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PTO Seeking Rulemaking Authority Despite Rescinding Proposed Claims and Continuation Rules
Jeffrey A. Wolfson
The U.S. Patent and Trademark Office (“PTO”) has announced that the director has signed a Final Rule,1 which has not yet been published, that rescinds the hotly contested proposed claims and continuation rules. These rules would primarily have limited the number of patent applicant filings of: (i) continuation applications, (ii) Requests for Continued Examination (“RCEs”), and (iii) claims without examination support documents (“ESDs”) within a single application. The proposed rules were at the heart of a two-year legal battle that pitted co-plaintiffs Triantafyllos Tafas and GlaxoSmithKline (“GSK”) against the PTO and its director.
On March 20, 2009 the U.S. Court of Appeals for the Federal Circuit essentially overturned much of the decision of the U.S. District Court for the Eastern District of Virginia in Tafas v. Doll,2 in which the proposed rules were enjoined and held to be invalid as being substantive and outside the scope of the PTO’s authority. The appellate decision, however, held the proposed rules in Tafas were within the authority of the PTO, because they were procedural, rather than substantive. The Court’s reasoning was as follows: Current law limits the PTO’s authority to procedural rulemaking power.3 The longstanding Patent Act empowers the PTO to “establish regulations… to govern the conduct of proceedings in the Office” and requires the PTO to engage in notice and comment rulemaking. The District Court held that the proposed rules were substantive in nature, because they significantly affect applicant’s rights and obligations and were a “drastic departure” from the terms of the Patent Act. While agreeing with the District Court that substantive rules affect individual rights and obligations, the Federal Circuit stated that procedural rules may also affect substance but that does not necessarily convert a procedural rule into a substantive one. The Federal Circuit did not set forth a definitive rule for doing so, however, but did conclude the proposed rules were procedural in nature and therefore within the authority of the PTO, except for the continuations rule, which was found to be in violation of 35 U.S.C. § 120. It remains unclear to what extent and how a procedural rule must affect downstream patent rights and obligations, such as enforceability or scope, to be considered substantive.
Plaintiffs’ petition to the Federal Circuit for a rehearing en banc was granted on July 6, 2009 but as a result of the PTO’s recent announcement, GSK and the PTO have jointly requested a dismissal of both the appeal and the District Court decision below. “These regulations have been highly unpopular from the outset and were not well received by the applicant community,” stated newly sworn-in PTO Director David Kappos. GSK hailed the decision to drop the proposed rules as protecting patent rights and supporting innovation.
Importantly, however, the battle over the PTO’s power to make rule changes is far from over. “This course of action represents the most efficient way to formally and permanently move on from these regulations and work with the IP community on new ways to take on the challenges these regulations were originally designed to address,” stated Kappos. While the litigation may be ending, the PTO’s problems of patent application backlog, decreased revenues, and patent prosecution inefficiencies remain. Co-appellant Tafas is noticeably absent from the motion to dismiss, and instead apparently prefers that the District Court decision limiting the PTO’s rulemaking authority stand as a safeguard against potential future substantive rulemaking attempts by the PTO.
A further attempt to expand the PTO’s rulemaking authority might happen sooner than expected, as current patent reform efforts have the support and backing of the Obama administration. An October 5th letter from Commerce Secretary Gary Locke to the Senate Judiciary Committee urges Congress to give the PTO not only the ability to increase patent fees by a proposed 15% on an interim basis, but also grant it substantive rulemaking authority and fee-setting power. His letter also suggests that the District Court created doubt about the PTO’s rulemaking authority, while some would argue that the opinion clarified that the PTO did not have substantive rulemaking authority.
“Substantive rulemaking authority would give the USPTO Director the ability to provide flexibility in the administration of patent rules and procedures,”5 Secretary Locke advised Congress. The Patent Reform Bill of 2007 made similar arguments, but stalled in Congress. The Patent Reform Bill of 2009 currently contains no such provision, but that could change given the Administration’s request. Congressional enactment of this type of reform would eliminate any argument over differences in procedural/substantive rulemaking and could result in similar or more burdensome requirements on the innovation community than those at issue in the Tafas litigation. Such Congressional support would be hard won, however, as opposition to granting substantive rulemaking authority to the PTO remains strong. Many in the tech community, notably IBM, Director Kappos’ former employer, are urging swift passage of the patent reform legislation as it now stands.
1 PTO Press Release on Patent Rules Package (Oct. 8, 2009).
2 Tafas v. Doll, 559 F.3d 1345 (Fed. Cir., Mar. 20, 2009) (formerly Tafas v. Dudas).
3 See Merck v. Kessler, 80 F.3d 1543 (Fed. Cir. 1996).
4 35 U.S.C. § 2(b)(2).
5 Letter from Secretary of Commerce Gary Locke to Members of Senate Judiciary Committee (Oct. 5, 2009) at 2-3.
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