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.