Tafas v. Doll: Where Is the USPTO Headed?

In what should be a major wake-up call to all patent practitioners and patent applicants, the U.S. Court of Appeals for the Federal Circuit has upheld three out of the four highly contentious rule proposals that were proffered by the U.S. Patent and Trademark Office (“USPTO”) in 2007. Although the ultimate consequences of the Federal Circuit's decision are not yet certain (because of the possibility of an en banc rehearing, appeal, or favorable decision from the district court on the various issues that were remanded to it), this Federal Circuit decision should raise the concern of patent applicants and anyone prosecuting patent applications before the USPTO.

The rule changes that were the subject of this Federal Circuit decision are part of what has appeared to be a systematic attempt by the USPTO to “reform” the patent system by using its unilateral “procedural” rule-making authority. At the very least, the Federal Circuit decision will provide the USPTO with ammunition, if it chooses to use it, to try to impose its controversial plans on patent practitioners and applicants alike.

The USPTO Rules and the Tafas Decision

On March 20, 2009, a divided Federal Circuit panel in Tafas v. Doll (2009 U.S. App. LEXIS 5806 (Fed. Cir. March 20, 2009)) (“Tafas“) upheld three out of four landscape-changing rules that were promulgated by the USPTO in 2007 (“Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications” 72 Fed. Reg. 46716 (Aug. 21, 2007)).

The four challenged rules related to the ability of patent applicants to employ any of several widely used schemes for strategic patent prosecution. The four rules would limit the ability of a patent applicant, as of right, to: 1) file multiple continuing applications; 2) file multiple Requests for Continued Examination (“RCE”); and 3) present more than a specified number of claims in one patent application or, collectively, a family of related applications. The specified number of claims proposed by the USPTO (25 total and/or five independent claims) is low enough to be of concern for many patent applicants.

Although the proposed rules provided that an applicant could exceed limits on the number of continuing applications or RCEs by making a sufficient showing, USPTO commentary accompanying the proposed rules suggested that it would be very difficult to make such a showing. Note that the Federal Circuit claimed that the USPTO commentary was not binding on the courts, “which will be free to entertain challenges to the USPTO's application of the Final Rules, including its view on when amendments, arguments, and evidence could not have been submitted earlier, under the standard set forth in 5 U.S.C. '706.”

The rules were first proposed by the USPTO in January 2006, finalized in August 2007, and were scheduled to take effect on Nov. 1, 2007. As many readers may recall, patent applicants and practitioners alike prepared frantically over the two months between announcement of the new rules and their scheduled effective date to understand the complexities and effects of these new rules and, where possible, to file or amend patent applications to avoid the consequences of the new rules.

One day before the rules were to take effect, the U.S. District Court for the Eastern District of Virginia granted a motion, brought by plaintiffs Triantafyllos Tafas and Glaxo-
SmithKline, for a temporary injunction preventing the USPTO from instituting the new rules. Thereafter, in 2008, the district court granted the plaintiffs' motion for summary judgment, and held that the rules were invalid as being substantive in nature, and therefore beyond the scope of the USPTO's procedural rule-making authority. The district court permanently enjoined the USPTO from implementing the rules, allaying concerns of most patent practitioners that the new rules would complicate and increase the costs of patent prosecution, and hinder patent applicants from efficiently protecting their valuable inventions. However, the USPTO, rather than abandon the rules and offer a more balanced proposal to improve patent prosecution, elected to appeal the district court's decision to the Federal Circuit and to assert the USPTO's right to autonomously promulgate rules that relate to prosecution, even though many patent applicants consider them a substantial detriment to the patent application process.

Based in part on precedent of the U.S. Court of Appeals for the District of Columbia, the Federal Circuit determined that the challenged rules were procedural in nature ' not substantive, as the district court had held. Because it considered the challenged rules procedural, the Federal Circuit held that those rules were within the scope of the USPTO's rule-making authority, and so were entitled to Chevron deference when determining whether those rules were consistent with the intent of the corresponding portions of the patent statute. Chevron deference refers to a policy wherein the interpretation of an administrative agency regarding an applicable, though ambiguous, statute is controlling, articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

Having determined that the four challenged rules were entitled to Chevron deference, the Federal Circuit: 1) upheld the district court's invalidation of the USPTO's proposed rule (37 C.F.R. '1.78) that would limit the number of continuing applications that an applicant could file, as of right, on grounds that the proposed rule was inconsistent with 35 U.S.C. '120; 2) reversed the district court's invalidation of the USPTO's proposed rule (37 C.F.R. '1.114) that would limit the number of RCEs that an applicant could file, as of right, on grounds that, based on the USPTO being accorded Chevron deference in promulgating the rule, the proposed rule was not inconsistent with 35 U.S.C. '132; and 3) reversed the district court's invalidation of the USPTO's proposed rules (37 C.F.R. ”1.75 and 1.265) that required an applicant who submitted more than a specified number of independent claims and/or total claims in one application or a family of related applications to provide the Examiner with an Examination Support Document containing the results of a comprehensive prior art search and applying those results to the claims on the grounds that this would not be inconsistent with 35 U.S.C. '112. With regard to the requirement to submit an Examination Support Document, many have contended that this improperly imposes the USPTO's examining responsibility on the applicant.

Although these reversals did not consider that the rules would impose changes for patent practitioners and applicants, in a forceful dissent (which may lay the groundwork for an en banc rehearing), Judge Randall Ray Rader validated many of the concerns voiced by patent practitioners since the rules were made public.

The Federal Circuit's affirmance of the district court's invalidation of the proposed rule that would have limited the availability of continuing applications is helpful for patent applicants. However, the reversal of the district court's invalidation of proposed Rules 1.75, 1.114, and 1.265 could seriously limit the ability of applicants to protect their inventions. Approaching the Tafas decision from a broader perspective, the Federal Circuit's determination that the proposed rules, in general, are procedural and not substantive, will clearly trouble those who believe that there is an increasing trend in USPTO rule-making toward burdening applicants with new practices and procedures.

Although many hope that the three remaining rules will be invalidated or diminished through an en banc rehearing, appeal, or through other means while on remand to the district court, the broader effects of this decision, unless it is overturned or blunted in pertinent ways, are substantial. The Federal Circuit's reasoning that the USPTO's proposed rules were procedural in nature, and so entitled to Chevron deference, may embolden the USPTO to develop additional rules ' something that the USPTO already has begun doing.

Additional New Rules

As part of the “2007-2012 Strategic Plan” the USPTO has stated that its “number one” objective for the coming years is to “provide high quality examination of patent applications” by inter alia attempting to “explore examination reform through the rule making process to create better focused examination and enhance information exchange between applicant and examiner.” (p. 16) The USPTO has pursued this stated initiative on various fronts since 2007, including the passing of the rules that are the subject of the Tafas decision.

Aside from the rules related to continuations, RCEs, and limiting the number of claims at issue in Tafas, the USPTO has proposed additional rules, none of which has yet been implemented. These proposals affect: 1) practice before the Board of Patent Appeals and Interferences (“Rules of Practice Before the Board of Patent Appeals and Interferences in Ex Parte Appeals” 73 Fed. Reg. 32938), 2) an applicant's ability to employ alternative claim language and Markush claims (“Examination of Patent Applications That Include Claims Containing Alternative Language” 72 Fed. Reg. 44992 (Aug. 10, 2007)); and 3) the way relevant prior art is disclosed to the patent office (“Changes to Information Disclosure Statement Requirements and Other Related Matters” 71 Fed. Reg. 38808 (July 10, 2006)). Although these rule changes run the entire gamut of patent prosecution and their merit (or lack thereof) is beyond the scope of this work, suffice it to say that if they are instituted, they will have a significant effect on patent prosecution.

Each of these proposed rule sets has been put on hold for the time being by the USPTO, but can be revived at any time. It could be that the USPTO has been cautiously awaiting a decision in the Tafas case before enacting any additional final rules that would have similar far-reaching effects, lest such rules become subject to an injunction like the rules disputed in the Tafas case. Because of this approach, the Tafas decision portends that the USPTO could become even bolder in instituting these and future rule changes.

It is important to remember that throughout the process of defending these rule changes, the USPTO has taken the position that as long as any rules fall within the scope of 35 U.S.C. '2(b)(2) (or in other words relate to the conduct of proceeding in the Patent Office) the rules do not exceed the USPTO's rule-making authority. While the Federal Circuit decision has somewhat limited that broader argument, the Federal Circuit's decision to apply Chevron deference to the USPTO's rules has opened the door to allowing the USPTO to promulgate additional rules with less fear of them being enjoined or overturned.

Conclusion

Although the long-term effect of the Tafas decision will not become known for some time, patent practitioners and applicants should be very wary of the message that was relayed to the USPTO by the Federal Circuit. There are legitimate concerns that this decision may bolster the USPTO's plans to rework the patent system through its newly empowered rule-making authority in a manner that may detrimentally change the practice of patent law and the ability to effectively prosecute, enforce, and monetize patents for many years to come.

Jeffrey M. Mann ([email protected]) is an associate in the Intellectual Property Practice Group of Stroock & Stroock & Lavan LLP in New York City. David L. Schaeffer is an attorney based in the New York City area.

In what should be a major wake-up call to all patent practitioners and patent applicants, the U.S. Court of Appeals for the Federal Circuit has upheld three out of the four highly contentious rule proposals that were proffered by the U.S. Patent and Trademark Office (“USPTO”) in 2007. Although the ultimate consequences of the Federal Circuit's decision are not yet certain (because of the possibility of an en banc rehearing, appeal, or favorable decision from the district court on the various issues that were remanded to it), this Federal Circuit decision should raise the concern of patent applicants and anyone prosecuting patent applications before the USPTO.

The rule changes that were the subject of this Federal Circuit decision are part of what has appeared to be a systematic attempt by the USPTO to “reform” the patent system by using its unilateral “procedural” rule-making authority. At the very least, the Federal Circuit decision will provide the USPTO with ammunition, if it chooses to use it, to try to impose its controversial plans on patent practitioners and applicants alike.

The USPTO Rules and the Tafas Decision

On March 20, 2009, a divided Federal Circuit panel in Tafas v. Doll (2009 U.S. App. LEXIS 5806 (Fed. Cir. March 20, 2009)) (“Tafas“) upheld three out of four landscape-changing rules that were promulgated by the USPTO in 2007 (“Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications” 72 Fed. Reg. 46716 (Aug. 21, 2007)).

The four challenged rules related to the ability of patent applicants to employ any of several widely used schemes for strategic patent prosecution. The four rules would limit the ability of a patent applicant, as of right, to: 1) file multiple continuing applications; 2) file multiple Requests for Continued Examination (“RCE”); and 3) present more than a specified number of claims in one patent application or, collectively, a family of related applications. The specified number of claims proposed by the USPTO (25 total and/or five independent claims) is low enough to be of concern for many patent applicants.

Although the proposed rules provided that an applicant could exceed limits on the number of continuing applications or RCEs by making a sufficient showing, USPTO commentary accompanying the proposed rules suggested that it would be very difficult to make such a showing. Note that the Federal Circuit claimed that the USPTO commentary was not binding on the courts, “which will be free to entertain challenges to the USPTO's application of the Final Rules, including its view on when amendments, arguments, and evidence could not have been submitted earlier, under the standard set forth in 5 U.S.C. '706.”

The rules were first proposed by the USPTO in January 2006, finalized in August 2007, and were scheduled to take effect on Nov. 1, 2007. As many readers may recall, patent applicants and practitioners alike prepared frantically over the two months between announcement of the new rules and their scheduled effective date to understand the complexities and effects of these new rules and, where possible, to file or amend patent applications to avoid the consequences of the new rules.

One day before the rules were to take effect, the U.S. District Court for the Eastern District of Virginia granted a motion, brought by plaintiffs Triantafyllos Tafas and Glaxo-
SmithKline, for a temporary injunction preventing the USPTO from instituting the new rules. Thereafter, in 2008, the district court granted the plaintiffs' motion for summary judgment, and held that the rules were invalid as being substantive in nature, and therefore beyond the scope of the USPTO's procedural rule-making authority. The district court permanently enjoined the USPTO from implementing the rules, allaying concerns of most patent practitioners that the new rules would complicate and increase the costs of patent prosecution, and hinder patent applicants from efficiently protecting their valuable inventions. However, the USPTO, rather than abandon the rules and offer a more balanced proposal to improve patent prosecution, elected to appeal the district court's decision to the Federal Circuit and to assert the USPTO's right to autonomously promulgate rules that relate to prosecution, even though many patent applicants consider them a substantial detriment to the patent application process.

Based in part on precedent of the U.S. Court of Appeals for the District of Columbia, the Federal Circuit determined that the challenged rules were procedural in nature ' not substantive, as the district court had held. Because it considered the challenged rules procedural, the Federal Circuit held that those rules were within the scope of the USPTO's rule-making authority, and so were entitled to Chevron deference when determining whether those rules were consistent with the intent of the corresponding portions of the patent statute. Chevron deference refers to a policy wherein the interpretation of an administrative agency regarding an applicable, though ambiguous, statute is controlling, articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837 (1984).

Having determined that the four challenged rules were entitled to Chevron deference, the Federal Circuit: 1) upheld the district court's invalidation of the USPTO's proposed rule (37 C.F.R. '1.78) that would limit the number of continuing applications that an applicant could file, as of right, on grounds that the proposed rule was inconsistent with 35 U.S.C. '120; 2) reversed the district court's invalidation of the USPTO's proposed rule (37 C.F.R. '1.114) that would limit the number of RCEs that an applicant could file, as of right, on grounds that, based on the USPTO being accorded Chevron deference in promulgating the rule, the proposed rule was not inconsistent with 35 U.S.C. '132; and 3) reversed the district court's invalidation of the USPTO's proposed rules (37 C.F.R. ”1.75 and 1.265) that required an applicant who submitted more than a specified number of independent claims and/or total claims in one application or a family of related applications to provide the Examiner with an Examination Support Document containing the results of a comprehensive prior art search and applying those results to the claims on the grounds that this would not be inconsistent with 35 U.S.C. '112. With regard to the requirement to submit an Examination Support Document, many have contended that this improperly imposes the USPTO's examining responsibility on the applicant.

Although these reversals did not consider that the rules would impose changes for patent practitioners and applicants, in a forceful dissent (which may lay the groundwork for an en banc rehearing), Judge Randall Ray Rader validated many of the concerns voiced by patent practitioners since the rules were made public.

The Federal Circuit's affirmance of the district court's invalidation of the proposed rule that would have limited the availability of continuing applications is helpful for patent applicants. However, the reversal of the district court's invalidation of proposed Rules 1.75, 1.114, and 1.265 could seriously limit the ability of applicants to protect their inventions. Approaching the Tafas decision from a broader perspective, the Federal Circuit's determination that the proposed rules, in general, are procedural and not substantive, will clearly trouble those who believe that there is an increasing trend in USPTO rule-making toward burdening applicants with new practices and procedures.

Although many hope that the three remaining rules will be invalidated or diminished through an en banc rehearing, appeal, or through other means while on remand to the district court, the broader effects of this decision, unless it is overturned or blunted in pertinent ways, are substantial. The Federal Circuit's reasoning that the USPTO's proposed rules were procedural in nature, and so entitled to Chevron deference, may embolden the USPTO to develop additional rules ' something that the USPTO already has begun doing.

Additional New Rules

As part of the “2007-2012 Strategic Plan” the USPTO has stated that its “number one” objective for the coming years is to “provide high quality examination of patent applications” by inter alia attempting to “explore examination reform through the rule making process to create better focused examination and enhance information exchange between applicant and examiner.” (p. 16) The USPTO has pursued this stated initiative on various fronts since 2007, including the passing of the rules that are the subject of the Tafas decision.

Aside from the rules related to continuations, RCEs, and limiting the number of claims at issue in Tafas, the USPTO has proposed additional rules, none of which has yet been implemented. These proposals affect: 1) practice before the Board of Patent Appeals and Interferences (“Rules of Practice Before the Board of Patent Appeals and Interferences in Ex Parte Appeals” 73 Fed. Reg. 32938), 2) an applicant's ability to employ alternative claim language and Markush claims (“Examination of Patent Applications That Include Claims Containing Alternative Language” 72 Fed. Reg. 44992 (Aug. 10, 2007)); and 3) the way relevant prior art is disclosed to the patent office (“Changes to Information Disclosure Statement Requirements and Other Related Matters” 71 Fed. Reg. 38808 (July 10, 2006)). Although these rule changes run the entire gamut of patent prosecution and their merit (or lack thereof) is beyond the scope of this work, suffice it to say that if they are instituted, they will have a significant effect on patent prosecution.

Each of these proposed rule sets has been put on hold for the time being by the USPTO, but can be revived at any time. It could be that the USPTO has been cautiously awaiting a decision in the Tafas case before enacting any additional final rules that would have similar far-reaching effects, lest such rules become subject to an injunction like the rules disputed in the Tafas case. Because of this approach, the Tafas decision portends that the USPTO could become even bolder in instituting these and future rule changes.

It is important to remember that throughout the process of defending these rule changes, the USPTO has taken the position that as long as any rules fall within the scope of 35 U.S.C. '2(b)(2) (or in other words relate to the conduct of proceeding in the Patent Office) the rules do not exceed the USPTO's rule-making authority. While the Federal Circuit decision has somewhat limited that broader argument, the Federal Circuit's decision to apply Chevron deference to the USPTO's rules has opened the door to allowing the USPTO to promulgate additional rules with less fear of them being enjoined or overturned.

Conclusion

Although the long-term effect of the Tafas decision will not become known for some time, patent practitioners and applicants should be very wary of the message that was relayed to the USPTO by the Federal Circuit. There are legitimate concerns that this decision may bolster the USPTO's plans to rework the patent system through its newly empowered rule-making authority in a manner that may detrimentally change the practice of patent law and the ability to effectively prosecute, enforce, and monetize patents for many years to come.

Jeffrey M. Mann ([email protected]) is an associate in the Intellectual Property Practice Group of Stroock & Stroock & Lavan LLP in New York City. David L. Schaeffer is an attorney based in the New York City area.