Dr. Triantafyllos Tafas’ lawsuit, arguing that the proposed U.S. Patent Office continuation rules are void for exceeding its authority, won a permanent injunction prohibiting the USPTO from putting the new rules changes into effect (Final Rules; 72 Federal Register 161 at 46716).  Triantyfyllos Tafas v. John Dudas and the United States Patent and Trademark Office.

Dr. Tafas, an inventor on more than seventeen patents pending and on eight U.S. issued patents as well as a co-founder at Ikonisys, complained that the USPTO exceeded its Congressionally-delegated rulemaking authority and that the new rule changes specifically violate Section 120, 132, and 365 of the Patent Act.

He was joined by SmithKline Beecham Corporation (d/b/a GlaxoSmithKline). Together, GSK and Tafas claim that the Final Rules, which change the patent system by modifying several long-established rules governing patent examination by the USPTO, are unlawful agency action under Section 706(2) of the Administrative Procedure Act (APA)

The proposed rules would have fundamentally changed the way patents are prosecuted. Once the application is filed, a patent examiner determines whether the claimed invention meets certain statutory requirements such as novelty, nonobviousness, and definiteness, among others. If an application fails to meet these demands, the examiner will issue an Office Action containing the grounds for rejection.

Once a patent application is filed and (finally) reviewed by a patent examiner, the examiner issues an Office Action stating reasons for reflecting the claims. The applicant may then amend the claims, argue against the rejection, or present evidence showing why the invention is patentable. The patent examiner must then respond by either allowing some or all of the claims or by issuing another rejection.

At issue is that this back-and-forth exchange between an applicant and an examiner does not go on forever. The patent rules state that the second Office Action may be made final. While that implies that there can be many added rounds of review and response, the reality is that the Patent Office almost always issues a second action as final. Why? Because it can. If the action is made final, it boxes the applicant in and limits their ability to respond.

After receiving a final rejection, an applicant may: (1) appeal to the Board of Patent Appeals and Interferences and from there to the United States Court of Appeals for the Federal Circuit; (2) file a request for continued examination (RCE) of the application; or (3) file a continuation or continuation-in-part application. All this costs the applicant additional money in order to proceed.

Before, an applicant could file an unlimited number of continuation or continuation-in-part applications, RCEs, and claims. The Proposed Rules would have limited the number of continuing applications, RCEs, and claims that an applicant could make as a matter of right. The USPTO justified the proposed changes on the ground that the growing number of continuation applications and increasing number and complexity of claims in applications was causing them to have to work too much.

The Final Rules would have permitted an applicant as a matter of right to file two continuation or continuation-in-part applications, plus a single RCE, after an initial application. If the applicant wanted to continue, a third continuation or continuation-in-part application or a second RCE can be filed with a petition and showing that explains why the amendment, argument, or evidence could not have been presented previously.

Fortunately, the court found that the rules went beyond what the law permits:

GSK, Tafas, and the USPTO make numerous arguments for summary judgment in their favor. After thorough examination of the parties’ briefs, the arguments of roughly two dozen amici curiae, and the extensive administrative record, the Court finds that the Final Rules are substantive in nature and exceed the scope of the USPTO’s rulemaking authority under 35 U.S.C. § 2(b)(2). Consequently, the Court will grant summary judgment to GSK and Tafas and void the Final Rules as otherwise not in accordance with law and in excess of statutory jurisdiction [and] authority. 5 U.S.C. § 706(2). In addition, because the Court believes that one who judges least judges best, it will not reach the other issues raised by the parties, resting instead on the determination of a single dispositive issue.

Section 2(b)(2) of Title 35 empowers the USPTO to establish regulations, not inconsistent with law, to govern the conduct of proceedings in the Office. Under Federal Circuit precedent, however, Section 2(b)(2) does not vest the USPTO with any general substantive rulemaking power.

The USPTO argued that it doesn’t matter if a rule is substantive or procedural and said that the question before the Court is simply whether the Final Rules fall within the expressly delegated rulemaking authority of Section 2(b)(2). According to the USPTO, the 2+1 Rule and the 5/25 Rule fall within the reach of Section 2(b)(2) because they govern the conduct of proceedings in the Office by facilitat[ing] and expedit[ing] the application process.

The court pooh-poohed this:

Despite this attempt to abolish the substantive- procedural distinction, however, the balance of the case law in the Federal Circuit and the Supreme Court indicates that the distinction exists, and that it is pertinent to this dispute. Both Merck and Animal Legal Defense Fund acknowledge the divide, and the law in those cases is clear: Section 2(b)(2)’s authority is limited to rules governing the conduct of proceedings before the Office, the USPTO does not have the authority to issue substantive rules, and it does not have the authority to make substantive declarations interpreting the Patent Act. See Merck, 80 F.3d at 1549-50; Animal Legal Def. Fund, 952 F.2d at 930. Contrary to the USTPO’s contention, the holding in Merck is not mere dicta. Instead, the Court’s delineation of the USPTO’s rulemaking authority under Section 2(b)(2) formed the basis for its conclusion that the Final Determination at issue in that case was not entitled to Chevron deference. See Merck, 80 F.3d at 1549-50. Furthermore, while the USPTO is correct that the ultimate issue in Animal Legal Defense Fund was whether a USPTO policy notice should have been subject to notice and comment rulemaking, in deciding that question the Court nevertheless made a strong statement about the procedural, rather than substantive, nature of Section 2(b)(2)’s statutory predecessor. See 932 F.2d at 930-31. Accordingly, the Court finds that Section 2(b)(2) does not permit the USPTO to promulgate substantive rules, and any rules that may be deemed substantive will be declared null and void.

The USPTO tried arguing that even if the substantive/procedural distinction matters, the USPTO has the authority to promulgate the Final Rules because they are clearly procedural. According to the USPTO, the Final Rules are procedural in nature because, rather than altering the substantive requirements for novelty, nonobviousness, or definiteness, they instead aim to curb repetitive filings by requiring applicants to justify those excess filings and to assist the agency in examining burdensome applications.

This still didn’t work:

Despite the USPTO’s arguments, the Court finds that the Final Rules are neither procedural rules nor rules relating to application processing that have substantive collateral consequences, but substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act. The 2+1 Rule and the 5/25 Rule, which limit continuing applications, RCEs, and claims, and the ESD requirement, which shifts the examination burden onto applicants, constitute a drastic departure from the terms of the Patent Act as they are presently understood. By so departing, the Final Rules effect changes in GSK’s and Tafas’s existing rights and obligations. The Court will now explain why the provisions of the Patent Act compel this conclusion.

As the Court described in Part I of this Opinion, under the existing patent system an applicant may file an unlimited number of continuation or continuation-in-part applications, RCEs, and claims. As to continuation and continuation-in-part applications, Section 120 provides that such applications shall have the benefit of the priority date of the initial application. 35 U.S.C. § 120. The CCPA has interpreted this language to mean that there is no statutory basis for fixing an arbitrary limit to the number of [continuing] applications that may be filed and that retain the benefit of the priority date.

I wouldn’t throw a party just yet, though.  Like the villain in a bad, B-movie horror flick, the Patent Office will keep coming back with more proposed rules to reduce their workload.  For more creatures from the depths, see the much-loathed Applicant Quality Submissions (AQS). 

In its press release, BIO has already asked for a more “fair and balanced” route to patent reform.

Read the entire opinion here (Tafas SJ Opinion)

Read a copy of the complaint here (link)

More here:

Patent Rule Injunction, Court To Sleep On It
Examination Support Document (ESD) Could Add $26,000 to Patent Costs
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

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6 Comments

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    Two points to be made here. The first is a good one: given the reasoning by the court in the Tafas decision, it seems likely that the PTO rules on Information Disclosure Statements (which could come out at any time) would also be considered substantive and therefore void. The second one is not so good: if I were the PTO i would now turn my attention to the Patent Reform Bill in Congress and either try to get expanded rulemaking authority (which would moot the decision) or get specific aspects of the rules written into the law. Hopefully Congress will be very careful about doing that given the clear reasoning of the court in Tafas – but one never knows!!

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    Actually we have to look how PTO
    replies to this.
    secondly can u write a blog on what is current position and what would be the changes after reform bill in details.

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    Rajesh not quite sure but the easiest way may be to look for the bill at thomas.gov under it’s heading S. 1145 there are mark-ups at several sites, perhaps look at place like the sites for IPO and BIO with varying degrees of comparison.

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    Search for pending patent applications & issued patents at WikiPatents – Community Patent Review.

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    […] No Joke, Court Smacks Down New Patent Rules Patent Rule Injunction, Court To Sleep On It Examination Support Document (ESD) Could Add $26,000 to Patent Costs 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 Posted August 2nd, 2008 by Stephen Albainy-Jenei in Patent Reform, USPTO | | […]

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    […] saga of the PTO’s rulemaking authority continued on March 20, 2009 when the Federal Circuit issued its […]