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USPTO Rules Are Void For Being Contrary to Law, VA District Court Declares
Tafas v. Dudas, et al.
Nos. 1:07cv846 (JCC) and 1:07cv1008 (JCC), Eastern District of Virginia, 04/01/2008
Companies Mentioned: Smithkline Beecham Corp. (d.b.a. GlaxoSmithKline, plc.), United States Patent and Trademark Office
Holding
In this action challenging the United States Patent and Trademark Office’s (“USPTO”) changes to the rules governing the examination of patents (“Final Rules”), the U.S. District Court for the Eastern District of Virginia granted plaintiffs’ motion for summary judgment, and denied defendant USPTO’s motion for summary judgment. Specifically, the district court held that 35 U.S.C. § 2 provides various specific powers to the USPTO. However, Section 2 does not provide the USPTO with any “general substantive rulemaking power.” According to the court, since “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.” The Final Rules are therefore void as “otherwise not in accordance with law” and “in excess of statutory jurisdiction (and) authority.”
Detailed Summary
Plaintiffs Smithkline Beecham Corporation d/b/a GlaxoSmithKline, et al. (collectively, “GSK”) and Triantafyllos Tafas (“Tafas”) instituted this lawsuit pursuant to the Administrative Procedure Act (the “APA”) to permanently enjoin defendants Jon W. Dudas and the USPTO from enacting the “Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications,” 72 Fed. Reg. 46,716-843 (Aug. 21, 2007)(to be codified at 37 C.F.R. pt. 1).
GSK and Tafas argued that the Final Rules, which changed 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 APA and should be declared null and void. On the other hand, the USPTO asserted that the Final Rules are entirely lawful and that it should be permitted to implement these amendments.
Under the old system, an applicant could file an unlimited number of continuation or continuation-in-part applications, requests for continued examination (RCEs), and claims. The Final Rules modify that system in several ways. First, Final Rules 78 and 114 (collectively, the “2+1 Rule”) permit an applicant as a matter of right to file two continuation or continuation-in-part applications, plus a single RCE, after an initial application. 72 Fed. Reg. at 46838, 46841; 37 C.F.R. §§ 1.78(d)(1)(i)–(iii), 1.114(f). If the applicant wants to engage in further prosecution, 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. 72 Fed. Reg. at 46839, 46841; 37 C.F.R. §§ 1.78(d)(1)(vi), 1.114(g). The 2+1 Rule also applies retroactively to patent applications already filed before the effective date of the Final Rules. See 72 Fed. Reg. at 46716-17.
Second, Final Rule 75 (the “5/25 Rule”) permits an applicant to present a total of five independent claims or twenty-five total claims for examination without providing any further information about those claims. 72 Fed. Reg. at 46836; 37 C.F.R. § 1.75(b)(1). An applicant who wants to exceed either limitation must provide an “examination support document” (“ESD”) containing information about the claims that may assist the examiner in determining the patentability of the claimed invention. 72 Fed. Reg. at 46836; 37 C.F.R. § 1.75(b)(1). Final Rule 265, as well as certain supplemental guidance issued by the USPTO, establishes the requirements for an ESD. See 72 Fed. Reg. at 46842-43; 37 C.F.R. § 1.265. In addition, both the 5/25 Rule and the ESD requirement apply retroactively to pending applications for which a first Office Action on the merits was not mailed before the effective date of the Final Rules. See 72 Fed. Reg. at 46716. Final Rules 75 and 78 also alter the existing examination process in other ways. Final Rule 75 defines how claims referring to different statutory classes of invention will be treated and how multiple dependent claims will be counted for purposes of the 5/25 Rule. 72 Fed. Reg. at 46836-37; 37 C.F.R.
Finally, Final Rule 78 requires patent applicants to identify related patent applications and sets forth a rebuttable presumption that applications meeting certain conditions contain patentably indistinct claims, thereby preventing applicants from evading the 2+1 and 5/25 Rules by attempting to simultaneously prosecute indistinct applications. 72 Fed. Reg. at 46840; 37 C.F.R. §§ 1.78(f)(1) & (2).
On October 15, 2007, GSK moved for a temporary restraining order and preliminary injunction enjoining the implementation of the Final Rules, which the court granted on October 31, 2007.
At issue is the validity of the Final Rules, where both parties filed their respective motions for summary judgment. The district court ruled in favor of plaintiffs and invalidated the Final Rules. “Because the USPTO’s rulemaking authority under 35 U.S.C. § 2(b)(2) does not extend to substantive rules, and because the Final Rules are substantive in nature,” the court found that the Final Rules are void as “otherwise not in accordance with law” and “in excess of statutory jurisdiction (and) authority.” 5 U.S.C. § 706(2).”
In arriving at this conclusion, the district court first went to define a “substantive rule” as any rule that “affect[s] individual rights and obligations.” Chrysler Corp. v. Brown, 441 U.S. 281 (1979). Applying the broad definition of “substantive,” the district court then held that the proposed rules are “substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act.”
In particular, 35 U.S.C. § 2 provides various specific powers to the PTO. However, Section 2 does not provide the PTO with any “general substantive rulemaking power.” According to the Court, “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.”
As a concrete example, 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 upon applicants, “constitute a drastic departure from the terms of the Patent Act as they are presently understood.” In so doing, the Final Rules “effect changes in GSK’s and Tafas’s existing rights and obligations.”
In addition, the district court found that the continuation rule “runs contrary to the law because it imposes a ‘hard limit’ that “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.” Likewise, the limitations on RCE filings is a “clear departure from the plan language” of 35 U.S.C. § 132 (i.e., the PTO “shall … “at the request of the applicant …”).
For over eighty years, the courts have blocked the USPTO from placing any “mechanical limits” on the number of claims. Although the USPTO may object to duplicate claims, the court found that the law prevents any strict limit on the number of claims. The district court found the ESD requirement substantive because it “shifts the burden of examination from the PTO to the Applicant:”
Further, the district court held the ESD requirement changes existing law and alters the rights of applicants under the current statutory scheme by shifting the examination burden away from the USPTO and onto applicants. Final Rule 265 demands that applicants conduct a broad search of patents, patent applications, and literature, and provide, among other things, a “detailed explanation” of “how each of the independent claims is patentable over the cited references.” 72 Fed. Reg. at 46842; 37 C.F.R. § 1.265(a). However, the Federal Circuit has stated that applicants have “no duty to conduct a prior art search” and “no duty to disclose art of which an applicant could have been aware.” Frazier v. Roessel Cine Photo Tech, Inc., 417 F.3d 1230, 1238 (Fed. Cir. 2005).
Thus, by requiring applicants like GSK and Tafas to perform prior art searches and by shifting the examination burden away from the USPTO, the ESD requirement manifestly changes existing law and alters applicants’ rights under Sections 102, 103, and 131. “Applicants must now undertake new substantive responsibilities if they wish to file more than five independent or twenty-five total claims, which represents a significant departure from Section 112’s rule of unlimited – though not unduly multiple – claims.” For these reasons, the court concluded hat Final Rules 75 and 265 are substantive rules.
On the basis of the foregoing, the district court granted plaintiffs’ motion for summary judgment, and denied defendants’ summary judgment.
View a PDF of the judicial opinion.Patent Law Commentary
Read the related Patent Law commentary: Tafas v. Dudas: USPTO’s Efforts to Limit Patent Applicant Rights Are Void, by John R. Carr, Esq.
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