Patent Law Updates | New Judicial Opinions
March 31, 2009
Federal Circuit Upholds PTO’s Rule-Making Authority in Final Rules Dispute
Tafas v. Doll
No. 2008-1352, U.S. Court of Appeals for the Federal Circuit, 3/20/2009
In a split decision, the U.S. Court of Appeals for the Federal Circuit has upheld the authority of the U.S. Patent and Trademark Office (“USPTO”) to issue the highly contested Final Rules relating to claims and continuation examination. The Federal Circuit ruled that the USPTO did not exceed its authority when it issued the Final Rules, and that most of its sections are consistent with the Patent Act. Specifically, the Federal Circuit concluded that Final Rule 114 (requests for continued examination), Final Rule 75 (claims), and Final Rule 265 (examination support documents) are consistent with the Patent Act, but that Final Rule 78 (continuations) violates the Patent Act. The Federal Circuit remanded several issues to the district court. In this regard, the Federal Circuit vacated-in-part and affirmed-in-part the decision of the U.S. District Court for the Eastern District of Virginia that these rules exceeded the agency’s rule-making authority,
In January 2006, the USPTO initiated two related notice and comment rulemaking proceedings. After receiving and considering the public comments, the USPTO issued the new rules on August 21, 2007, with an effective date of November 1, 2007. Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications, 72 Fed. Reg. 46,716 (Aug. 21, 2007). Four of the new rules (collectively, the “Final Rules”) are at issue in this appeal.
Two of the new rules, Final Rule 78 and Final Rule 114, pertain to continuation applications and requests for continued examination (“RCEs”) and were issued to address the “large and growing backlog of unexamined patent applications.” Opinion, p. 2, citing 72 Fed. Reg. 46,717.
Final Rule 78 governs the availability of continuation and continuation-in-part applications. Under the rule, an applicant is entitled to file two continuation applications as a matter of right. Id., citing 37 C.F.R. § 1.78(d)(1)(i).
Final Rule 114 provides for similar treatment of RCEs. Under the rule, an applicant is allowed one RCE as a matter of right. Id. § 1.114(f). For each additional RCE, the applicant must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted prior to the close of prosecution in the application.” Id. § 1.114(g).
The two other rules, Final Rule 75 and Final Rule 265, are intended to address the USPTO’s difficulty in examining applications that contain a large number of claims. 72 Fed. Reg. at 46,721. Final Rule 75 requires an applicant who submits either more than five independent claims or twenty-five total claims to provide the examiner with information in an examination support document (“ESD”). Id., p. 3, citing 37 C.F.R. § 1.75(b)(1). The requirements for ESDs are set forth in Final Rule 265.
Shortly after the Final Rules were published in the Federal Register, Triantafyllos Tafas, SmithKline Beecham Corporation, and Glaxo Group Limited (collectively, “Appellees”) filed suit against the USPTO. On October 31, 2007, the district court preliminarily enjoined enforcement of the Final Rules. Tafas v. Dudas, 511 F. Supp. 2d 652 (E.D. Va. 2007) (“Tafas I”).
The district court agreed with Appellees that the Final Rules were “substantive rules that change existing law and alter the rights of applicants such as [Appellees] under the Patent Act.” Id., p. 4, citing Tafas v. Dudas, 541 F. Supp. 2d 805, 814 (E.D. Va. 2008) (“Tafas II”).
The district court concluded that because the USPTO lacks substantive rulemaking authority under Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996), the Final Rules exceed the USPTO’s statutory jurisdiction in violation of 5 U.S.C. § 706(2). Id., citing Tafas II, 541 F. Supp. 2d at 814. Accordingly, the district court granted Appellees’ motion for summary judgment that the Final Rules are invalid.
With regard to Final Rule 78, The district court found that its requirement for the third and subsequent continuation applications was inconsistent with the text of 35 U.S.C. § 120 and the Federal Circuit’s precedent. The district court concluded that Final Rule 78 was inconsistent with the statutory mandate that qualifying applications “shall have” the benefit of the priority date of the initial application. Id., pp. 21-22, citing Tafas II, 541 F. Supp. 2d at 814.
On appeal, the Federal Circuit agreed with the district court that Final Rule 78 is inconsistent with § 120. In light of the USPTO’s presumed “inten(t) to deny additional applications in almost all circumstances,” the district court correctly found that Final Rule 78 set forth a “mechanical rule” that “changes existing law and deprives applicants of their valuable rights under 35 U.S.C. § 120 to an unlimited number of continuation and continuation-in-part applications as a matter of right.” Id., p. 22, citing Tafas II, 541 F. Supp. 2d at 815. The Federal Circuit concluded that Rule 78 is invalid because it attempts to add an additional requirement—that the application not contain amendments, arguments, or evidence that could have been submitted earlier—that is foreclosed by the statute.
With regard to Final Rule 114, t he district court found that Final Rule 114, which governs the availability of RCEs, conflicts with the Patent Act in two ways. The first was that it “places a limit on RCEs as of right on the basis of application family, rather than on the basis of each individual application, whether it be a parent application or a continuation or continuation-in-part application.” Id., p. 26, citing Tafas II, 541 F. Supp. 2d at 815. The district court found that this was inconsistent with 35 U.S.C. § 132, which uses the singular form of “application.”
Second, the district court found that § 132(b)’s mandate that “(t)he director shall prescribe regulations to provide for the continued examination of applications for patent at the request of the applicant” gave applicants the right to “an unlimited number of RCEs per application at their discretion.” Id. This right, the district court held, was violated by Final Rule 114. Id.
On appeal, the Federal Circuit disagreed, stating that § 132 does not unambiguously dictate that its provisions be applied on a per application basis. Deferring to the USPTO’s reasonable interpretation of the statute, the Federal Circuit concluded that Final Rule 114 can properly be applied on a per family basis. Id., citing Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1337-38 (Fed. Cir. 2008).
With regard to Final Rules 75 and 265, the district court held that the ESD requirement violated 35 U.S.C. §§ 102, 103, 112, and 131, as well as the Federal Circuit’s precedent that holds that applicants have no duty to search the prior art.
The district court began its analysis with § 112, ¶ 2’s requirement that (t)he specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.” The district court held, and appellees argued on appeal, that this language precludes the USPTO from putting an arbitrary limit on the number of claims in an application.
But the Federal Circuit disagreed, stating that “(s)ubject to the arguable requirement that an applicant cannot ‘obscure’ his invention by ‘undue multiplicity,’ our precedent does not suggest that there is a limit on the number of claims.” Id., p. 28, citing In re Clark, 97 F.2d 628, 631 (CCPA 1938).
The Federal Circuit though stated that it need not decide whether the USPTO may impose a limit on the number of claims an applicant can pursue because it still could not find at this point that the ESD requirement creates any such limit. Rather, the Federal Circuit explained, this requirement simply requires that an ESD be submitted if more than five independent or twenty-five total claims are included in certain sets of copending applications.
Finally, the district court found that Final Rules 75 and 265 improperly shift the burden away from the examiner and onto the applicant. Id., p. 30, citing Tafas II, 541 F. Supp. 2d at 817. On this point, the Federal Circuit agreed with the district court that the USPTO bears the initial burden of proving unpatentability, but disagreed that the ESD requirement shifts that burden. Final Rules 75 and 265 do not require an applicant to make a prima facie case of patentability. In this regard, the Federal Circuit held that even though the ESD requirement creates an additional procedural step for the submission of applications, such requirement does not alter the ultimate burdens of the examiner or applicant during examination.
On the basis of the foregoing, the Federal Circuit affirmed the district court’s grant of summary judgment that Final Rule 78 is invalid, vacated its grant of summary judgment with respect to Final Rules 75, 114, and 265, and remanded for further proceedings consistent with its opinion.
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