IP News

Complied by Hany Rizkalla

PTO Preliminarily Enjoined from Implementing Final Rules

In SmithKline Beecham Corp. v. Dudas (consolidated with Tafas v. Dudas), No. 1:07-cv-1008-JCC (No. 1:07-cv-846-JCC), (E.D. Va. 2007), the District Court for the Eastern District of Virginia granted plaintiffs SmithKline Beecham Corporation and Glaxo Group Limited's ('GSK') Motion for a Temporary Restraining Order and Preliminary Injunction, preventing the U.S. Patent and Trademark Office ('PTO') from implementing its proposed new rules governing continuing applications and claims.

Months after proposing changes to its rules that would limit the number of continuing applications, requests for continued examinations ('RCE'), and claims that an applicant could make, and after receiving many negative comments opposing these changes during the public comment period, the PTO on Aug. 21, 2007 published the Final Rules, titled 'Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications.' Among the many modifications made by the Final Rules, which were set to take effect on Nov. 1, 2007, were limiting an applicant to two continuation or continuation-in-part applications, plus one RCE, after an initial application, as a matter of right. Any further prosecution must be filed with a 'petition and showing' that explains why this evidence could not have been previously presented. In addition, an application was limited to a total of five independent claims and 25 total claims. To exceed either of these limitations, an applicant would have to provide an 'examination support document' ('ESD') to assist the examiner in determining patentability of the claimed invention. Finally, the Final Rules applied not only to applications filed on or after Nov. 1, 2007, but also to all pending applications for which a first Office Action on the merits was not mailed before Nov. 1, 2007.

Triantafyllos Tafas, a sole inventor, initially opposed the Final Rules. He was later joined by GSK, which moved for a TRO and preliminary injunction, to enjoin the implementation of the Final Rules. In addressing GSK's motion, the district court applied the law of the Federal Circuit with respect to the issuance of a preliminary injunction. The four factors considered by the court were: 1) the likelihood of GSK's success on the merits; 2) irreparable harm if the injunction is not granted; 3) the balance of hardships between the parties; and 4) the public interest.

In addressing GSK's likelihood of success on the merits, the court first focused on whether the PTO had the authority to promulgate substantive rules. While noting that 35 U.S.C. '2(b)(2) empowered the PTO to 'set reasonable deadlines and requirements for the prosecution of applications,' the court held that it did not, however, vest the PTO with any general substantive rulemaking power. That finding, coupled with the fact that Congress has previously considered whether it should grant the PTO substantive rulemaking authority, created a 'colorable question as to whether the Final Rules are truly substantive.' The court ultimately concluded that GSK is likely to succeed on this issue. The court further concluded that GSK demonstrated a likelihood of success on the issue that a Final Rule limiting the number of continuing applications would run contrary to the mandate of 35 U.S.C. '120. Regarding the alleged retroactive application of the Final Rules, the court reasoned that since Congress did not expressly grant the PTO the power to promulgate retroactive rules and since any such rule would 'alter the bargain on which inventors like GSK rely in making their decision to surrender their rights,' the court found that GSK has demonstrated a real likelihood of success on this issue as well. On the issue of whether the requirements of an ESD are unconstitutionally vague, the court found that GSK had demonstrated a likelihood of success on this issue and held that there are serious concerns 'as to whether a reasonably prudent person would be able to comply with the ESD requirements.' Finally, with respect to the Final Rule restricting the number of claims or RCEs, the court held that neither party can claim a strong likelihood of success on those issues. Thus, after weighing all of the above issues, the court found that the likelihood of success on the merits factor weighs in favor of GSK.

In analyzing the irreparable harm to GSK if the injunction is not granted, the court noted that while GSK failed to state an exact amount of monetary loss if it had to comply with the Final Rules, 'the uncertainty caused by the regulations will cause harm to [GSK's] investments and provide a disincentive to their filing of new patent applications for researching new pharmaceutical products.' Further, the court remarked that GSK would be unable to recover its losses if the Final Rules are ultimately invalidated, and found that GSK is likely to suffer irreparable harm if the preliminary injunction is not granted. As to the remaining two factors, the court found that the uncertainty and loss suffered by GSK tilts the balance of hardships in its favor and that the public interest is most served by continuing the status quo. Thus, after considering the four factors, the court granted both the TRO and the motion for a preliminary injunction.

Hany Rizkalla, Ph.D. is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6105.

Complied by Hany Rizkalla

PTO Preliminarily Enjoined from Implementing Final Rules

In SmithKline Beecham Corp. v. Dudas (consolidated with Tafas v. Dudas), No. 1:07-cv-1008-JCC (No. 1:07-cv-846-JCC), (E.D. Va. 2007), the District Court for the Eastern District of Virginia granted plaintiffs SmithKline Beecham Corporation and Glaxo Group Limited's ('GSK') Motion for a Temporary Restraining Order and Preliminary Injunction, preventing the U.S. Patent and Trademark Office ('PTO') from implementing its proposed new rules governing continuing applications and claims.

Months after proposing changes to its rules that would limit the number of continuing applications, requests for continued examinations ('RCE'), and claims that an applicant could make, and after receiving many negative comments opposing these changes during the public comment period, the PTO on Aug. 21, 2007 published the Final Rules, titled 'Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications.' Among the many modifications made by the Final Rules, which were set to take effect on Nov. 1, 2007, were limiting an applicant to two continuation or continuation-in-part applications, plus one RCE, after an initial application, as a matter of right. Any further prosecution must be filed with a 'petition and showing' that explains why this evidence could not have been previously presented. In addition, an application was limited to a total of five independent claims and 25 total claims. To exceed either of these limitations, an applicant would have to provide an 'examination support document' ('ESD') to assist the examiner in determining patentability of the claimed invention. Finally, the Final Rules applied not only to applications filed on or after Nov. 1, 2007, but also to all pending applications for which a first Office Action on the merits was not mailed before Nov. 1, 2007.

Triantafyllos Tafas, a sole inventor, initially opposed the Final Rules. He was later joined by GSK, which moved for a TRO and preliminary injunction, to enjoin the implementation of the Final Rules. In addressing GSK's motion, the district court applied the law of the Federal Circuit with respect to the issuance of a preliminary injunction. The four factors considered by the court were: 1) the likelihood of GSK's success on the merits; 2) irreparable harm if the injunction is not granted; 3) the balance of hardships between the parties; and 4) the public interest.

In addressing GSK's likelihood of success on the merits, the court first focused on whether the PTO had the authority to promulgate substantive rules. While noting that 35 U.S.C. '2(b)(2) empowered the PTO to 'set reasonable deadlines and requirements for the prosecution of applications,' the court held that it did not, however, vest the PTO with any general substantive rulemaking power. That finding, coupled with the fact that Congress has previously considered whether it should grant the PTO substantive rulemaking authority, created a 'colorable question as to whether the Final Rules are truly substantive.' The court ultimately concluded that GSK is likely to succeed on this issue. The court further concluded that GSK demonstrated a likelihood of success on the issue that a Final Rule limiting the number of continuing applications would run contrary to the mandate of 35 U.S.C. '120. Regarding the alleged retroactive application of the Final Rules, the court reasoned that since Congress did not expressly grant the PTO the power to promulgate retroactive rules and since any such rule would 'alter the bargain on which inventors like GSK rely in making their decision to surrender their rights,' the court found that GSK has demonstrated a real likelihood of success on this issue as well. On the issue of whether the requirements of an ESD are unconstitutionally vague, the court found that GSK had demonstrated a likelihood of success on this issue and held that there are serious concerns 'as to whether a reasonably prudent person would be able to comply with the ESD requirements.' Finally, with respect to the Final Rule restricting the number of claims or RCEs, the court held that neither party can claim a strong likelihood of success on those issues. Thus, after weighing all of the above issues, the court found that the likelihood of success on the merits factor weighs in favor of GSK.

In analyzing the irreparable harm to GSK if the injunction is not granted, the court noted that while GSK failed to state an exact amount of monetary loss if it had to comply with the Final Rules, 'the uncertainty caused by the regulations will cause harm to [GSK's] investments and provide a disincentive to their filing of new patent applications for researching new pharmaceutical products.' Further, the court remarked that GSK would be unable to recover its losses if the Final Rules are ultimately invalidated, and found that GSK is likely to suffer irreparable harm if the preliminary injunction is not granted. As to the remaining two factors, the court found that the uncertainty and loss suffered by GSK tilts the balance of hardships in its favor and that the public interest is most served by continuing the status quo. Thus, after considering the four factors, the court granted both the TRO and the motion for a preliminary injunction.

Hany Rizkalla, Ph.D. is an associate in the New York office of Kenyon & Kenyon LLP. He can be reached at 212-908-6105.