In the News BNA Patent, Trademark and Copyright Journal

Tafas, GSK Petition for En Banc Review of Challenge to PTO Claiming Rules

Plaintiffs who were substantially defeated in their challenge of the Patent and Trademark Office's proposed continuation and claim limitation rules filed separate petitions June 3 calling for an en banc rehearing of the case by the U.S. Court of Appeals for the Federal Circuit (Tafas v. Doll, Fed. Cir., No. 2008-1352, en banc rehearing requested 6/3/09).

The closely-watched case generated considerable negative reaction in the patent community when the court held March 20, in a 2-1 decision, that the PTO had the authority to impose rules setting threshold limits on continuation practice and the number of claims per patent application. 559 F.3d 1345, 90 USPQ2d 1129 (Fed. Cir. 2009) ( 77 PTCJ 553, 3/27/09).

Commentators were somewhat hopeful that the court would agree to rehear the case en banc, but said that the petitioners faced an uphill battle in getting a reversal.

Rules Upheld Earlier, Prompting Criticism

The PTO's four relevant "Final Rules" were issued in August 2007 (72 Fed. Reg. 46,716) (74 PTCJ 527, 8/31/07).

New Rule 78 sets a threshold limit of two continuation applications and Rule 114 sets a limit of one RCE, or request for continued examination. Applicants attempting to exceed those limits must show that the "amendment, argument, or evidence sought to be entered could not have been previously submitted."

Rule 75 permits applicants to present a total of five independent claims and 25 total claims. Applicants wishing to exceed those limitations must provide an examination support document, or ESD, to assist the examiner in determining patentability. Rule 265 establishes the requirements for an ESD.

Though holding that the PTO does not have substantive rulemaking authority, the Federal Circuit's majority opinion said that the rules were not substantive in that applicants were not "effectively foreclosed from obtaining the patent rights to which they are entitled." Granting deference, therefore, to the PTO to interpret potential conflicts with the Patent Act, the court further held that only Rule 78 is inconsistent with the statute.

Judge William C. Bryson filed a concurring opinion, primarily to express his disagreement with the deference analysis in the principal opinion. But he also commented on Rule 78, agreeing with the holding that it is invalid, but saying an unanswered question remains "whether the rule is invalid as applied to serial continuances; i.e., a series of continuances in which each was co-pending with its immediate predecessor, but in which only the second in the series was co-pending with the first application."

Judge Randall R. Rader dissented as to the determination that the rules are not substantive.

The patent community was almost unanimously shocked and dismayed by the opinion (77 PTCJ 555, 3/27/09). While most commenters contacted by BNA acknowledged that there were still significant hurdles before the PTO would be able to implement the rules, many were concerned about the longterm impact of broadening the agency's powers.

Further, though many claimed the court's rejection of the PTO's attempt to limit continuation applications was a key victory, others feared that Bryson had laid out the means for the PTO to create a conforming rule that would be equally restrictive.

Questions for En Banc Rehearing

Independent inventor Triantafyllos Tafas, who brought the original complaint against the PTO (74 PTCJ 527, 8/31/07), in a petition signed by Steven J. Moore of Kelley Drye & Warren, Stamford, Conn., alleges that the Federal Circuit majority opinion:

(1) misapplied significant binding Supreme Court and Federal Circuit precedent concerning the correct standard for classifying administrative rules as "substantive" versus "non-substantive"; (2) failed … to fully consider evidence that the Final Rules significantly and adversely affect individual rights and obligations under the law; (3) failed to correctly address … the threshold question of whether the PTO has the jurisdictional authority under [the Administrative Procedure Act in] 35 U.S.C. §2(b)(2) to enact the Final Rules; and (4) misapplied Chevron deference to its improper determination that Final Rules 75, 265 and 114 were not "inconsistent with existing law."

The petition presents two questions for rehearing en banc:

  • Does the standard "foreclose effective opportunity to present patent applications for examination" or "effectively foreclose[] [applicants] from obtaining patent rights to which they are entitled" comport with United States Supreme Court and Federal Circuit precedent classifying "substantive" rules as those which cause a change in existing law or policy affecting individual rights and obligations?
  • Are Final Rules 75, 114, and 265 impermissibly inconsistent with law so as to exceed the scope of the United States Patent and Trademark Office's limited rulemaking authority under Section 2(b)(2) of the Patent Act?

In October 2007, Smith-KlineBeecham Corp. d/b/a GlaxoSmithKline filed a similar complaint, which was ultimately consolidated with the Tafas action (74 PTCJ 727, 10/19/07).

The GSK petition was signed by former Solicitor General Carter G. Phillips, now of Sidley Austin, Washington, D.C., and lists as co-authors John M. Desmarais of Kirkland & Ellis, New York, F. Christopher Mizzo of Kirkland & Ellis, Washington, D.C., and Sherry M. Knowles, chief intellectual property counsel at GSK. Desmarais had argued the case in front of the Federal Circuit panel.

The GSK petition charges that the Federal Circuit's majority opinion and Bryson's concurrence "conflict with each other, leaving the PTO and patent applicants wholly uncertain about this Court's test for deciding whether PTO rules are lawful." The petition also argues that "The Final Rules are not, as the principal opinion suggests, merely mechanisms to 'govern the timing of and materials that must be submitted with the patent applications,' but measures that significantly affect applicants' rights and obligations under the Patent Act." GSK asks the en banc court to address similar questions to those posed by Tafas:

  • Whether the Panel majority erred in reject the test for determining whether a Patent and Trademark Office ("PTO") rules is "substantive," as set forth in the controlling precedent of [Chrysler Corp. v. Brown, 441 U.S. 281 (1979); Animal Legal Defense Fund v. Quigg, 932 F.2d 920, 930 (Fed. Cir. 1991); and Cooper Technologies Co. v. Dudas, 536 F.3d 1330, 1335 (Fed. Cir. 2008) (76 PTCJ 621, 8/29/08)]; and
  • Whether the Panel majority erred in holding that the challenged Final Rules, 72 Fed. Reg. 46,716 (Aug. 21, 2007), fall within the PTO's limited, non-substantive rulemaking authority.

Rules Opponents Hopeful for Review

"Everywhere I go," said Robert Greene Sterne of Sterne Kessler Goldstein Fox, Washington, D.C., "the anxiety is high and the desire is great for the court to take this case en banc. There is a widespread feeling that these rules are substantive in effect. [Practitioners] don't know how best to articulate that from a legal test, but the result is substantive for sure."

Stern said he regards the chances of en banc review in the case a toss-up. He was somewhat skeptical, however, because the court did not withhold the panel opinion from publication and take the case en banc sua sponte, as it sometimes does with splintered and controversial panel rulings.

"Why they would allow a fractured decision to go out is interesting," he said. "I think that what may happen now is that they may realize, through their sources, as well as by reading what was filed, and what they're hearing at conferences and in the press, that there is a widespread concern" about the rules in the patent community. "That may tip the balance" in favor of en banc review, he hoped.

Stephen G. Kunin of Oblon, Spivak, McClelland, Maier & Neustadt, Alexandria, Va., joined Sterne in saying that a rehearing by no means guarantees a different result. "The petitioners will have an uphill battle in getting the Federal Circuit to completely reverse its panel decision and find all the rules to be substantive or inconsistent with law," he said.

Kunin told BNA that the Federal Circuit will carefully look at analyses by Administrative Procedures Act authorities including Arti K. Rai, a law professor at Duke University. Rai's paper, "Growing Pains in the Administrative State: The Patent Office's Troubled Quest for Managerial Control," generally supports the panel majority opinion:

The Federal Circuit opinion in Tafas correctly follows the approach of the D.C. Circuit, which has shifted its focus from asking whether a given rule change has a "substantial impact" on parties' rights to inquiring "more broadly" into whether the rule change embodies a "substantive value judgment." 157 U. Pa. L. Rev. 2052, 2078 (2009).

"The stakes are high for both the PTO and the petitioners in this litigation," Kunin said. Though expressing "great empathy for the petitioners," he really was more concerned with the "unfortunate fundamental breakdown of the PTO's rulemaking process" in its imposition of these rules.

Irrespective of the court case, Kunin hoped that the new PTO administration would "see fit to revisit these rules and take the PTO in a new direction working with the patent community in a more transparent and participative process to find better ways to identify the PTO's workload and quality problems and solve them in a way that is less draconian than the approach taken in the present litigation."

Reproduced with permission from BNA's Patent,Trademark & Copyright Journal, 78 PTCJ 178 (June 12,2009).  Copyright 2009 by The Bureau of National Affairs, Inc. (800-372-1033) <>