PTO Continuation and Claim Rules Temporarily Blocked by District Court

On October 31, 2007, Judge Cacheris of the Eastern District of Virginia held court in the case of Tafas v. Dudas. In that case, several plaintiffs have joined together in an attempt to block implementation of a set of new patent prosecution rules proposed by the USPTO. The jist of those rules would be to effectively limit the number of claims filed in each patent application and to limit the number of ‘continuation’ applications that may stem from any original patent application.

At the conclusion of the hearing, the Court issued an oral decision temporarily enjoining the PTO from implementing the new rules that were set to become effective on November 1, 2007. John White, who attended the hearing, noted that the crowd clearly supported the plaintiffs and were quite relieved by the decision. Jill Browning of the Ashe firm also attended today’s hearing and provides the following analysis of Judge Cacheris’ hearing on the PTO’s Continuation and Claim Limitations:

With respect to the arguments presented, the Court was clearly well prepared on all the issues.  The attending members of the patent bar (of which there were many) were grateful to the Court for making its decision granting the injunction before the critical November 1 deadline and before the rules had a chance to become effective.   

The Court, at the outset, asked why GSK had delayed in filing its motion.  GSK indicated that the rules issued in August, 2007, were so different from the rules the public commented on in January, that, given the complexity of the rules, GSK’s filing of the motion was timely.  On this point, the USPTO later argued that the Final Rules were merely a “logical outgrowth” of the public comments provided and, thus, acceptable under the law.  GSK took issue with this point, but indicated that this topic would be more germane to the summary judgment briefing and did not need to be decided now. 

GSK began its argument by focusing on the public interest.  GSK argued that the public’s interest would best be served by not implementing the rules and, as support for this, pointed out that every amicus and declaration (and a letter from a Senator) filed by a third party had supported GSK’s position, as opposed to the USPTO’s. [Link] GSK pointed out that the public interest would best be served by maintaining the status quo, as opposed to implementing rules that would require applicants (and specifically GSK) to make substantive choices and decisions regarding their patent portfolios that could never be “undone.”  One particularly persuasive point GSK made during argument wsa that the “contract” between the applicant and the government (i.e., the applicant discloses its trade secret in return for patent protection) was broken by the USPTO’s enactment of the rules.  GSK pointed out that the “quid” of submitting the applications was already accomplished, and now the USPTO wanted to change the “quo.” 

In response, the USPTO argued that the USPTO was not deaf to the public outcry – but that the outcry of “change is bad” is not enough to outweigh an agency’s need to conduct its business in a way that alleviates an over burdened system.  In fact, at one point the USPTO, in a somewhat contradictory argument, noted that it was not enacting a “mechanical” rule eliminating additional continuations. Rather, the rules were simply directed at a way to relieve an overburdened system.  The USPTO stated that the New Rules would increase efficiency and decrease backlog.

GSK rebutted the USPTO’s argument that a delay would cause irreparable harm (i.e., loss of money in changing to the new implementation) by pointing out that the money was already spent, and delaying the implementation of the rules would not cause the USPTO to lose additional money.  On rebuttal, the USPTO indicated that the government would have to expend additional money re-training the examiners, as they could not be expected to maintain their understanding of such complicated and detailed rules for any extended period of time.

With respect to the merits of the case, the Court specifically asked each party whether the USPTO was acting in an arbitrary and capricious manner.  While GSK indicated that they did not need to address this question until summary judgment briefing, it believed that the USPTO was so acting, as evidenced by the Final Rules contradicting over 100 years of court precedent.  The USPTO, in response to the Court’s question, clung to the argument that the rules were merely procedural, and, thus, are well within the USPTO’s authority.  The USPTO also indicated that the 10,000 page record, which included a public comment period, supported the USPTO’s careful and extensive consideration of the issues and stands in stark contradiction to any allegation that the USPTO acted in an arbitrary and capricious manner.

The Court also asked each party what makes the New Rules “substantive” vs. “procedural.”  GSK argued that the rules were substantive primarily because the rules represent a break with over 100 years of substantive patent practice (focusing primarily on the ability to file unlimited continuations, excepting very narrow prosecution laches situations that should be applied on a very limited case-by-case basis).  The USPTO responded by arguing that the Final Rules were procedural because they do not affect the substantive rights of applicants to file, and do not even limit the number of continuations that an applicant can file – the applicant, to file additional applications (i.e., more than the 2 + 1) need only file a petition, which will be decided on a case-by-case basis.

GSK argued that the effect of the Final Rules was, in fact retroactive because it impaired the rights of a party, relying on Supreme Court precedent.  The USPTO indicated that Final Rules were not retroactive, merely because they “upset expectations” and that there is no property right in a patent application or in any particular procedure adopted by the USPTO.   

While, as the USPTO pointed out, an injunction is an extraordinary measure, GSK argued out that agencies are enjoined “all the time” when they promulgate rules that are challenged as being beyond the agencies’ authority.  Apparently, the Court agreed with GSK.  The reasoning for Judge Cacheris’ decision will be found in an opinion that he will issue before close of business today.

1.  When we can expect a final decision on the merits:  The summary judgment briefing schedule that the USPTO had agreed upon with Tafas appears to no longer be in effect for several reasons.  First, the USPTO claims that the expedited briefing schedule was agreed to based on Tafas’ agreement not to seek an injunction.  The USPTO indicated that Tafas reneged on the agreement and joined the motion for a preliminary injunction or TRO and, thus, this alone was grounds to vacate the government’s agreement.  Second, even if the court determined that Mr. Tafas’ actions did not repudiate the agreement, given the additional amicus briefs, and joining GSK as a party, the USPTO requires additional time to adequately address the briefs.  Further, the USPTO pointed out that, because the injunction was granted, plaintiff’s arguments for a speedy hearing on the summary judgment motion are less pertinent.  The Court instructed the parties to attempt to agree on a briefing schedule.  Hopefully, the briefing schedule will be presented as an order so that we will be able to determine when it will be heard, as this will determine when ultimate resolution of the case.

Of course, the preliminary injunction is not a decision on the merits of the rules — it is only preliminary relief. A full decision will likely be delayed until at least early January.  The PTO may still choose to appeal.

In other prosecution news… New IDS rules are expected to be published soon.

7 thoughts on “PTO Continuation and Claim Rules Temporarily Blocked by District Court

  1. Now that we have received a reprieve from implementation of the rules limiting claims and continuations, I urge all of you who have railed against implementation of the new rules to focus your attention on lobbying to defeat all of or at least key provisions of the Patent Reform Act of 2007. As I understand it, both the House bill (which has passed) and Senate bill (which has not yet come to the floor for a vote) grant the USPTO Director the power to make substantive rule changes, the lack of which was a primary basis for preliminarily enjoining implementation of the rules.

    Therefore, write your Senators to express your opposition to the bill and in particular the provision granting the USPTO Director authority to implement substantive rule changes.

    Sample letters are available at link to nipra.org. I modified one of the letters on this site and sent it to both Senators from Kansas (where I live) and Missouri (where I work). I found links to the text of the Senate Bill (S. 1145) at http://www.filewrapper.com.

    Follow up the letters with calls to the Senators’ offices to determine the staff person working on this legislation and talk to them to express your concerns. In talking to one such staff member, they were very familiar with the provisions of the bill but it does not appear that they were particularly aware of the potential dangers of the provision ostensibly granting the Director authority to make substantive rule changes or the details of the current controversy surrounding the attempts by the Patent Office to push the rule changes through despite overwhelming opposition.

    It is my understanding that this legislation has more support among Democrats than Republicans, so efforts to sway Democrats may be particularly helpful.

    If you spend as much time lobbying as you have blogging, maybe it will make a difference.

  2. David French replies:

    here wrote: “doesn’t deferred examination make it even more difficult for competitors to determine early the scope of protection to eventually issue? they won’t have the “early” benefit of office actions.”

    If anyone is concerned, they can request that examination commence on a specific application. They can even use a nominee so that their identity will not be disclosed.

  3. If the PTO had made it possible in these new rules to get a second RCE or a third continuation or more than 5 independent claims for pending applications with a reasonable rational explanation for it [such as examiners who keep changing their grounds of rejection or refusing to properly examine generic claims],instead of a blatently obvious attempt to make it de facto impossible by piling on massively onerous, costly, dangerous, ambiguous and unecessary rule requirements, the PTO would not have engendered nearly the massive objection from the patent bar and applicants. Nor do lectures on patent practice from PTO managers and attorneys who have never written, prosecuted or enforced a single patent sit well with thousands of experienced practitioners. It is not too late for a more productive and less unilateral dialogue.

  4. doesn’t deferred examination make it even more difficult for competitors to determine early the scope of protection to eventually issue? they won’t have the “early” benefit of office actions.

  5. David French writes:

    If the USPTO wants respite from the examination overload, then they should implement deferred examination. Many patent attorneys are opposed to this, and some clients. The solution is to make it optional.

    As an interim step, applicants can be given the right to petition for, say, a three year deferral of examination at modest cost. Later, this could be increased to five or seven years. This deferral would be canceled if someone else from the public requests that examination of a specific application should commence. The fee paid for deferral under such circumstances could be refunded.

    I suspect that a significant number of applicants would elect for deferral of examination. If that amounted to 10% or 15% of pending filings, that would provide immediate relief to the USPTO. Furthermore, at the end of the deferral period, a portion of such deferred examination applications would likely be abandoned. That would provide a permanent benefit.

    I have never understood why the patent office must examine on a timely basis speculative applications that will eventually go nowhere. The fact that such applications exist can be easily determined by looking at patent application annual renewals in countries that engage in this practice. In the UK, at one time, as of the third year from filing the drop-out rate was 15%. This drop-out rate rose on a straight-line basis towards 80% by the end of the patent term.

    If the USPTO made this procedure optional, on the basis as described, I cannot see how anyone could object.

  6. David French writes:

    If the USPTO wants respite from the examination overload, then they should implement deferred examination. Many patent attorneys are opposed to this, and some clients. The solution is to make it optional.

    As an interim step, applicants can be given the right to petition for, say, a three year deferral of examination at modest cost. Later, this could be increased to five or seven years. This deferral would be canceled if someone else from the public requests that examination of a specific application should commence. The fee paid for deferral under such circumstances could be refunded.

    I suspect that a significant number of applicants would elect for deferral of examination. If that amounted to 10% or 15% of pending filings, that would provide immediate relief to the USPTO. Furthermore, at the end of the deferral period, a portion of such deferred examination applications would likely be abandoned. That would provide a permanent benefit.

    I have never understood why the patent office must examine on a timely basis speculative applications that will eventually go nowhere. The fact that such applications exist can be easily determined by looking at patent application annual renewals in countries that engage in this practice. In the UK, at one time, as of the third year from filing the drop-out rate was 15%. This drop-out rate rose on a straight-line basis towards 80% by the end of the patent term.

    If the USPTO made this procedure optional, on the basis as described, I cannot see how anyone could object.

  7. “Of course, the preliminary injunction is not a decision on the merits of the rules —it is only preliminary relief. A full decision will likely be delayed until at least early January.” – Jill Browning

    The preliminary injunction is – most certainly! – a “decision on the merits of the rules,” as there is extensive case law that legal rulings made on a motion for preliminary injunction establish the “law of the case.” Further, even if this were not so, it is virtually inconceivable for any human being – and this would even include federal judges! – to so completely reverse a recent, prior decision as “wrong” without some intervening event, in this case, a significant change in the legal landscape, that would justify finding today’s decision incorrect or “overruled.”

    Law school and “legal lip service” about the “preliminary” nature of decisions rendered on prelimianry injunction motions as found in the case law to one side, today the District Court “decided the merits” of the judicial challenge to the PTO rules – and the PTO lost badly and the PTO knows it!

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