The U.S. Court of Appeals for the Federal Circuit ruled today in a split decision that the Patent and Trademark Office did not overstep its authority in adopting a set of new rules that some intellectual property lawyers say fundamentally alter patent practice and threaten innovation.
Lawyers for the PTO say the four new PTO rules, issued in 2007, were constructed to reduce a backlog of unexamined patent applications by, among other things, limiting the number of claims per application, as well as the number of continuing applications and requests for continued examination. Critics of the rules say multiple claims are essential in protecting inventions.
Lawyers for GlaxoSmithKline and inventor Dr. Triantafyllos Tafas challenged the rules in federal court, arguing the PTO lacks the authority to make substantive changes. A federal district judge in the Eastern District of Virginia found the rules were substantive, and not procedural, and blocked the PTO from implementing the changes. The PTO appealed.
In the Federal Circuit, the case generated considerable amicus participation—including the Intellectual Property Owners Association, the Pharmaceuticals Research and Manufacturers of America, and the Biotechnology Industry Organization. Dozens of lawyers—including counsel from the two lead firms, Kelly Drye & Warren and Kirkland & Ellis—are named in the opening pages of the opinion. To listen to the oral argument, click here.
Simply because an applicant needs to put more effort into an application to comply with a rule does not make the rule substantive, Judge Sharon Prost wrote in the opinion for the court. Prost also said there is no absolute limit to the number of claims an applicant can file. But Prost acknowledged that the PTO “may in some cases attempt to apply the rules in a way that makes compliance essentially impossible and substantively deprives applicants of their rights.” In those cases, Prost wrote, judicial review is available.
“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,” Prost wrote. “In essence, they govern the timing of and materials that must be submitted with patent applications.”
Judge William Bryson filed a concurring opinion. Judge Randall Rader wrote in partial dissent. All three judges vacated one of the rules—limiting the number of continuation requests—as contradictory to existing law. Altogether, Rader found that the new rules are substantive, not procedural, and said he would affirm the trial court ruling. Rader said the rules “drastically change” existing law, altering an inventor’s rights and obligations under the Patent Act.
The panel judges voted to remand the case. The trial court still must determine whether the final rules are impermissibly vague and whether they are arbitrary and capricious.
Kirkland partner John Desmarais, who argued for GlaxoSmithKline, was not immediately available for comment this afternoon. Kelley Drye partner Steven Moore, argued for Tafas, whose company makes microscopes that read slides in order to render a medical diagnosis. “At this point we are trying to resolve the three vary disparate opinions,” Moore says. It’s too soon to say whether the plaintiffs will seek en banc review, Moore says.
"Many will welcome the Federal Circuit’s decision today in Tafas v. Doll upholding the district court’s decision that the 'continuation' limitation in the Final Rules package at issue is invalid, but most will be disappointed by the court’s reasoning, and its decision on the other rules," Foley & Lardner partner Courtenay Brinckerhoff says.
UPDATE (4:10 p.m.)
Robert Greene Sterne, director of Sterne, Kessler, Goldstein & Fox, who represented Amberwave Systems Corp. as an amicus, tells Legal Times in an e-mail: "This decision has far reaching implications for inventors and patent owners because it could result in these rules being eventually adopted which would place an unwanted and negative burden on the patent process. These rules will undoubtedly increase costs and risk of inequitable conduct on patent applicants which will decrease the incentive for investors to invest in innovation activities of all types."
UPDATE (5 p.m.)
Banner & Witcoff partner Bradley Wright says in an e-mail to Legal Times: "In a relief to some, the court struck down the PTO's attempt to limit the number of "continuing" applications that an applicant may file, concluding that the patent statute expressly permitted such filings. But the rules upheld by the court may impose higher costs and hurdles for patent applicants, and may discourage companies from filing applications due to the increased costs and burdens."