal presents the question of whether a third
party has the right to challenge, by way of the Adminis-
trative Procedure Act (APA), a ruling of the Patent and
Trademark Office reviving a patent application that had
become abandoned by failure to meet a filing schedule
established by the Patent Cooperation Treaty and its
implementing statute. The challengers are Exela Pharma
Sciences, LLC; Exela Pharmsci, Inc.; and Exela Holdings,
Inc. (collectively “Exela”). Exela petitioned the PTO to
“reconsider and withdraw” its revival of the national stage

    ∗
        Randall R. Rader, who retired from the position of
Circuit Judge on June 30, 2014, did not participate in this
decision.
EXELA PHARMA SCIENCES, LLC   v. LEE                       3

application and to cancel the issued patent. The patent is
United States Patent No. 6,992,218 (“the ’218 patent”),
assigned to SCR Pharmatop.
    The PTO declined to consider Exela’s petition, stating
that no law or regulation authorizes non-party challenge
to a PTO ruling to accept a tardy filing. Exela then
brought suit under the APA in the United States District
Court for the Eastern District of Virginia, arguing that
the PTO’s action was ultra vires and that Exela’s petition
should have been considered and favorably decided. The
PTO moved to dismiss Exela’s complaint on several
grounds.
     The district court initially held that Exela was enti-
tled to challenge the PTO’s decision under the APA, but
on reconsideration and in view of new Fourth Circuit
precedent, the district court dismissed Exela’s complaint
for failing to meet the statute of limitations for claims
filed against the United States, including APA claims. 1
    We affirm the dismissal, on the ground that PTO re-
vival rulings are not subject to third party collateral
challenge, thereby precluding review regardless of wheth-
er Exela’s claims were time-barred.
                      BACKGROUND
    Patentee SCR Pharmatop filed its initial patent appli-
cation in France on June 6, 2000 and, in conformity with
the Patent Cooperation Treaty (PCT), filed an interna-
tional patent application identifying the United States,
among others, as a designated state on June 6, 2001. The

   1    Exela Pharma Sciences, LLC v. Kappos, No. 1:12-
cv-469, 2012 WL 3638552 (E.D. Va. Aug. 22, 2012); Exela
Pharma Sciences, LLC v. Kappos, No. 1:12-cv-469, 2012
WL 6697068 (E.D. Va. Dec. 21, 2012) (Reconsideration
Decision).
4                         EXELA PHARMA SCIENCES, LLC    v. LEE

PCT implementing statute, 35 U.S.C. §351 et seq., re-
quires the applicant to fulfill certain United States docu-
mentary and fee requirements within 30 months after the
filing of the foreign priority application, here by December
6, 2002. See 35 U.S.C. §371(c), (d); PCT art. 22. SCR
Pharmatop did not file the required materials by Decem-
ber 6, 2002, and consequently the United States applica-
tion was deemed abandoned. On January 2, 2003 SCR
Pharmatop filed a petition to revive the application,
stating that the delay was “unintentional,” using the form
provided by the PTO for revival requests. The PTO
granted the petition on April 25, 2003. The application
was duly examined, and the ’218 patent issued on Janu-
ary 31, 2006.
    In August 2011 SCR Pharmatop and exclusive subli-
censee Cadence Pharmaceuticals, Inc. (collectively
“Pharmatop”) sued Exela in the United States District
Court for the District of Delaware for infringement of the
’218 patent. The suit was brought under the Hatch-
Waxman Act, 35 U.S.C. §271(e)(2), in response to Exela’s
notice and filing of an Abbreviated New Drug Application
and Paragraph IV Certification relating to Pharmatop’s
injectable acetaminophen-based drug Ofirmev.
    On November 30, 2011 Exela filed the subject petition
in the PTO, under the APA and 37 C.F.R. §§1.181, 1.182,
and 1.183, challenging the PTO’s revival of the patent
application that led to the ’218 patent. Exela argued that
“unintentional” delay was not an available ground for
revival of a U.S. patent application claiming priority
under the PCT-implementing statute as then in effect.
Exela pointed out that 35 U.S.C. §371(d) limited the
revival of such national stage applications to those in
which the non-compliance was “unavoidable”:
    The requirements with respect to the national fee
    . . ., the translation . . ., and the oath or declara-
    tion . . . shall be complied with by the date of the
EXELA PHARMA SCIENCES, LLC   v. LEE                        5

   commencement of the national stage or by such
   later time as may be fixed by the Director. . . .
   Failure to comply with these requirements shall
   be regarded as abandonment of the application by
   the parties thereof, unless it be shown to the satis-
   faction of the Director that such failure to comply
   was unavoidable. . . . 2
35 U.S.C. §371(d) (2002). Exela argued that the PTO
erred in applying its general revival regulation, 37 C.F.R.
§1.137, which provides:
   Revival of abandoned application, terminated
   reexamination proceeding, or lapsed patent.
   (a) Unavoidable. If the delay in reply by applicant
       or patent owner was unavoidable, a petition
       may be filed pursuant to this paragraph to re-
       vive an abandoned application, a reexamina-
       tion proceeding . . . , or a lapsed patent. A
       grantable petition pursuant to this paragraph
       must be accompanied by: . . .
   (b) Unintentional. If the delay in reply by appli-
       cant or patent owner was unintentional, a peti-
       tion may be filed pursuant to this paragraph to
       revive an abandoned application, a reexamina-
       tion proceeding . . . , or a lapsed patent. A
       grantable petition pursuant to this paragraph
       must be accompanied by: . . .
37 C.F.R. §1.137 (2000). Exela asserted that a PTO
regulation cannot override a statute, and therefore, the
PTO lacked discretion to grant SCR Pharmatop’s revival
petition for “unintentional” delay.

   2   The statute was amended, effective December 18,
2013, removing the clause stating the “unavoidable”
standard.
6                           EXELA PHARMA SCIENCES, LLC   v. LEE

    The PTO declined to consider Exela’s petition, stating
that no statute or regulation authorizes third party
challenge to a PTO ruling concerning revival of a patent
application. See PTO letter to Exela’s counsel, February
17, 2012 (returning petition fee).
     Following the PTO’s rejection of its petition, Exela
filed this district court action under the APA, asking the
court to compel the PTO to vacate its revival decision.
The PTO moved to dismiss Exela’s complaint under
Federal Rules 12(b)(1) and (6) on several grounds, includ-
ing that Exela lacks standing to challenge the PTO’s
revival ruling, that Exela’s APA action is time-barred,
and that a PTO revival ruling is not subject to judicial
review at the request of a third party challenger.
    The district court initially denied the PTO’s motion to
dismiss on all grounds, but while its decision was pend-
ing, the Fourth Circuit issued its decision in Hire Order,
Ltd. v. Marianos, 698 F.3d 136, 170 (4th Cir. 2012),
holding that for facial challenges to a federal regulation,
the six-year limitations period of 28 U.S.C. §2401(a) starts
to accrue when the regulation is adopted. The district
court, on reconsideration, observed that the regulation
here at issue, 37 C.F.R. §1.137, was adopted in 1982, and
that Exela presented a facial challenge to the regulation,
for it sought a declaration “regarding which standard to
apply across the board.” Reconsideration Dec. at 4–6.
Applying Hire Order, the district court held Exela’s action
time-barred by the six-year period of limitations.
    This appeal followed.
                       DISCUSSION
    Exela argues that its complaint was improperly dis-
missed and that it is entitled to proceed, citing the APA’s
purpose of providing remedy to any “person suffering
legal wrong because of agency action, or adversely affect-
ed or aggrieved by agency action within the meaning of a
EXELA PHARMA SCIENCES, LLC   v. LEE                        7

relevant statute.” 5 U.S.C. §702. Exela stresses that the
dominating consideration in APA actions is the “strong
presumption that Congress intends judicial review of
administrative action,” Bowen v. Michigan Academy of
Family Physicians, 476 U.S. 667, 670 (1986). Exela states
that the PTO’s action in reviving the Pharmatop applica-
tion was contrary to the PCT statute, and that unless
judicial review is available, an ultra vires PTO action will
escape correction, thereby enabling enforcement of a
patent that should not have issued.
    The PTO responds that there is no authority for third
parties to collaterally challenge the correctness of PTO
revival rulings. Thus the PTO contends that the merits
should be decided in its favor, even if dismissal is not
appropriate on limitations grounds.
    Exela argues that although such third party action is
not explicitly authorized by statute or regulation, it is
available under the APA. Exela cites the Court’s state-
ment in Block v. Community Nutrition Institute that
“where substantial doubt about the congressional intent
exists, the general presumption favoring judicial review of
administrative action is controlling.” 467 U.S. 340, 350–51
(1984).
    We conclude that Congress did not intend to permit
judicial review for challenges such as the one brought
here. Whether the APA confers such a cause of action
upon third parties raises a substantial question of patent
law, and is reviewable by this court applying Federal
Circuit law. See Helfgott & Karas, P.C. v. Dickinson, 209
F.3d 1328, 1334 (Fed. Cir. 2000) (holding “[T]he question
of whether the Commissioner has violated the APA in
applying the PCT rules and regulations, as well as its own
regulations, raises a substantial question under the
patent laws. . . .”).
   The question on this appeal is not whether a patent
applicant may challenge a PTO revival ruling as to its
8                       EXELA PHARMA SCIENCES, LLC   v. LEE

application; that question was resolved in the affirmative
by this court’s decision in Morganroth v. Quigg, 885 F.2d
843 (Fed. Cir. 1989). The issue here is whether a third
party may collaterally challenge and obtain judicial
review of a PTO revival ruling concerning an unrelated
patent application. The Patent Act’s “intricate scheme for
administrative and judicial review of PTO patentability
determinations,” and “the Patent Act’s careful framework
for judicial review at the behest of particular persons
through particular procedures” demonstrate that third
party challenge of PTO revival rulings under the APA is
not legislatively intended. Pregis Corp. v. Kappos, 700
F.3d 1348, 1357 (Fed. Cir. 2012) (“[A] third party cannot
sue the PTO under the APA to challenge a PTO decision
to issue a patent.”).
    We conclude that PTO revival actions are not subject
to third party challenge under the APA. On this ground,
the dismissal of the Exela complaint is affirmed.
                      AFFIRMED
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

     EXELA PHARMA SCIENCES, LLC, EXELA
    PHARMSCI, INC., EXELA HOLDINGS, INC.,
              Plaintiffs-Appellants

                            v.

        MICHELLE K. LEE, Deputy Director,
         U.S. Patent and Trademark Office,
                  Defendant-Appellee

       CADENCE PHARMACEUTICALS, INC.,
              SCR PHARMATOP,
                  Intervenors

                 ______________________

                       2013-1206
                 ______________________

   Appeal from the United States District Court for the
Eastern District of Virginia in No. 12-CV-0469, Judge
Liam O'Grady.
                ______________________
NEWMAN, Circuit Judge, concurring.
     I join the court’s decision, for neither the Patent Act
nor the Administrative Procedure Act provides a cause of
action in which third persons may challenge the revival
by the PTO of an application that was deemed abandoned
for failure to meet a filing date.
2                          EXELA PHARMA SCIENCES, LLC   v. LEE

    I write separately to address the concerns raised in
Judge Dyk’s concurring opinion, in which he criticizes the
court’s ruling in Aristocrat Technologies Australia Pty
Ltd. v. International Game Technology, 543 F.3d 657 (Fed.
Cir. 2008). With all respect to my colleague, I do not
share the view that Aristocrat was wrongly decided.
    In Aristocrat the defendant in an infringement suit
argued that the PTO erroneously revived Aristocrat’s
Patent Cooperation Treaty application (which was one
day late), and sought invalidity on that ground. This
court stated that the PTO’s revival of an application “is
neither a fact or act made a defense by title 35 nor a
ground specified in part II of title 35 as a condition for
patentability.” 543 F.3d at 663. The court explained:
      If any prosecution irregularity or procedural
      lapse, however minor, became grist for a later as-
      sertion of invalidity, accused infringers would in-
      undate the courts with arguments relating to
      every minor transgression they could comb from
      the file wrapper. This deluge would only detract
      from the important legal issues to be resolved –
      primarily, infringement and validity.
Id.
     The Patent Act is explicit as to the grounds for chal-
lenges to issued patents; these grounds do not include
challenge to PTO discretionary actions in revival of
deemed-abandoned applications.        A PTO decision to
excuse a tardy filing is not a statutory ground of invalidi-
ty or defense to infringement under 35 U.S.C. §282, nor is
it a ground on which third persons can initiate and partic-
ipate in post-issuance disputes, see Chapter 30 (prior art
citations and requests for reexamination), Chapter 31
(inter partes review), and Chapter 32 (post-grant review).
Rather, it is an irregularity in prosecution that “becomes
irrelevant after the patent has issued.” Magnivision, Inc.
v. Bonneau Co., 115 F.3d 956, 960 (Fed. Cir. 1997); see
EXELA PHARMA SCIENCES, LLC   v. LEE                         3

also Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1324
(Fed. Cir. 2004) (“[T]he presumption of validity is not
subject to being diluted by ‘procedural lapses’ during
prosecution.”). The patent statutes are specific as to
legislative intent, and do not extend to “prosecution
irregularities and procedural lapses.” Aristocrat, 543 F.3d
at 663. The Supreme Court in Block v. Community Nutri-
tion Institute, 467 U.S. 340 (1984), discussed the princi-
ples of challenge to administrative actions, and
summarized:
   Whether and to what extent a particular statute
   precludes judicial review is determined not only
   from its express language, but also from the struc-
   ture of the statutory scheme, its objectives, its leg-
   islative history, and the nature of the
   administrative action involved.
467 U.S. at 345. The recently enacted America Invents
Act (AIA), which provides new mechanisms for third party
attacks on issued patents, did not change the principle
that internal PTO procedures are not subject to third
party collateral attack.
     The Court stated in Block: “In a complex scheme of
this type, the omission of such a provision is sufficient
reason to believe that Congress intended to foreclose [the
action].” 467 U.S. at 346. The statute concerning filing
schedules under the Patent Cooperation Treaty was
recently amended to remove the requirement that delay
be unavoidable, see 35 U.S.C. §371(d) (2013), demonstrat-
ing legislative knowledge of the issue decided in Aristo-
crat. However, Congress made no new amendments to
the scope of infringement defenses available in the dis-
trict courts. Aristocrat warrants stability, not judicial
taint as “problematic.”
    Judge Dyk correctly points out that there are areas in
which “a non-listed defense has been recognized by
courts,” conc. op. at 4, citing cases in which antitrust
4                        EXELA PHARMA SCIENCES, LLC   v. LEE

violation, patent misuse, and shop right have been recog-
nized as defenses to patent infringement. With all re-
spect, my colleague errs in stating that such major
substantive issues, each of which is a traditional defense,
“cannot be so easily distinguished” from an excuse for a
missed filing date. Conc. Op. at 5. If judges cannot easily
distinguish the significance of antitrust violation from a
missed date, we must try harder.
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

     EXELA PHARMA SCIENCES, LLC, EXELA
    PHARMSCI, INC., EXELA HOLDINGS, INC.,
              Plaintiffs-Appellants

                            v.

        MICHELLE K. LEE, Deputy Director,
         U.S. Patent and Trademark Office,
                  Defendant-Appellee

       CADENCE PHARMACEUTICALS, INC.,
              SCR PHARMATOP
                   Intervenors
             ______________________

                       2013-1206
                 ______________________

   Appeal from the United States District Court for the
Eastern District of Virginia in No. 12-CV-0469, Judge
Liam O'Grady.
                ______________________
DYK, Circuit Judge, concurring.
    I join the majority opinion holding that the structure
of the Patent Act bars third party Administrative Proce-
dure Act (“APA”) challenges to patent validity based on an
improper revival of an abandoned patent application.
2                        EXELA PHARMA SCIENCES, LLC   v. LEE

    In my view, the Patent Act is structured to channel
third party challenges to patent validity to either of two
routes: as defenses to infringement actions or as challeng-
es brought at the PTO utilizing statutorily authorized
proceedings such as inter partes review, post-grant re-
view, or inter partes reexamination. This statutory
scheme is inconsistent with APA review by third parties
in the district court. See Pregis Corp. v. Kappos, 700 F.3d
1348, 1357 (Fed. Cir. 2012) (“[A] third party cannot sue
the PTO under the APA to challenge a PTO decision to
issue a patent.”).
     The heart of Exela’s argument to the contrary is that
it is entitled to proceed under the APA because there is a
“strong presumption that Congress intends judicial re-
view of administrative action,” Bowen v. Michigan Acad-
emy of Family Physicians, 476 U.S. 667, 670 (1986), and
because, since our precedent in Aristocrat Technologies
Australia Pty Ltd. v. International Game Technology, 543
F.3d 657 (Fed. Cir. 2008), barred review of improper
revival as a defense in infringement actions, the only
available route to review is under the APA.
    In Aristocrat, this court held that a defendant in an
infringement action could not assert improper revival of
an abandoned patent application as a defense in that
action. See 543 F.3d at 660–61. We need not decide here
whether Aristocrat was correctly decided. Whether it was
or not, the Patent Act is inconsistent with third party
APA review. However, I write separately to explain why I
think our decision in Aristocrat was problematic.
    The panel in Aristocrat held that improper revival
could not be raised as a defense to an infringement action
because improper revival was not literally among the
catalog of defenses listed in 35 U.S.C. § 282. See id. at
663–64. The panel noted that we have held that a “provi-
sion of the Patent Act not falling within the literal scope
EXELA PHARMA SCIENCES, LLC   v. LEE                        3

of section 282 may nevertheless provide a defense of
noninfringement or invalidity.” Id. at 664 (relying on
Quantum Corp. v. Rodime, PLC, 65 F.3d 1577, 1584 (Fed.
Cir. 1995) (holding that a patentee who improperly en-
larged the scope of its claims during reexamination,
violating 35 U.S.C. § 305, was subject to a defense of
invalidity)). But the panel distinguished Quantum on the
ground that the concern in Quantum that “failure to
impose invalidity for violation of the statute would en-
courage noncompliance” was not present where there is
“no legitimate incentive for an applicant to intentionally
abandon its application, much less to attempt to persuade
the PTO to improperly revive it.” Id.
    There are four aspects of the Aristocrat opinion that
in my view warrant its reconsideration.
    First, Aristocrat did not discuss the presumption of
judicial review of agency action. See Sackett v. Envtl. Prot.
Agency, 132 S. Ct. 1367, 1373 (2012); Bowen, 476 U.S. at
670; Block v. Cmty. Nutrition Inst., 467 U.S. 340, 348–49
(1984); see also 5 U.S.C. § 702 (conferring a general cause
of action upon persons “adversely affected or aggrieved by
agency action within the meaning of a relevant statute”).
As we hold today, there is no APA review for improper
revivals and no alternative mechanism for review, so an
invalidity defense would be the only route available for
judicial review.
     Second, contrary to the suggestion in Aristocrat and
by my colleague in her concurrence, this is not a case
involving a minor procedural error in the PTO process.
See Magnivision, Inc. v. Bonneau Co., 115 F.3d 956, 960
(Fed. Cir. 1997) (holding that “[p]rocedural lapses during
examination [such as in that case, an examiner’s not
recording a phone call] . . . do not provide grounds of
invalidity”). Here, Congress thought the issue of timely
filing to be sufficiently important that it provided that a
4                         EXELA PHARMA SCIENCES, LLC   v. LEE

patent would be treated as abandoned for noncompliance,
and it allowed the PTO to reinstate the patent only when
specific criteria were satisfied. See 35 U.S.C. § 371(d)
(2002).
     Third, in Morganroth v. Quigg, 885 F.2d 843, 846
(Fed. Cir. 1989), we held that review of the PTO’s refusal
to revive a patent application was available under the
APA. That case is not cited in Aristocrat, and it is indeed
difficult to understand why a third party facing liability
for infringement of the patent cannot seek judicial review
of a revival decision if the patent applicant can do so, even
though the patent applicant and accused infringer must
pursue different avenues for review (a defense for the
accused infringer and review under the APA for the
patent applicant).
     Fourth, Aristocrat failed to recognize that Quantum
was hardly the only example of situations in which a non-
listed defense has been recognized by courts. Obvious-
ness-type double patenting, for example, is a well-
established defense that is not specified in the statute.
See, e.g., Gilead Scis., Inc. v. Natco Pharma Ltd., 753 F.3d
1208, 1212 (Fed. Cir. 2014). Patent “misuse” is also a
defense. See, e.g., Brulotte v. Thys Co., 379 U.S. 29 (1964)
(holding that charging royalties beyond life of the patent
impermissibly enlarges monopoly of the patent); Princo
Corp. v. Int’l Trade Comm’n, 616 F.3d 1318, 1326–29
(Fed. Cir. 2010) (describing patent misuse and calling it
“mainly a judicially created defense”). The “shop rights”
doctrine is also a “judicially created defense to patent
infringement” that “applies when an employer is sued for
patent infringement by an employee who created the
patented invention with the employer’s resources while
under its employment, even though the employer other-
wise has no legal rights to the resultant invention.”
Beriont v. GTE Labs, Inc., 535 F. App’x 919, 923 (Fed. Cir.
EXELA PHARMA SCIENCES, LLC   v. LEE                     5

2013). These other cases cannot be so easily distinguished
from the situation in Aristocrat itself.
   In the future, en banc action to reconsider Aristocrat
may be appropriate.