By Kevin E. Noonan --
Chief Judge Paul Michel, writing for most of the en banc
Court of Appeals for the Federal Circuit (Judge Lourie took no part in the
decision), today granted the joint motion of all parties to dismiss the appeal
of Tafas v. Kappos. Thus, the infamous "continuation
and claims rules" are now really, most sincerely dead. Importantly, the Court denied the joint
motion (the U.S. Patent and Trademark Office joined by one of the plaintiffs,
GlaxoSmithKline but not Dr. Triantafyllos Tafas) to vacate the District Court's
opinion that was the subject of the appeal (see "Dr. Tafas Files Reply to USPTO/GSK Motion to Dismiss Appeal and Vacate District Court Judgment").
The Court's ruling was based on its interpretation
of U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994), that there are two
instances where an appeal is mooted, with different consequences for
vacatur. Vacating the decision of
the court below when dismissing an appeal is proper, according to the Federal
Circuit's interpretation of Supreme Court precedent, "if the mootness
arises from external causes over which the parties have no control, or from the
unilateral act of the prevailing party." Vacatur is not proper, however, "when the mootness is
due to a voluntary act by the losing party, such as a settlement."
The Federal Circuit
held that the withdrawal of the rules at issue by the Patent Office fell into
the second, voluntary category rather than the first, involuntary one, despite
the Patent Office position that the "intervening" regulatory change
is analogous to an intervening statutory change (which the Court suggested
might be considered involuntary). "The
agency does not control Congress; but it does control the decision to rescind
the regulations," said the Court and accordingly "it was the USPTO
(the losing party in the district court action) that acted unilaterally to
render the case moot, and vacatur is not appropriate."
(Interestingly,
the Patent Office did not raise the issue of independent executive branch
action, such as the rumored action by the Office of Management and Budget to
prohibit implementation of the rules package for failure to comply with (or
more properly, to substantially ignore or misrepresent) Federal regulations
regarding the economic burden of the rules (see "Response to Rescission of Claims and Continuations Rules"). While such action might have increased the "involuntary"
nature of the withdrawal, it could also have brought to the Court's attention
the alleged fact that the substantive basis for the appeal was mooted several
months before the Federal Circuit panel heard the appeal.)
There are
several important consequences to this action. For the parties, claims for fees (made by Tafas and perhaps
available to GSK) are intact in view of the patency of the judgment below. The Patent Office is required to use "notice
and comment" proceedings for all rulemaking (and as David Boundy has
noted, the Office must observe the Regulatory Flexibility Act procedures for
all rulemaking). Most importantly,
perhaps, is that the Office has forgone its right to appeal the District Court's
decision, and while merely persuasive but not binding authority, it is the only
judicial decision on the scope of Patent Office authority on these types of
rules packages.
As a
reminder (and keep in mind that as part of the Federal Circuit's en banc order,
the panel decision was also vacated and has no precedential value), District
Court Judge James Cacheris of the Eastern District of Virginia ruled 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)." Moreover, the judgment
voided the claims and continuation 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).
Specifically,
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," citing Merck & Co., Inc. v. Kessler, 80
F.3d 1543, 1550 (Fed. Cir. 1996). Judge Cacheris also noted that this 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, 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 doing so Judge Cacheris swept aside the Patent Office's attempts to "abolish
the substantive-procedural distinction," stating that "any rule that 'affect[s]
individual rights and obligations' is substantive."
For a fuller
discussion of Judge Cacheris' decision, once again assuming relevance for
future Patent Office adventures in rulemaking, please see "No April Fool's Joke -- Tafas and GSK Win on Summary Judgment."
Kevin,
Yes, the "wicked witch [of the Rules packages] is dead" and good riddance! And a tip of my hat to GSK and especially Tafas who saw this through to the end.
Posted by: EG | November 16, 2009 at 03:30 PM
Regardless of the voluntary / involuntary distinction and other questions, it's simply great news that the coffin has finally been nailed shut on those continuation and claims rules. Patent litigation keeps getting easier with the USPTO under the command of Kappos.
http://www.GeneralPatent.com
Posted by: Gena777 | November 23, 2009 at 04:46 PM