PLI's John White Discusses Tafas/GSK v. Dudas

    By Kevin E. Noonan --

John White (at right) of the PLI Patent Blog came to visit some of the Patent Docs today, and he had more to say about the summary judgment hearing in Tafas/GSK v. Dudas held last Friday in the Eastern District of Virginia before Judge James C. Cacheris.  Readers will recall that Judge Cacheris granted Tafas/GSK’s preliminary injunction motion last October that prevented the November 1st enactment of the U.S. Patent and Trademark Office’s misguided and ill-conceived “new rules” limiting the number of claims and continuation applications an applicant can file.

Although Judge Cacheris took the unusual step (in the Eastern District of Virginia) of taking the matter under advisement, John thinks we should see a decision in about a week or so.  And while unwilling to say the Court’s decision will be a “slam dunk,” he reported getting the feeling that Judge Cacheris was inclined to stick to his original determination that the rules should not be implemented (while admitting that there was never a great deal of profit to be made by judicial tealeaf reading).

The hearing was held in the ceremonial courtroom in the Eastern District courthouse, its largest, and it was packed with about 100 people.  John summarized the arguments for both sides from his notes taken during the hearing.  GSK first argued that the PTO actions were outside the scope of its authority under 35 U.S.C. § 2(b)(2), being of a substantive nature and not merely procedural.  Second, GSK argued that even if the PTO had the statutory authority to promulgate the “new rules,” they were contrary to 35 U.S.C. § 120, which by its plain meaning contains no limitations on the number of continuing applications an applicant may file.  Responding to questioning from the Court (which was a very “hot” bench, a characteristic of this court) regarding the arbitrary and capricious standard for overturning agency actions, GSK responded that the PTO’s actions met the standard, by being outside the scope of the Office’s authority and for ignoring the (overwhelmingly negative) comments submitted during the notice and comment period.  GSK also argued that the ultra vires nature of the PTO’s rulemaking made it entitled to no deference under the Supreme Court’s Chevron standard for judicial review of agency rulemaking.  GSK also argued that, with regard to examination support documents (ESDs), the PTO had failed to satisfy the procedural requirements for obtaining approval of the rules by the Office of Management and Budget (OMB) by understating the economic impact of the rules (actually, according to the PTO, ESDs would have no economic impact).  Finally, in a point that John believed the Court seemed to appreciate, GSK argued that the rules constituted an unconstitutional taking of a property right since patent applicants like GSK had disclosed valuable trade secrets under the rules in force at the time their applications were filed, and the Office was substantially changing the rules retroactively in ways that would irrevocably diminish applicants’ ability to protect their intellectual property.

The government set forth contrary positions in arguments by Department of Justice lawyer Lauren Wetzler and PTO lawyer Steven Walsh.  Counsel Wetzler was in the unenviable position of arguing the intricacies of patent law and PTO rules of practice, and made a few gaffes, the most egregious of which was stating that GSK’s trade secret argument was specious because the PTO didn’t disclose (publish) pending applications (John reports audible muttering in the courtroom at this statement).  She also argued that patent applications are not property, citing cases that were 100 years old and generally ignoring CAFC precedent to the contrary.

Counsel Walsh’s arguments, according to John, actually seemed to help GSK.  His main argument was that the application of § 120 had changed in recent years; in the past, his argument went, applicants had not filed the interwoven and excessive amount of related applications they now do, and the rules were necessary (and intended) to stop this practice.  Of course, this argument went directly to GSK’s point that the rules were an attempt to effect a substantive change in the law outside the scope of PTO’s authority. Counsel Walsh also argued that keeping a continuation application pending during the term of a granted patent was contrary to the reissue statute, an argument GSK countered by contending that any such inconsistency should be corrected by statute, not by PTO rulemaking.

Counsel for the other plaintiff in the case, Dr. Triantafyllos Tafas, was not a potted plant at the hearing, and John credited him with raising at least two good points during argument.  First, Dr. Tafas' Counsel argued that the PTO rules were a fundamental change in how Office policies were considered.  By promulgating the rules, the Office was asserting an authority to interpret the law, not merely implement it.  Dr. Tafas' Counsel referenced the conventional disclaimer by the Office that its guidelines, and the M.P.E.P., did not have the force of law but were merely an explication of how Office policies were intended to apply the law as interpreted by the Federal Circuit and Supreme Court.  These rules were different, in that the Office was asserting the authority to interpret the scope and extent of the continuation right.  He also argued that the Court should consider all applicants, not merely those like GSK with the economic wherewithal to absorb the increased costs that would be occasioned by the ESD and application cross-disclosure rules.  Dr. Tafas' Counsel also asked the Court to consider the amici’s arguments, a request the government contended the Court should ignore (purportedly because it represented an effort to supplement Dr. Tafas’ arguments outside the scope of his brief).  The Court’s colloquy that it needed to consider “all these arguments” as a reason for taking the case under advisement suggests it will in fact consider the amici in reaching its decision.

In response to a question, John also related an interesting fact that has gone relatively unnoticed.  After years of bemoaning Patent Office fee diversion, over the past few years the Office has received 100% of its budgetary allotment.  Indeed, the PTO budget has doubled in the past four years, no doubt making it an exception to every other department except Defense in getting additional federal money.  (The Senate Judiciary Committee asserted as much in its draft report on the Senate patent reform bill when commenting on provisions to put an "end" fee diversion.)  Despite this budgetary support, the Office has not been able to stem the tide of a growing backlog.  The rules can be seen as a bureaucratic response to this fact, since it seems to be easier to try to reduce the number of applications being filed than to properly address the management problems that now can be seen to be at the root of the Office’s inability to efficiently examine the mountain of pending applications.  As has been posited by Patent Docs in the past, the Office would probably be just as happy to take the “oldest” 250,000 applications and put them on a bonfire in the PTO courtyard as to implement the rules.  The point is to reduce the backlog, not make the fundamental changes (like increasing the number of hours examiners have for examining each application) that would bring cases to resolution rather than keep them on the continuation/RCE treadmill.

John also confirmed a suspicion Patent Docs has been having during the rules contretemps, that the intransigence of PTO management is a bureaucratic rather than a political phenomenon.  Although the Office’s “our way or the highway” attitude and demonization of both its “customers” and patent counsel is in keeping with at least the rhetoric coming from the current administration in other areas, the political appointees -- Jon Dudas, paradoxically -- are much less invested in having these rules, and their brethren the IDS and alternative claim language rules, put into practice.  John speculated that, should Judge Cacheris rule against the PTO and the case go to the Federal Circuit, and should that Court not render a decision until the summer, the new rules would be unlikely to go into effect in any event, in deference to the new administration that will be in place next January.  Of all the things he said today, that prospect was the most heartening to those of us who are happy Judge Cacheris granted the October 31st injunction.

For information regarding this topic, please see:

• "Judge Cacheris Takes GSK Case under Advisement," February 8, 2008
• "GSK Summary Judgment Hearing Set for Friday Morning," February 7, 2008
• "New Briefing Deadline Set In PTO Rules Case," December 18, 2007
• "Court Sets Summary Judgment Schedule in New Rules Case," December 3, 2007
• "No Discovery in New Rules Case," November 27, 2007
• "Tafas v. Dudas; SmithKline Beecham Corp. v. Dudas (E.D. Va. 2007)," October 31, 2007
• "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

Comments

[EG]

To John White,

Thanks for the further "exposee" on the hearing Friday. You and Gene Quinn get a "gold star" and I don't hand those out lightly.