CASRIP Newsletter - Winter/Spring 2008, Volume 15, Issue 1
Setbacks to the USPTO’s “Final Rules”: Tafas v. Dudas
By Brad Riel
An April 1, 2008 decision from the U.S. District Court for the Eastern District of Virginia has, at least temporarily, stopped the United States Patent Office (“USPTO”) from promulgating new rules restricting the number of continuation applications, continuation-in-part applications, requests for continued examination (“RCE”), and claims that an applicant may pursue as a matter of right. In particular, the court granted plaintiffs Triantafyllos Tafas (“Tafas”) and GlaxoSmithKline’s (“GSK”) motions for summary judgment and requests to permanently enjoin the USPTO from enacting these new rules and voided the new rules as “not in accordance with law” and “in excess of statutory jurisdiction and authority.” The court consequently denied the USPTO’s motion for summary judgment and motion to strike various exhibits and amici curiae.
A. Substantive vs. Procedural Rules
On January 3, 2006, the USPTO issued two separate notices proposing changes to the filing and examination of patent applications. On August 21, 2007, the USPTO published a final set of new rules (“Final Rules”) after receiving substantial feedback on the proposed changes. The Final Rules were originally set to go into force on November 1, 2007, and apply retroactively to applications filed as of August 21, 2007.
The USPTO contended that the Final Rules allow it to conduct a more thorough and reliable examination of patent applications , which is necessary to reduce the escalating number of patent applications awaiting examination. The Final Rules make numerous changes to the existing rules. Those at issue include:
1. Final Rules 78 and 114 (the “2 Rule”) 
These rules 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. Unless the applicant petitions for a waiver, any subsequent continuations or RCEs require a petition explaining why the amendment, argument, or evidence could not have been previously presented. The present rules allow an applicant as a matter of right to file any number of continuation applications, continuation-in-part applications, and RCEs.
2. Final Rule 75 and 265 (the “5/25 Rule”)
These rules permit an applicant as a matter of right to present a total of five independent claims or twenty-five total claims in a patent application. Applicants wishing to exceed these limits must provide an examination support document (“ESD”) containing information for assisting the examiner in determining patentability of any additional claims. The present rules allow an applicant as a matter of right to file any number of claims.
On August 22, 2007, Tafas filed a Complaint against the USPTO and Jon Dudas, Director of the USPTO and Under-Secretary of Commerce for Intellectual Property.  Tafas is the co-founder and Chief Technology Officer of Ikonisys, a company that developes solutions for cancer diagnosis management, prenatal detection of genetic disorders, and fertility testing. On September 7, 2007, Tafas filed an Amended Complaint alleging that the Final Rules exceed the USPTO’s rulemaking authority and violate the Constitution, the Patent Act, the Administrative Procedure Act, and the Regulatory Flexibility Act. The Amended Complaint sought to permanently enjoin the implementation of the Final Rules and to have them declared null, void, and without legal effect.
On December 20, 2007, Tafas, GSK, and the USPTO each filed motions for summary judgment. On January 22, 2008, the USPTO filed a motion to strike various exhibits and amici curiae. While the motions for summary judgment filed by Tafas and GSK fleshed out the details of their complaints, the motion for summary judgment filed by the USPTO argued that the Final Rules are entirely lawful and that the USPTO should be permitted to implement these much needed changes.
III. DISTRICT COURT DECISION
The court began its analysis by determining the scope of the USPTO’s rulemaking authority under 35 U.S.C. § 2(b)(2). Relying on the language and structure of section 2(b)(2) as well as Federal Circuit case law interpreting section 2(b)(2), the court determined that the USPTO has procedural, but not substantive, rulemaking authority. The court also relied on the fact that Congress debated whether it should grant the USPTO substantive rulemaking authority, but ultimately declined to do so.
While GSK and Tafas accepted and relied on the distinction between procedural and substantive rulemaking authority, the USPTO rejected this distinction and argued that the Final Rules fall within its statutory rulemaking authority. The court found that this distinction exists and is pertinent to the dispute.
The USPTO finally argued that even if a distinction between procedural substantive rulemaking authority exists, the USPTO has the authority to promulgate the Final Rules because they are procedural in nature. The court disagreed; defining a “substantive rule” as any rule that “affect[s] individual rights and obligations.”
The court concludedthat the Final Rules are substantive rules for at least the following reasons:
1. Rule 78
Rule 78 effectively imposes a hard limit on additional applications since the USPTO intends to deny an applicant from filing more than two continuation or continuation-in-part applications in almost all circumstances. Imposing a hard limit deprives applicants of their existing right to any number of continuation and continuation-in-part applications.
2. Rule 114
Rule 114 places a limit on RCEs on the basis of application family rather than individual application. Limiting RCEs based on application family is a clear departure from an applicant’s existing right where RCEs are limited based on individual application. Rule 114, similar to Rule 78, effectively places a hard limit on additional RCEs. Imposing a hard limit deprives applicants of their existing right to an unlimited number of RCEs.
3. Rule 75 and 265
Final Rule 75 imposes a mechanical limit of 5 independent claims or 25 total claims on every application unless the applicant provides an ESD. The ESD requires an applicant to conduct a broad search of prior art and submit arguments distinguishing his invention over such prior art; activities which are not the duty of applicants, but rather are the duty of the USPTO. Shifting this burden from the USPTO to the applicant alters applicants’ existing right to any number of claims.
A. Effect of Decision
After the January 3, 2006 notices, numerous law firms began modifying their patent prosecution strategies to mitigate any possible damages caused by the proposed changes. This decision has begun to put to rest anxieties over the possible implementation of the Final Rules.
However, the effect of this decision is complicated by ongoing developments with the Patent Reform Act of 2007 (“PRA”). The PRA proposes various changes to existing patent law. It was passed by the House on September 7, 2007, but has not passed the Senate. In the version passed by the House, the PRA includes “clarifications” to the USPTO’s rulemaking authority which arguably expand the USPTO’s authority to promulgate the Final Rules. The current version of the PRA does not include these “clarifications”. The PRA is expected to be brought to the Senate floor during the current working session which ends in late May. It is unknown whether the PRA will end up including expanded USPTO rulemaking authority, or even whether the Senate will pass the PRA.
The USPTO is also currently attempting to promulgate other rule changes, including some directed to Information Disclosure Statements and accerated examination procedures. It is possible that this decision may reduce the USPTO’s ability to promulgate such other proposed rule changes.
B. What’s Next?
The USPTO is reportedly planning an appeal to the U.S. Court of Appeals for the Federal Circuit. Dudas and the USPTO have sixty days from entry of final judgment to file a Notice of Appeal and sixty days following a denial if they move for reconsideration of the final judgment.
The USPTO is also expected to make a final push for substantive rulemaking authority as part of the PRA. If such authority is legislatively enacted, it will impact this decision.
With the upcoming presidential election, there will be a different administration. Such change is likely to mean a new Commissioner of Patents, who may be persuaded by the unpopularity of the Final Rules to pursue alternative means to reduce the USPTO’s backlog problem.
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