In the News BNA Patent, Trademark and Copyright Journal

Federal Circuit Vacates Tafas Panel Ruling; Agrees to Rehear PTO Rules Case En Banc

On July 6, granting the wishes of a deeply-concerned patent community, the U.S. Court of Appeals for the Federal Circuit agreed to vacate and rehear a panel decision that authorized the Patent and Trademark Office to set new rules for patent application continuations and claims (Tafas v. Doll, Fed. Cir., No. 2008-1352, en banc rehearing granted 7/6/09).

The rules would set threshold limits of two continuation applications and one request for continued examination. They would also permit applicants to present a total of five independent claims and 25 total claims, or require a filing of an examination support document by applicants who wished to exceed those limits.

Patent practitioners generally welcomed the decision to hear the case en banc, expressing cautious optimism that the en banc court will impose meaningful limits on the rulemaking authority of the agency.

District Court Injunction Vacated Implementation of the rules was at first enjoined by the U.S. District Court for the Eastern District of Virginia one day before they were to take effect in 2008 (211 PTD, 11/1/07). But a divided Federal Circuit panel vacated that decision March 20 in holding that the rules are not substantive in that applicants were not "effectively foreclosed from obtaining the patent rights to which they are entitled."

559 F.3d 1345, 90 USPQ2d 1129 (Fed. Cir. 2009) (53 PTD, 3/23/09).

Granting deference, therefore, to the PTO to interpret potential conflicts with the Patent Act, the court further held that only the rule limiting continuations is inconsistent with the statute. However, a concurring opinion suggested a restructuring of that rule that would conform with the statute.

A dissent filed by Judge Randall R. Rader criticized the majority's view that the rules were not substantive.

The two original plaintiffs in the case, independent inventor Triantafyllos Tafas and pharmaceutical firm Smith-KlineBeecham Corp. d/b/a GlaxoSmithKline, requested the en banc rehearing in separate petitions June 3 (106 PTD, 6/5/09). Their petitions were supported by the American Intellectual Property Law Association in an amicus brief filed June 17.

Reflecting Rader's dissenting opinion, the petitioners and the AIPLA asked the court to reassess Federal Circuit and Supreme Court pronouncements on substantive rulemaking. GSK's petition posed two questions accordingly:

Whether the Panel majority erred in rejecting the test for determining whether a Patent and Trademark Office ("PTO") rule 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 (Fed. Cir. 1991)]; and Cooper Technologies Co. v. Dudas, [536 F.3d 1330 (Fed. Cir. 2008)]; 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.

The per curiam rehearing order was issued by 11 of the 12 court judges. Judge Alan D. Lourie did not participate in the rehearing poll.

The parties will be allowed to file additional briefs, with the appellant PTO's brief due in 30 days. Amicus briefs will also be entertained.

The GSK petition was signed by former Solicitor General Carter G. Phillips, now of Sidley Austin, Washington, D.C., and lists as coauthors 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.

Steven J. Moore of Kelley Drye & Warren, Stamford, Conn., continues to represent Tafas.

Patent Community Encouraged

The patent community was almost unanimously shocked and dismayed when the original panel opinion was published in March (54 PTD, 3/24/09). Unsurprisingly, patent practitioners contacted by BNA offered an enthusiastic reaction to the July 6 en banc order.

Bradley C. Wright of Banner & Witcoff, Washington, D.C., told BNA that he "breathed a sigh of relief" on hearing that the full court would take up the case and could overrule the panel decision. "It's unlikely they would take the case en banc only to endorse the majority view," he said.

Wright pointed out that "it is very difficult to muster the seven votes" needed to approve an en banc rehearing, especially considering that Lourie did not participate. "So it is likely the court will change some aspect of the opinion. Even if they don't throw it out entirely, they will place some meaningful limits on the PTO's authority."

To that end, Wright praised GSK's petition as painting an "all or nothing" scenario where, "if the PTO can do this, they can do almost anything, and the whole 'procedural versus substantive' issue is illusory."

Wright was also generally pleased with the Federal Circuit's recent willingness to take more issues en banc when "the patent community has signalled that it needed some clarity. I think Chief Judge Michel is particularly interested in making sure the court's decisions are not murky, and the fractured opinion in this case left murkiness." Assuming that Lourie plays a role in the en banc deliberations, Wright said that he particularly looks forward to "meaningful input" from Lourie as well as from Judges Pauline Newman and Richard Linn, noting that all three were experienced patent practitioners before joining the court.

Stephen G. Kunin of Oblon, Spivak, McClelland, Maier & Neustadt, Alexandria, Va., was also "encouraged" by the decision. "It represents an opportunity for judges who share Judge Rader's views that the PTO rulemaking in toto was prohibitively substantive and in many respects in contravention of statutory and judge-made law to weigh in on this critically important determination of the scope and extent of permissible PTO rulemaking authority," Kunin told BNA.

"While the rules in many respects appear to be procedural in nature, their effect on the rights of applicants and patentees is far from de minimus," he added.

Courtenay C. Brinckerhoff of Foley & Lardner, Washington, D.C., said she was "cautiously optimistic," but added, "I don't think we should be celebrating in the streets at this point." She recalled being optimistic in the wake of the oral arguments before the Federal Circuit panel, and was "so disappointed" by the panel decision that she is now "reluctant to read too much into the tea leaves."

In fact, she noted that there is some concern in the patent community that, "given some of the judges' experience with the Administrative Procedure Act, a rehearing could give even more deference to the PTO. That would be pretty disastrous in my view."

Brinckerhoff said that practitioners should "make decisions that fit the current rule structure with the patent applications at hand," and otherwise just "stay tuned." Because of the decline in patent application filings at the PTO, she suggested that the court may be "not in so much of a hurry" to curtail the filing of continuation applications and requests for continued examination, because such constraints would turn off the revenue stream from such filings.

But the PTO's financial troubles should not detract from the real issue in the case, she said, "whether the power of the Patent Office should be reigned in or expanded."

Brinckerhoff's views were echoed in a statement issued by Teresa Stanek Rea, the president of the American Intellectual Property Law Association: "We are happy to see that the en banc Federal Circuit will look at the difficult but important administrative law issues in this case. The case is extremely important as the first significant opportunity to define the scope of the PTO's rulemaking authority.

Reproduced with permission from BNA's Patent,Trademark & Copyright Journal, 78 PTCJ 178 (July 8, 2009).  Copyright 2009 by The Bureau of National Affairs, Inc. (800-372-1033) <>