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PTO Rules Find Skeptical Audience at Federal Circuit

More than 150 lawyers who represent clients with intellectual property interests gathered today at the U.S. Court of Appeals for the Federal Circuit to try to glean whether the court will support new patent rules that critics argue threaten innovation.

The Patent and Trademark Office issued four rules in April 2007 to reduce a growing backlog of unexamined patent applications. The rules, among other things, limit the number of continuing applications and requests for continued examination.

Lawyers for GlaxoSmithKline, the world's second-largest pharmaceuticals company, and inventor Dr. Triantafyllos Tafas challenged the rules in federal court, arguing the PTO lacks the authority to issue such substantive changes. Judge James Cacheris of the Eastern District of Virginia in April ruled against the PTO, which appealed to the Federal Circuit.

Judges Randall Rader, William Bryson, and Sharon Prost made up the panel today. Kirkland & Ellis partner John Desmarais argued for GlaxoSmithKline, and Steven Moore, a partner with Kelley Drye & Warren, argued for Tafas, founder of a company that makes microscopes that read slides in order to render a medical diagnosis.

PTO General Counsel James Toupin argued the rules are procedural and do not set "hard limits" on the number of applications that can be filed. The PTO, he argued, acted within the scope of its authority.

"While predicting an outcome of a Federal Circuit appeal based on oral arguments is harder than predicting the weather in D.C., the panel seemed receptive to GSK's position," said Foley & Lardner partner Courtenay Brinckerhoff, who attended the hearing.

A lawyer for GlaxoSmithKline, Kirkland & Ellis partner F. Christopher Mizzo, had argued in briefs that the rules the PTO created violate established patent law and "fundamentally alter patent practice." Mizzo called the rules an "unprecedented and unlawful grab for power" that cuts into the incentive to innovate. GlaxoSmithKline had 1,900 patent applications pending as of October 2007. In more than 100 cases, the company had filed two or more continuing applications.

Twenty amicus briefs were filed on behalf of GlaxoSmithKline and Tafas. Firms representing the amici include Arnold & Porter; Arent Fox; Bingham McCutchen; Covington & Burling; Howrey; Morgan, Lewis & Bockius; Pillsbury Winthrop Shaw Pittman; and Wilmer Cutler Pickering Hale and Dorr.

Robert Sterne, director of Sterne, Kessler, Goldstein & Fox, who represented amicus R&D Licensing Cos., says the judges appeared to side with GlaxoSmithKline and Tafas. Argument lasted about 45 minutes. "None of these escape hatches that the PTO has built into these rules are very real, and they will kill applicants as a practical matter," Sterne says.