By Kevin E. Noonan --
Judge James C. Cacheris, Senior Judge sitting in the U.S. District Court for the Eastern District of Virginia, delivered what is perhaps the most significant ruling in U.S. patent law this year (and this includes the Supreme Court's KSR Int'l Co. v. Teleflex, Inc. opinion). He granted GlaxoSmithKline's (GSK) motion for temporary restraining order (TRO) and preliminary injunction (PI) to prevent the U.S. Patent and Trademark Office from implementing its new continuation and claims rules entitled "Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably-indistinct Claims and Examination of Claims in Patent Applications; Final Rule" (New Rules). The New Rules were set to be implemented tomorrow, November 1st, and the notice on the Patent Office website remained up until well after close of business today (see "USPTO Late to Its Own Party").
The New Rules were opposed in separate lawsuits filed by GSK and earlier by Triantafyllos Tafas, a sole inventor, and supported by amicus curiae briefs from the American Intellectual Property Lawyers Association (AIPLA) (see "AIPLA Supports GSK's Lawsuit Against the Patent Office's New Rules"); Elan Pharmaceutical Corp.; HEXAS, LLC, The Roskamp Institute, and Tikvah Therapeutics, Inc.; the pharmaceutical manufacturer's trade organization (PhRMA); the Biotechnology Industry Organization (BIO); as well as a letter from Senator Charles Schumer of New York asking Jon Dudas, Undersecretary of Commerce and Director of the Patent and Trademark Office, to delay implementation of the New Rules (see "Senator Schumer Sends a Signal"). GSK's motion was further supported by declarations from Harry F. Manbeck, Jr., Commissioner of Patents during the first Bush Administration (see "GSK Brings Out the Big Guns Opposing the New Continuation and Claims Rules"); Bert Magen of the Vierra Magen lawfirm; David J. Kappos, Vice President and Assistant General Counsel, Intellectual Property Law, IBM (an early corporate supporter of the New Rules); Joseph F. Hetz of the Brinks Hofer law firm; and Samson Helfgott, a patent attorney formerly employed by the General Electric Co. These declarants and amici were uniformly opposed to the New Rules, a fact that the Court found important in its determination.
In a thorough and well-reasoned opinion (especially in view of the compressed time frame that saw parties filing briefs as late as yesterday), the Court made some preliminary findings that formed the basis for its decision. Most important of these is that the Court was persuaded, over vigorous albeit contradictory assertions from Patent Office counsel, that the Office's implementing statute, 35 U.S.C. § 2(b)(2)(A), did not grant the Office substantive rulemaking authority. Particularly persuasive for the Court was the evidence, adduced by GSK, that Congress had included provisions granting the Office just such substantive rulemaking authority in patent "reform" legislation introduced in 2005, and included in legislation recently passed by the House of Representatives (H.R. 1908) (see "Patent 'Reform' Bill Passes House of Representatives"). Not unreasonably, the Court concluded that Congress would not be trying to grant the Patent Office authority it already had.
The Court also voiced "serious concerns" that the New Rules are contrary to the Patent Act, citing In re Henricksen which held that the Patent Office did not have the power to restrict an applicant from filing a continuation application under 35 U.S.C. § 120. In this regard, the Court was unpersuaded by the Patent Office's reliance on In re Bogese, which dealt with prosecution laches. The Court cited in particular dicta from the Federal Circuit in Symbol Technologies Inc. v. Lemelson Med. Educ. & Research Found. that prosecution laches should be used sparingly lest it "vitiate" applicant's rights contained in § 120.
The Court applied the law of the Federal Circuit in deciding GSK's TRO/PI motion, although it noted in a footnote that 4th Circuit law was substantially the same. The Court applied the familiar test for deciding such a motion:
- The likelihood that GSK would prevail on the merits;
- Whether GSK would suffer irreparable harm if the New Rules were implemented;
- The balance of the hardships between the parties; and
- The public interest.
With regard to the question of the likelihood that GSK would prevail on the merits, the Court found that GSK had demonstrated a likelihood of success that:
- The New Rules exceed the Patent Office's statutory authority;
- The New Rules are contrary to the Patent Act;
- Application of the New Rules to pending applications implicates the prohibition on retroactive application of agency regulations; and
- The standards for submitting an examination support document are impermissively vague.
The Court found that neither party demonstrated a likelihood of success on the questions of whether the limitations of requests for continuing examination (RCEs) were contrary to 35 U.S.C. § 132; or that the Patent Office was entitled to Chevron deference with regard to the claims limitations rules. The Court also held that the Patent Office had demonstrated that promulgation of the New Rules was not arbitrary and capricious, mostly on the basis of Patent Office computer modeling showing that the New Rules would have an impact on the backlog despite the Office's admission that only 2.7% of pending applications (11,000) would be impacted by the New Rules.
The Court also found that GSK had shown sufficient evidence of irreparable harm, despite the Patent Office's argument that GSK had not provided evidence of any particular patent that would be negatively affected. The Court found the harm to be in the uncertainty that the New Rules would create, and the negative impact on investment that would follow from such uncertainty.
On the question of the balance of the harm, the Patent Office asserted that it would cost "millions" to reconfigure its computer network and to re-train examiners (asserting that the examiner corps could not be relied upon to remember its training on the New Rules should implementation be delayed). GSK responded, and the Court agreed, that the costs in question were "sunk" costs, already incurred for implementing rules the Office knew might not go into effect. The Court found that while the costs and harm to the Patent Office were not "nonexistent," the harm to GSK due to "uncertainty and loss of investment suffered immediately" by GSK was the deciding factor in finding this prong of the test in GSK's favor.
Finally, the public interest question pitted the Patent Office's general (and generic) assertion that the public interest was best served by a efficient and timely patenting process against not only GSK's assertions, but the evidence from the amici and declarants that a significant portion of the relevant public did not believe that its interests would be served by implementation of the New Rules. Patent Office statements regarding the importance of certainty in the patenting process were countered by GSK's assertions of the need for investor certainty that a technology-dependent company like GSK would be able to protect its technology with patents. The Court was evidently convinced by the argument that such companies relied on the current patent system to protect their interests, and that the changes proposed by the Office "changes those companies' calculus and immediately decreases their ability to pursue costly new innovations." The Court also noted the harm to the public in permitting the New Rules to be implemented while the Court was considering GSK's complaint on the merits, in view of the irrevocable decisions some applicants would have to make under rules that could be later overturned.
Despite its statements on likelihoods, the Court did not address the merits of the parties' positions, and so this decision merely (and thankfully) preserves the status quo. Before GSK filed its complaint and its case was consolidated with the Tafas action, the Patent Office and Dr. Tafas had agreed on an accelerated briefing schedule for summary judgment motions in exchange for Dr. Tafas withdrawing his request for preliminary injunction. In view of the Court's decision today, this agreement has been terminated, and the Court asked the parties to submit a briefing schedule in the near future. Accordingly, the Court's determination on the merits of whether and to what extent the New Rules will ever be implemented has been delayed indefinitely. For most patent prosecutors, however, the important thing is that the New Rules will not go into effect tomorrow.
For additional information on this topic, please see:
- "USPTO Late to Its Own Party," October 31, 2007
- "GSK Secures Injunction," October 31, 2007 (includes links to Court's Order and Opinion)
- "Senator Schumer Sends a Signal," October 30, 2007
- "GSK TRO/Preliminary Injunction Hearing," October 29, 2007
- "AIPLA Supports GSK's Lawsuit Against the Patent Office's New Rules," October 25, 2007
- "GSK Brings Out the Big Guns Opposing the New Continuation and Claims Rules," October 24, 2007
- "Hooray! - (Finally) the Big Dogs Have Joined the Hunt," October 11, 2007
- "Rules Challenger Amends Complaint and Withdraws PI Motion," September 11, 2007
- "Inventor Sues PTO to Prevent New Continuation and Claims Rules from Taking Effect," August 30, 2007