Tafas v. Dudas; Smithkline Beecham Corp. v. Dudas (E.D. Va. 2008)
By Donald Zuhn --
Earlier today, Judge James C. Cacheris, Senior Judge sitting in the U.S. District Court for the Eastern District of Virginia, issued his long-awaited and much-anticipated decision
in the consolidated cases of Tafas v. Dudas and Smithkline Beecham Corp. v. Dudas. Finding that "the Final Rules are substantive in nature and exceed the scope of the USPTO’s rulemaking authority under 35 U.S.C. § 2(b)(2)," Judge Cacheris granted Tafas' and GSK's motions for summary judgment and voided the claims and continuation rules (the Final Rules) as "otherwise not in accordance with law" and "in excess of statutory jurisdiction [and] authority," and thus, in contravention of the Administrative Procedure Act (APA).
As most any patent practitioner is well aware, Judge Cacheris issued a preliminary injunction on October 31, 2007, thereby preventing the USPTO from implementing the Final Rules, which had been set to take effect on November 1, 2007 (see Patent Docs report). On February 8, 2008, Judge Cacheris heard the parties' summary judgment arguments, and then announced that due to the mountain of papers filed in the case (the parties' summary judgment, opposition, and reply briefs alone -- excluding exhibits -- numbered more than 600 pages), he would be taking the case under advisement and would issue a decision as soon as possible (see "Judge Cacheris Takes GSK Case under Advisement").
Citing Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996), as well as two other Federal Circuit cases that cite Merck, Judge Cacheris determined that "[u]nder Federal Circuit precedent . . . Section 2(b)(2) [of the Patent Act] does not vest the USPTO with any general substantive rulemaking power." In Merck, the Federal Circuit found that the USPTO's broadest rulemaking power "authorizes the Commissioner to promulgate regulations directed only to ‘the conduct of proceedings in the [USPTO]’; it does NOT grant the Commissioner the authority to issue substantive rules." Judge Cacheris also noted that his reading of Section 2(b)(2) was "further supported by the fact that, since 2005, Congress has debated and considered whether it should grant the USPTO substantive rulemaking authority but has declined to do so." Thus, despite the Patent Office's attempts to "abolish the substantive-procedural distinction," the Court determined that the relevant case law was clear: "Section 2(b)(2)'s authority is limited to rules governing the 'conduct of proceedings' before the Office, the USPTO does not have the authority to issue substantive rules, and it does not have the authority to make substantive declarations interpreting the Patent Act."
In response to the Patent Office's argument that even if the Final Rules have "collateral substantive consequences," that does not place the Rules beyond the scope of the USPTO's rulemaking authority," Judge Cacheris stated that "any rule that 'affect[s] individual rights and obligations' is substantive." Determining that the Final Rules were "substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act," the Court found that the Final Rules had more than mere collateral substantive consequences, and in fact "constitute a drastic departure from the terms of the Patent Act as they are presently understood."
Judge Cacheris concluded his opinion by explaining why the cornerstones of the Final Rules -- the 2+1 and 5/25 Rules -- were substantive rules. With respect to rule limiting continuations (i.e., Final Rule 78), the Court stated that:
Though Final Rule 78 does not completely prohibit applicants from filing more than two continuation or continuation-in-part applications, because the USPTO intends to deny additional applications in almost all circumstances . . . the "could not have been submitted" standard of the petition and showing requirement effectively imposes a hard limit on additional applications.
Also noting that Final Rule 78 might impact applicants’ rights under Sections 102 and 103 and "result in the denial of otherwise meritorious patents," Judge Cacheris found Final Rule 78 to be substantive.
With respect to the rule limiting RCEs (i.e., Final Rule 114), the Court determined that "limiting RCEs based on application family is a clear departure from the plain language of [35 U.S.C. § 132(a)], which states that the USPTO must provide for the continued examination of each application." Because "Congress intended to allow for an unlimited number of RCEs and intended to commit the invocation of the continued examination process to the discretion of the applicant, not the USPTO," Judge Cacheris also found Final Rule 114 to be substantive.
With respect to the Final Rules creating the 5/25 Claims Rule and corresponding Examination Support Documents (ESDs) (i.e., Final Rules 75 and 265), the Court noted that 35 U.S.C. § 112 "expressly permits an applicant to file 'one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention,'" and further noted that "[s]ince 1938, the CCPA has consistently held that the Patent Act does not place any mechanical limits on the number of claims an applicant may file." According to the Court, the Final Rule creating ESDs does not "cure" the above problem, since the ESD Rule "go[es] far beyond merely requiring additional information," and instead, "changes existing law and alters the rights of applicants under the current statutory scheme by shifting the examination burden away from the USPTO and onto applicants." In support of his finding that the 5/25 and ESD Rules were substantive, Judge Cacheris also noted that the Federal Circuit has stated that applicants have no duty to conduct prior art searches, and that 35 U.S.C. § 131 specifically states that the Patent Office "shall cause an examination to be made of the application."
The USPTO has not yet posted a comment regarding today's decision or whether it intends to appeal the decision to the Federal Circuit. However, Patent Docs readers may recall that the Patent Office waited until almost six hours on October 31st to post a notice regarding the issuance preliminary injunction, even though the Final Rules were set to go into effect on the next day (see "USPTO Late to Its Own Party").
For information regarding this topic, please see:
• "PLI's John White Discusses Tafas/GSK v. Dudas," February 11, 2008
• "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
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