GSK Files Brief in Tafas v. Dudas Appeal

    By Donald Zuhn --

On Wednesday, SmithKline Beecham Corp., SmithKline Beecham plc, and Glaxo Group Ltd. (GSK) filed their brief in the Tafas v. Dudas appeal (see "Brief of Plaintiffs-Appellees GlaxoSmithKline").  As we previously reported, the Plaintiffs-Appellees had until September 24th to serve and file their brief.

Most patent practitioners are no doubt quite familiar with the sequence of events that led to the Patent Office's appeal.  Briefly, GSK and Dr. Triantafyllos Tafas sought to enjoin the Patent Office from enforcing its new continuation and claims rules (Final Rules) package, which was published in August 2007.  The day before the rules package was set to take effect (strangely enough, on Halloween), Judge James C. Cacheris of the Eastern District of Virginia granted GSK's and Dr. Tafas' motions for a temporary restraining order and preliminary injunction.

Last April (this time on April Fool's Day), Judge Cacheris made the injunction permanent, finding that "the [continuation and claims] 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 therefore voided the new rules.  Citing Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996), and two other CAFC cases that cite Merck, Judge Cacheris 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."  Judge Cacheris also determined that the continuation and claims rules were "substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act," and "constitute a drastic departure from the terms of the Patent Act as they are presently understood."  Judge Cacheris concluded his opinion by offering a thorough explanation as to why the cornerstones of the continuation and claims rules -- the 2+1 rule and 5/25 rule -- were indeed substantive rules (see "No April Fool's Joke -- Tafas and GSK Win on Summary Judgment").

In its opening brief, the Patent Office made two main assertions:  first, that the Office acted within its rulemaking authority, and second, that the continuation and claims rules do not violate the relevant statutory provisions (see "USPTO Files Opening Brief in Tafas v. Dudas Appeal").  While the assertions themselves were unsurprising, the approach taken by the Patent Office represented an intriguing departure from the framework adopted by Judge Cacheris' opinion, and revealed at least a portion of the Office's appellate strategy.  Where Judge Cacheris focused mainly on the substantive nature of the continuation and claims rules, and explicitly avoided a determination regarding whether the Patent Office was entitled to any deference, the Office relied heavily on its belief that Chevron deference places the continuation and claims rules beyond reproach (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)).

In its 60-page brief, GSK begins by attacking the Patent Office's claim to broad Chevron deference.  According to GSK, the Patent Office takes the view that "the district court should have first cloaked the agency with Chevron deference, then deferred to the PTO’s view of the scope of its own powers, and then deferred again to the PTO’s view that the Final Rules are consistent with the Patent Act."  GSK argues, however, that such a view sidesteps the Supreme Court's determination in Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990), that "[a] precondition to deference under Chevron is a congressional delegation of administrative authority" (the threshold question outlined in Adams Fruit, sometimes referred to as Chevron step zero, proceeds the two-step Chevron test).  GSK notes that "[t]he PTO ignores Adams Fruit, neglecting even to mention it in its opening brief," concluding that the Office's "silence speaks volumes."

GSK also argues that "[w]hile it is true that the PTO possesses some rulemaking authority relating to 'procedures' in the PTO, the critical point is that it does not possess the relevant authority to pass these substantive Final Rules."  According to GSK, "the district court carefully applied the Supreme Court’s and this Court’s settled view of what it means for rules to be substantive," which specifies that any rule that "'effects a change in existing law or policy' which 'affect[s] individual rights and obligations'" is substantive.  Moreover, because "[t]he PTO designed the Final Rules precisely to address its 'disapproval o[f] a given type of behavior' -- the PTO’s perception that applicants file too many continuing applications, RCEs, and claims," and "admitted that it crafted the Final Rules to 'stop' continuing applications and limit claims," GSK argues that "[t]his admission confirms that the Final Rules are substantive."

GSK also contends that the continuation and claims rules are contrary to existing patent law.  In particular, it asserts that new Rule 78 "creates a hard mechanical limit on the number of continuing applications an applicant may file and that, as a result, the rule strips applicants of valuable rights to which they are entitled under 35 U.S.C. § 120."  GSK notes, however, that "for over a century, applicants have been permitted to file additional continuing applications with no arbitrary or mechanical limit."  GSK also contends that new Rule 114 violates 35 U.S.C. § 132(b) by defining an "arbitrary and mechanical limit" of one RCE per application family, since § 132(b) states that the Patent Office "shall" prescribe regulations to provide for continued examination "at the request of the applicant," and the limit of one RCE per application family (rather than application) is "a clear departure from the plain language of the statute."  GSK further contends that "Rule 75 is inconsistent with Section 112, ¶ 2's grant to applicants to pursue 'one or more claims' in patent applications," and that "Rule 265 shifts the burden of examination to applicants by requiring applicants to establish the patentability of each independent claim before the PTO demonstrates a prima facie case of unpatentability."  With regard to the "hopelessly vague and boundless prior art search[es]" mandated under new Rule 265, GSK observes that:

Only Congress can change the law so that the PTO may require that patent applicants conduct prior art searches and patentability examinations.  Notably, Congress has considered granting the PTO authority to require prior art searches and patentability examinations, but has not done so to date.

Moreover, GSK argues that "[n]either the Rule, nor the PTO’s responses to comments in the Final Rules, provides any boundaries on the scope of the ESD's search requirements."  As a result, patent applicants would not be able to determine whether their searches complied with the requirements of Rule 265.  GSK concludes the brief by arguing that new Rules 75, 78, 114, and 265 are unlawfully retroactive.  In particular, these rules "impose 'new duties' on completed transactions (previously filed patent applications) and 'impair rights a party possessed when he acted' (the right to fully protect an invention in exchange for relinquishing a trade secret)."

The U.S. Patent and Trademark Office and USPTO Director Jon Dudas now have until October 15th to file their reply brief.

Comments

[EG]

Don,

GSK's brief again exposes the sheer sophistry and lawlessness of the USPTO's position on these continuation-claim Rules. And how the USPTO is going to address GSK's arguments at oral argument with a straight face in view of what should be blistering questions from the Federal Circuit bench should be a sight to behold and hear.

What is also really sad is how much ink, effort, money and frustration has been spent by us in the private sector to bring these unlawful and unthoughtful Rules to ground. We can only count the days to when the current USPTO hierarchy is gone, and with it hopefully this misguided attitude about the Rule of Law.