The American Intellectual Property Law Association and the Intellectual Property Owners Association have filed briefs with the district court asking it to issue a summary judgment that the retroactive application of PTO rules on continuation and claiming practice is poor sportsmanship.

See Triantafyllos Tafas v. Jon W. Dudas, et al. consolidated with Smithkline Beecham Corporation, et al. v. Jon W. Dudas, et al. (1:07cv1008), to enjoin enactment of the USPTO’s new rules, “Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications,” (Final Rules).

According to the brief, the rules are improperly retroactive as issued because they impair existing rights and impose duties on completed transactions with the agency. The new procedures limit applicants to filing two new continuing applications and one request for continued examination. In addition, applications can only contain up to 25 claims and no more than five of them independent claims.

The impaired rights are not vested rights in issued patents but rights the applications themselves, which are assignable and which contain trade secrets. For many applicants, the filing of a patent application includes a decision to surrender those trade secrets. That decision, according to the brief, was made in reliance on longstanding law guaranteeing a full and fair opportunity to seek a spectrum of patent protection adequate to protect their investments in research and development, product commercialization, and in the patenting process itself.

The AIPLA believes that at least two parties are reciprocally affected by that act: (1) the public, which gets access to what formerly constituted trade secret property, and (2) the applicant, who seeks patent protection in lieu of relying on trade secrecy both in this country and abroad.

The new Rules restrict the ability of patent applicants to file continuation applications to seek adequate protection for the inventions they had elected to protect through the patent system, rather than relying on trade secrecy. Retroactive implementation of the new Rules will, as a practical matter, compel IP owners to (1) abandon pending patent claims, (2) abandon entire patent applications, and (3) surrender currently existing claim scope without adequate opportunity for consideration by the PTO. The kind of loss that patent applicants will face is significant and their substantive rights will be affected materially.

The AIPLA argues that retroactive application of the new Rules also will harm substantive rights in other ways:

There will be situations that result in applicants having to abandon patent applications containing allowable subject matter or face charges of inequitable conduct. One such situation will arise, for example, when prior art references come to light in foreign prosecution occurring years after the original United States application was filed. In the interim, if the applicant has exhausted its right to file continuing applications (even its “one more” application)6 and receives a notice of allowance, that applicant has no right to amend the claims to overcome the reference. The applicant, however, has an obligation to provide this invalidating art to the PTO; but the PTO has no obligation to consider the references, let alone reopen prosecution. The applicant must then choose between permitting issuance of potentially invalid claims and abandoning the application altogether (or filing a petition which is discretionary with the PTO).

The new Rules even punish applicants for previously having made purely procedural decisions fully authorized under then-existing law. For example, the new Rules cut off an applicant’s ability to obtain patent protection by further restricting continuing practice, simply because the applicant had filed a “divisional” application before filing a “continuation” application. See Questions and Answers Claims and Continuations Final Rule C12 (September 27, 2007).7 This formerly innocuous decision, having nothing to do with the substance of the invention, now will result in the loss of two continuation applications under the new Rules, a punishing sanction against the owner that cannot be justified.

The Intellectual Property Owners Association (IPO) also submitted and amicus brief regarding just the proposed changes to § 1.78(f)(2) of the Final Rules for two reasons. First, § 1.78(f)(2) will impermissibly be applied retroactively, imposing on applicants substantial new duties with respect to patent applications that have already been filed. Second, § 1.78(f)(2) contradicts applicants’ rights under the patent statute and case law.

Congress did not grant to the USPTO the power to promulgate retroactive rules. See 35 U.S.C. § 2(b)(2); Bowen v. Georgetown University Hospital, 488 U.S. 204, 208 (1988). Section 1.78(f)(2), however, imposes on applicants substantial new duties with respect to applications that were filed even before Section 1.78(f)(2) was published. See 72 Fed. Reg. at 46717 (listing effective dates of Final Rules provisions). The USPTO has long encouraged different inventions to be claimed in different patent applications. See 37 C.F.R. § 1.141(a). Section 1.78(f)(2), however, retroactively penalizes this innocent practice by requiring applicants to identify any such applications with overlapping filing dates or priority dates and to justify to the USPTO the very existence of these applications. See § 1.78(f)(2)(i)-(ii). Compliance is enforced with the threat of presuming claims in these applications to be unpatentable. See § 1.78(f)(2)(i). Because of this retroactive effect, § 1.78(f)(2) exceeds the rulemaking authority of the USPTO. Landgraf v. USI Film Prods., 511 U.S. 244, 280 (1994).

Section § 1.78(f)(2) also contradicts several provisions of the patent laws, including the statute requiring the USPTO to examine applications (35 U.S.C. §§ 131-132), the statute granting applicants the right to reconsideration and judicial review of rejections (id. §§ 134, 141), and the statute protecting applicants from inconsistent double-patenting rejections (id. § 121).

Second, § 1.78(f)(2) would defeat a patent applicant’s statutory right to de novo review of “double patenting” rejections by the Board of Patent Appeals and Interferences (hereinafter “the Board of Appeals”), see 35 U.S.C. § 134(a), and by the Court of Appeals for the Federal Circuit, id. at § 141. Under § 1.78(f)(2), the double patenting rejections are treated not as a question of law, but as a procedural failure, reviewable only under an “abuse of discretion” standard through an Administrative Procedure Act (APA) challenge. See Star Fruits S.N.C. v. United States, 393 F.3d 1277, 1285 (Fed. Cir. 2005).

Third, the presumption that claims are patentably indistinct contradicts § 121 of the patent statute by its application to “divisional applications” filed in response to USPTO restriction requirements. Divisional applications inevitably have overlapping disclosures, filing dates, and inventors with their respective parent applications. Section 121 of the patent statute was enacted specifically to prevent an application from being used against its corresponding divisional application, see 35 U.S.C. § 121, in direct conflict with the USPTO’s new presumption.

In addition, a collective Public Interest Amici was submitted by various organizations including the Public Patent Foundation (PUBPAT), Computer & Communications Industry Association (CCIA), AARP, Foundation for Taxpayer and Consumer Rights (FTCR) and others. The AARP is not typically for/against patents, they want cheap meds.

The Public Interest Amici believe that the public interest supports the USPTO’s final rules and that the public interest will be well served by the Final Rules because they will help the USPTO curtail [what the group perceives as] abusive behavior by exploitative patent applicants and improve patent quality.

The group believes that the public interest supports the USPTO’s Final Rules for the following reasons:

First, they will enable the USPTO to curtail abuses of the patent application process made by those patent applicants who seek to pervert the system to gain an unfair advantage. Second, the Final Rules will help the USPTO improve patent quality, which is a critical issue for ensuring the patent system benefits the American public. As a result, since the public interest overwhelmingly supports the Final Rules, they are unquestionably reasonable and rational.

Beating the long-dead horse of Lemley, the group claims that:

Continuation applications provide applicants who have had their patent applications finally rejected the ability to force the USPTO to revoke the finality of the rejection simply by paying a fee for a new filing. Thus, as one reference cited by the administrative record in this case found, it is impossible for an examiner to ever actually finally reject a patent application so long as the applicant has sufficient financial resources to keep paying for continuation applications. Final Rules at 46718-19 (citing Mark A. Lemley & Kimberly A. Moore, Ending Abuse of Patent Continuations, 84 B. U. L. Rev. 63 (2004)). This results in USPTO examiners who have repeatedly rejected an application facing the possibility of an endless stream of continuation applications being filed by the applicant that “may well succeed in ‘wearing down’ the examiner, so that the applicant obtains a broad patent not because he deserves one, but because the examiner has neither incentive nor will to hold out any longer.” Lemley & Moore, 85 B. U. L. Rev. at 65. Such “wearing down” of examiners is an abhorrent abuse of continuation applications.

Applicants also abuse the continuation application process in other ways. Some monitor commercial actors who attempt to design around a previously issued patent and then submit claims in a much later filed continuation application that are directed specifically at those design-around efforts. Id. at 7677. These applicants lie in wait until the commercial actor launches or otherwise commits to their design-around product and they then quickly get the USPTO to issue the continuation patent, which has a greater likelihood of ensnaring the commercial actor because its claims were written with the design-around product specifically in mind. As expressly discussed by the USPTO in the administrative record in this case, such perverse manipulation of the patent system is contrary to the public interest because it defeats the public notice function of patent claims, which in turn undermines investments made by commercial actors trying to avoid patent infringement. Final Rules at 46758 (citing To Promote Innovation: The Proper Balance of Competition and Intellectual Property Law and Policy, Ch. 4 at 26-31 (Federal Trade Commission 2003) and Lemley & Moore, 84 B. U. L. Rev. at 100).

To read the AIPLA brief supporting a summary judgment for SmithKline, click here. To read the IPO brief supporting a summary judgment for SmithKline, click here. To see the brief by the Public Interest Sector, click here.

See Also:
Is the Public Interest Really Upheld by the New USPTO Rules?
Court Blocks New USPTO Rules on Continuations and Claims — For Now
Patent Wars Episode II: GSK Strikes Back
Inventor Challenges Patent Office Rules in Virginia

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