Federal Court backs USPTO rule change

A decision by the US Court of Appeals for the Federal Circuit (CAFC) in the case of Tafas v Doll, relating to crucial patent filing rules, has surprised the innovation community.

In August 2007, the United States Patent and Trademark Office (USPTO) published a range of changes to its filing and examination procedures. Among them were two rules that capped the number of continuation applications that an applicant could file at two and the number of requests for continued examination at one as a matter of right, before forcing the applicant to file more stipulating that exceeding the cap would incur further costs and procedures. The new rules drew a legal challenge from GlaxoSmithKline (GSK), alleging that they contravened basic tenets of the Patent Act. Supporting the company's case were the American Intellectual Property Law Association (AIPLA), plus two notable bio-science groups. On 20 March this year, however in a move that could affect corporations with extensive filing plans the CAFC ruled in favour of the USPTO on three out of the four issues that were appealed.

Commonly known as the New Rules, the directives were hatched as part of a drive to ease USPTO backlog troubles, which had been widely criticised by innovators with pending patents. The CAFC was required to rule on four of them:

Rule 78 capping continuations and continuations-in-part (CIP) that an innovator may file, before forcing the applicant to file a petition 'showing that the amendment, argument, or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application'. A CIP would allow innovators to file additional claims and subject matter not listed in already-filed parent applications.

Rule 114 restricting the number of requests for continued examinations (RCEs) that applicants could make in order to put rejected applications back under USPTO scrutiny. Applicants are limited to one RCE per family as a matter of right before triggering a petition requirement to file any additional RCEs.

Rules 75 and 265 limiting the number of claims applicants could make to a total of 25 if they wish to avoid expensive additional searches and reporting requirements.

A contentious clause of the New Rules required businesses to retroactively revise the claims of prior-filed patent applications in order to comply with the new framework. As IP Review Online reported in August 2008, this clause was dropped following the first part of GSK's legal action.

Judges Bryson, Prost and Rader heard the CAFC case, with Rader dissenting from the majority verdict. In their ruling, Bryson and Prost said: 'While we do not purport to set forth a definitive rule for distinguishing between substance and procedure in this case, we conclude that the final rules challenged in this case are procedural.'

Conversely, Rader argued: 'This case presents a threshold question about the nature of these rules substantive or procedural. Because [they] drastically change the existing law and alter an inventor's rights and obligations under the Patent Act, they are substantive and the PTO exceeded its statutory rulemaking authority.'

Speaking to IP Review Online, Ken Sheets Group IP Manager and in-house patent counsel at leading patent services provider, CPA Global gave his view on why the CAFC felt the rules were procedural, not substantive. 'The majority felt that the rules changed only the method and timing of how an applicant submits a patent application and do not prevent an opportunity for an effective examination,' he said. 'An agency created by Congress isn't able to make the law. But it is well known that an agency can make its own procedural rules. Two judges on the panel said that the patent office was not exceeding its authority to make rules that, as the rules were made by the agency, they were only procedural.' However, Sheets added: 'I very much agree with Judge Rader that these rules are all substantive. These are far beyond how and when someone files a patent application; these go to the heart of an applicant's ability to get a patent.'

Asked how he thought the case would proceed following the CAFC ruling, Sheets said: 'I see one of three scenarios: that Glaxo will file an en banc petition for a rehearing, in which all the judges on the Federal Circuit will sit and review the case before putting it to a full vote; that they will immediately appeal to the Supreme Court; or if that appeal fails they will take the case back down to the District Court.'

Sheets also pointed out that, if the rules did come into play, 'it could actually backfire and create a lot of additional work' for the USPTO. 'If you can't file more than 25 claims in a single application, you could just file a continuation with another 25 claims,' he said. 'The remaining rules seemed to have depended on the restrictions for continuations. Now that the restriction is gone, I think there would be a huge rise in continuations under these rules just to get around the 25-claims requirement.'