Patent Docs

USPTO News: EFS-Web Maintenance Scheduled for Sunday, May 31, 2009

    By Christopher P. Singer --

The U.S. Patent and Trademark Office has posted on the top page of the EFS-Web portal site an advisory that the system will be unavailable because of system maintenance.  According to the advisory, the maintenance is scheduled to begin at midnight and end at 4 a.m. on Sunday, May 31st (EDT) -- obviously a window of time with minimal filing activity.  During this period, the electronic business center states that EFS-Web will be unable to process (1) National Stage applications filed under 35 U.S.C. § 371; (2) follow-on documents to existing applications; (3) real-time online fee payments; and (4) Customer Number selection list for Registered e-Filers.

Docs at BIO: Panel Addresses Narrowing Scope of Biotech Patents

    By Donald Zuhn --

In a Breakout Session entitled "The Narrowing Scope of Biotech Patent Claims: What Does It Mean for the Industry?" at last week's BIO International Convention, a panel consisting of Anne Dollard, the Deputy General Counsel and Chief Patent Counsel for Takeda San Francisco; Thomas Kim, Senior Director of Intellectual Property for VGX Pharmaceuticals, Inc.; Jane Gunnison of Ropes & Gray LLP; John Tessensohn of Shusaku Yamamoto Patent Law Offices; and Dr. Hans-Rainer Jaenichen of Vossius & Partner, discussed how practices in the United States, Europe, and Japan have led to a narrowing of biotech patent claim scope.  The panel was moderated by James Haley of Ropes & Gray LLP and Len Smith, Senior Intellectual Property Counsel for Novo Nordisk, Inc.

Ms. Dollard began the presentation by discussing how the statutory subject matter requirement of 35 U.S.C. § 101 has recently moved to the forefront of biotech patenting.  She reviewed the impact of Laboratory Corp. v. Metabolite Laboratories, Inc. (LabCorp), In re Bilski, Classen Immunotherapies, Inc. v. Biogen Idec, and the pending appeal in Prometheus v. Mayo on medical diagnostic claims, and then provided a review of Association for Molecular Pathology v. U.S. Patent and Trademark Office, a recently-filed case concerning gene patents assigned to Myriad Genetics.  Speaking of the ACLU case, Ms. Dollard stated that the clear intent of the plaintiffs was "to take down patents on human genes."  As for Bilski, Ms. Dollard compared the case with KSR International Co. v. Teleflex Inc., "where we thought the world was going to end," and stated that the impact of Bilski could ultimately be less significant than first thought.

Mr. Kim followed with a discussion of recent obviousness caselaw.  After reviewing KSR International Co. v. Teleflex Inc. and Takeda Chemical Industries, Ltd. v. Alphapharm Pty., Ltd., Mr. Kim addressed two recent obviousness Federal Circuit decisions:  Procter & Gamble Co. v. Teva Pharmaceuticals USA, Inc. and In re Kubin.  With respect to the future of biotech claims in a post-KSR world, he cautioned that trouble may lie ahead since biotechnology was becoming more predictable.  Mr. Kim also noted that while applicants might be able to point to secondary considerations of nonobviousness, such considerations would be unlikely to trump a strong case of obviousness.

Using antibodies as a paradigm, Ms. Gunnison next addressed the issue of written description.  She first reviewed Examples 13 and 14 of the Written Description Training Materials issued by the Patent Office just over a year ago, and then turned to a recent Board decision (Ex parte Xia), where the Board determined that a description of an epitope was not required for compliance with the written description requirement.  Ms. Gunnison then discussed Chiron Corp. v. Genentech, Inc., where the Federal Circuit determined that an antibody format that did not exist at the time of filing could not be adequately described.  She concluded her presentation by observing that changes in the written description standard have been costly for applicants.  Touching on a theme raised earlier by Mr. Kim, Ms. Gunnison responded to a question by stating that we could be reaching a point where monoclonal antibodies to known sequences would be considered obvious, but that this would depend on whether antibodies were viewed as chemical compounds (requiring application of structural nonobviousness caselaw) or whether Kubin would prevail. 

The last two panelists, Mr. Tessensohn and Dr. Jaenichen provided informative presentations regarding the state of biotech practice in Japan and Europe, respectively.  Mr. Tessensohn began his presentation by focusing on recent acquisitions by Japanese biotech companies, noting that these companies were facing the same issues (i.e., "anemic pipelines and expiring patents") that many U.S. biotech companies are currently facing.  Turning to patent practice in Japan, Mr. Tessensohn argued that the environment was not "hostile," but acknowledged that patentability standards were evolving and becoming more narrow in Japan (he noted that he was "not here to be a JPO apologist, but you have to know what you're dealing with").  With respect to written description and enablement, he stated that the Japan Patent Office (JPO) required disclosure of pharmacological test results in the application, adding that if such results were submitted after filing that was "too bad."  As for those who would suggest that the JPO was applying a heavier hand with regard to non-Japanese applicants, Mr. Tessensohn humorously contended that there was "no grand conspiracy theory" at work, and that the tough standards in Japan were affecting U.S. companies (e.g., Pfizer) and Japanese companies (e.g., Astellas) alike.  And his solution for dealing with these tough standards was simple:  "crank out as much disclosure as possible."  He added that applicants could not go wrong by following his "ABCD" rule when drafting applications, and remember to provide data that is All-inclusive, Broad, Comprehensive, and Detailed.  Mr. Tessensohn observed that it was best to avoid inferences and prophetic examples in favor of lots of data and working examples.  On the issue of obviousness, he noted that many Japanese IP High Court decisions have been decided on an "obvious to try" standard, which is alive and well in Japan, but that the "silver bullet" for dealing with obviousness rejections in Japan was to show unexpected results (which can be submitted after filing in Japan).

The session's last panelist, Dr. Jaenichen, began by discussing a few favorable differences between European and U.S. patent practice.  For example, he noted that in Europe, claims to hybridization variants are readily obtainable, provided that the claims include a functional limitation.  He stated that the same is also true for claims reciting percent identity, adding that a functional limitation is not required for claims to allelic variants.  Dr. Jaenichen also contended that the sequencing of the human genome did not mean that human genomics claims were all but dead, as there would be continue to be avenues open for genomics claiming (e.g., splice variants).  With respect to the European Patent Office's recent decision to crack down on "abuses" related to divisional filings, Dr. Jaenichen argued that only 0.35% of all applications were considered to be abuses of the system, and thus concluded that the EPO's new rules regarding divisional practice were simply a money-making device.

Docs at BIO: Panel Offers Suggestions for Fixing the USPTO -- Updated

    By Donald Zuhn --

In a Wednesday Super Session entitled "A Model Patent Office for the Future -- Promoting and Protecting Investments in Innovation," a panel consisting of Sherry Knowles, Vice President of Corporate Intellectual Property at GlaxoSmithKline Biopharmaceuticals, Inc.; Q. Todd Dickinson, Executive Director for the American Intellectual Property Law Association (AIPLA); John Duffy, Professor of Law at George Washington University Law School; and Jeff Kushan, a Partner at Sidley Austin LLP, provided a long range view of what the model patent office of the future can and should look like to drive innovation and economic growth, and promote investment in IP-intensive industries.

Ms. Knowles (at left), who moderated the session, began the discussion by fondly recalling the "Golden Era" of patent prosecution in which U.S. examiners were intrigued by inventions disclosed and claimed in patent applications, and worked with applicants to advance prosecution.  She noted that cooperation between the USPTO and its stakeholders had reached an all-time low, analogizing the USPTO to a "hospital that hates patients."  Pointing to statistics showing a decreasing filing rate, a first quarter allowance rate of 42% (which Ms. Knowles noted was also an all-time low), and an increasing application backlog of applications, she labeled the current situation a "train wreck."  Ms. Knowles contended, however, that stakeholders could not just count on patent reform, the courts, or the yet-to-be-named USPTO Director to fix the Office's problems, but rather had to play an active role (including working with the USPTO) to ensure that the USPTO's problems are solved.

Mr. Dickinson (at right), who served as USPTO Director during the Clinton Administration, discussed a number of challenges that will confront the next Director, including the application backlog, application pendency, the current revenue shortfall, examiner attrition, and examination quality.  With respect to the first two challenges, Mr. Dickinson noted that the application backlog was approaching a million applications and that application pendency currently stood at 38 months.  He indicated that Gary Locke, the new Secretary of Commerce, had recently proposed reducing pendency to only 10 months.  While he found this goal to be laudable, he observed that the last time the USPTO had a 10-month application pendency, the country was embroiled in a Civil War.  He also noted that only one USPTO Director had been able to reduce application pendency in the past thirty years (later confirming that he had been that lone Director).  With regard to the Office's revenue shortfall, Mr. Dickinson pointed out that as a result of a drop in application filings and lower maintenance fee collections, revenue was down 10% for the year.  The revenue shortfall, in turn, had forced the Office to implement a hiring freeze and eliminate programs such as law school reimbursement for examiners, which not surprisingly, had negatively impacted examiner attrition (although Mr. Dickinson noted that the negative impacts have been somewhat offset by the unsettled job market).  Finally, Mr. Dickinson argued that examination quality was an issue that the USPTO needed to address, and one that patent reform (which has focused on downstream, litigation-related "reforms") could not fix.

Mr. Dickinson next proposed several USPTO reforms, including changes in Office leadership, the count system, examination time allotments and examiner pay, enhanced worksharing, an end to fee diversion, and deferred examination.  Mr. Dickinson advised the new USPTO leadership that rulemaking transparency and attempts to engage stakeholders in the process would be critical to the success of any future rulemaking (a lesson he said he learned during passage of the AIPA, and a lesson that the last Administration never seemed to learn).  According to Mr. Dickinson, the count system, by which the Office measures examiner (and supervisor) performance, was in need of an update (he noted that the system had not been significantly changed in 30 years).  However, he advised session attendees that such an update would not come cheap, as the last update of the system cost $20 million.  Mr. Dickinson also argued that the amount of time allotted for examination, which he said ranged from 18-36 hours per application, was also in need of an update.  Mr. Dickinson warned, however, that adding just one hour to the examination of each application would result in an additional $20 million in expense.  On the topic of worksharing, Mr. Dickinson stated that continued implementation of such programs would require a leap a faith and buy-in from stakeholders with regard to searches conducted by foreign patent offices.  While noting that the last six Bush budgets and the first Obama budget had specified an annual end to fee diversion, Mr. Dickinson argued that a permanent end to fee diversion was needed in order to permit the USPTO to engage in long-term planning.  Finally, on the topic of deferred examination, he admitted that his own organization had traditionally rejected deferred examination proposals, but refused to dismiss deferred examination as a possible tool for reforming the USPTO, stating that the devil would be in the details (e.g., how many years would be available, how would the fee structure be altered, how would intervening rights and patent term adjustment be handled).

In a presentation entitled "Ending the Patenting Monopoly: The Global Transition to Patent Office Decentralization," Prof. Duffy (at left) discussed the evolution of the USPTO from its current antiquated state.  Noting that the USPTO had changed little since its 1836 origins, when the centralization of patent examination was a revolutionary (but perhaps sensible) concept, he argued that radical change was needed (and that such change was almost inevitable).  Prof. Duffy argued that the current system, in which applicants were forced to deal with a single entity, necessarily created a monopolistic attitude at the USPTO.  Thus, stakeholders upset over lengthy application pendency in the U.S. were left with no recourse but to accept that pendency.

As an example of a decentralized (or demonopolized) patent examination system, Prof. Duffy pointed to the Israeli patent system, in which applicants are allowed to use the examination of a corresponding application in a number of other patent offices to secure an allowance of an application in the Israeli Patent Office.  Prof. Duffy also noted that steps towards demonopolization had already been taken in the form of the implementation of the PCT, where U.S. applicants can choose to have searches conducted by the USPTO, EPO, IP Australia, or South Korean Patent Office (and at significantly different costs); the creation of the EPO, where national offices compete with the EPO to provide examination services; and the Patent Prosecution Highway (PPH), a worksharing arrangement between the USPTO and a number of foreign patent offices.

Prof. Duffy concluded his presentation by discussing private searches, the peer-to-patent system, and accelerated examination/Application Quality Submissions (AQSs), in which entities other than the USPTO perform the search or examination functions.  Referring to the above as the "cutting edge" of demonopolozation, Prof. Duffy predicted an inevitable move towards private searches.  However, he acknowledged that inequitable conduct remained a thorn in the side of accelerated examination.  Prof. Duffy also noted that the reaction to the demonopolization movement had not been favorable, pointing to a section of the Senate patent reform bill (S. 515), which labels search and examination functions as "sovereign," and requires these functions to be performed by U.S. citizens.  Mr. Dickinson speculated that lobbying from the examiners' union had led to the addition of this provision to the bill.

Mr. Kushan (at right) was the last member of the panel to offer his suggestions for USPTO reform in a presentation entitled "An Idealized PTO for Biotech and Pharmaceutical Applications."  Touching on the issue of patent quality, Mr. Kushan noted that the standards under which patents issue are frequently different from the standards under which patents are litigated.  Mr. Kushan also agreed with Mr. Dickinson that the outdated count system and time allotted for examination needed to be changed.  He also criticized the "two sets of eyes" policy as one in which examination was done "twice inefficiently" instead of just "once inefficiently."  Mr. Kushan advocated for "on demand" examination, with the caveat that applicants should be required to pay higher fees to defer examination.  He also contended that inequitable conduct reform was as necessary for the USPTO as it was for applicants.

In the question and answer portion of the session, Ms. Knowles proposed (somewhat surprisingly) that the USPTO should enact escalating fees for the presentation of additional claims (akin to current EPO practice), the filing of each new continuation, and the submission of each new reference.  While the other panelists were less than enthusiastic about her proposal, none mentioned that in the absence of production goal reform (i.e., changes to the count system and examination time allotments) and inequitable conduct reform, escalating fees would be unlikely to resolve the problems confronting the USPTO.  Ms. Knowles also asked the panelists for their opinions regarding the substantive or procedural nature of the rule limiting continuations that was at issue in Tafas v. Doll.  Mr. Dickinson stated that the AIPLA believed the rule was substantive, but Prof. Duffy, noting his background in administrative law, suggested that Ms. Knowles would not be happy if the Supreme Court ever got their hands on the case.  When Ms. Knowles stated that she thought the Supreme Court would provide a more favorable ruling for GSK than the Federal Circuit did, Prof. Duffy jokingly advised her to hire some new attorneys.  When asked about his Supreme Court prediction after the session, Prof. Duffy indicated that the Supreme Court (where he once clerked) was not as familiar with patent law as it was with administrative law, and therefore, the Court would likely defer to the USPTO with respect to its interpretation of 35 U.S.C. § 120, and thus find the rule limiting continuations to be consistent with that section.

USPTO Begins Pilot Program with the German Patent Office

    By Christopher P. Singer --

As we previously reported by Patent Docs, the U.S. Patent and Trademark Office began a Patent Prosecution Highway (PPH) Pilot Program with the German Patent and Trademark Office (DPMA) on April 27, 2009 which will last for two years.  The USPTO issued another press release on April 20, 2009, providing links for applicants interested in reviewing the requirements for participation in the pilot program via the USPTO or DPMA.

USPTO Extends Patent Prosecution Highway Pilot Program with IP Australia; Begins Pilot Program with German Patent Office

    By Christopher P. Singer --

In a Notice, dated April 13, 2009, the U.S. Patent and Trademark Office announced that it will continue the existing Patent Prosecution Highway (PPH) Pilot Program with the Intellectual Property Office of Australia (IP Australia) for an unspecified period of time in order to gather more information and assess the feasibility of the program prior to making the PPH program permanent.

In a separate Notice, dated April 14, 2009, the USPTO announced that it will begin another PPH Pilot Program with the German Patent and Trademark Office (DPMA).  The new pilot program will begin on April 27, 2009 and last until April 27, 2011.  The forms for applicants interested in taking part in this program will be made available on the DMPA's website and the USPTO's website (Form PTO/SB/20DE) on April 27, 2009.  The following types of applications will be eligible for participation in this program:

1.  U.S. applications filed under the Paris convention that either have (a) a valid priority claim under 35 U.S.C. § 119(a) and 37 C.F.R. § 1.55 to one or more applications filed with the DPMA or (b) a valid priority claim under 35 U.S.C. §§ 119(a) or 365(a) to a PCT application containing no priority claims.

2.  U.S. National stage applications filed under the PCT, where the PCT application has (a) a valid priority claim under 35 U.S.C. § 365(b) to an application filed with the DPMA; (b) a valid priority claim under 35 U.S.C. § 365(b) to a PCT application containing no priority claims; or (c) contains no priority claim.

3.  A bypass continuation application filed under 35 U.S.C. § 111(a) with a valid priority claim under 35 U.S.C. § 120 to a PCT application, where the PCT application has (a) a valid priority claim under 35 U.S.C. § 365(b) to an application filed with the DPMA; (b) a valid priority claim under 35 U.S.C. § 365(b) to a PCT application containing no priority claim; or (c) contains no priority claim.

The Notice provides several examples of specific application types that fall within those requirements.

As mentioned in prior posts regarding the other participant Offices, the motivation behind the PPH is to leverage fast-track patent examination in participant offices so that applicants can obtain corresponding patents faster and more efficiently in each participant country.  Further, the PPH program should allow each office to benefit from work previously done by the initial examining office and consequently reduce examination workload and improve patent quality.

EFS & PAIR News

    By Christopher P. Singer --

This past week, the Electronic Business Center (EBC) posted two notices on its PAIR and EFS-Web systems.  In the notice posted on the opening page of EFS-Web, the Patent Office announced that it is making a minor change to the document description identification of a letter submitted with an information disclosure statement (IDS).  As of April 6, 2009, the EBC will discontinue the current "information disclosure statement letter" document description option, and it requests that Applicants begin using the document description "Transmittal Letter" for letters that accompany any IDS forms (SB/08a or 1449).

The EBC also announced that Private PAIR and Public PAIR will be unavailable on Saturday, April 4, 2009 from 12:01 AM to 5:00 AM Eastern Time due to system maintenance.

Gary Locke Confirmed as New Secretary of Commerce

    By Christopher P. Singer --

On March 24, 2009, the Senate unanimously confirmed Gary Locke (at right) as the 36th Secretary of Commerce.  While Secretary Locke obviously has a number of critical economic issues that require his immediate attention, the Department of Commerce also oversees the expansion of the country's broadband infrastructure (including the digital TV transition), the Census (to be taken in 2010), the National Oceanic and Atmospheric Administration (NOAA), and the National Institute of Standards and Technology (NIST), in addition to the U.S. Patent and Trademark Office.

In his remarks before the Senate, Secretary Locke made several comments relating to the USPTO, saying that the application backlog needs to be addressed, and the U.S. needs to lead the world in innovation, science, and technology.

The Department of Commerce press release can be viewed here.

USPTO Will Not Enforce New Claims and Continuation Rules . . . For Now

By Christopher P. Singer --

In the wake of the Federal Circuit's decision in Tafas v. Doll (see "Tafas v. Doll (Fed. Cir. 2009)"; "Federal Circuit Issues Decision in Tafas v. Doll"; and "Anyone Remember What These 'New Rules' Are All About?"), the U.S. Patent and Trademark Office posted an announcement clarifying that it has no immediate plans to enact the claims and continuations rules.  While the USPTO takes the opportunity to remind us that the CAFC "concluded that the Final Rules were all within the agency's rulemaking authority," it also acknowledges that the Court held Rule 78 (limiting the number of continuations) inconsistent with the Patent Act.  The announcement concludes by noting that because there are issues yet to be determined by the District Court on remand and that litigation is ongoing, the "Final Rules will not be implemented at this time."  The announcement did not mention the status of any of the other rules packages (IDS, Markush, and Appeals).

Tafas v. Doll (Fed. Cir. 2009)

    By Donald Zuhn --

On Friday, the Federal Circuit issued its decision in Tafas v. Doll (formerly Tafas v. Dudas).  The Tafas appeal concerns the validity of four rules in the continuation and claims rules package promulgated by the U.S. Patent and Trademark Office on August 21, 2007.  The four rules at issue are:  Rule 75, which requires applicants submitting more than five independent or 25 total claims to file an Examination Support Document (ESD); Rule 78, which limits applicants to two continuation applications per application family absent a petition and showing; Rule 114, which limits applicants to one RCE per application family absent a petition and showing; and Rule 265, which establishes the requirements for an ESD.

In an opinion authored by Judge Prost and joined by Judge Bryson, a split panel determined that Rules 75, 78, 114, and 265 are procedural, but that Rule 78 is inconsistent with 35 U.S.C. § 120.  Judge Rader dissented in part, contending that all four of the rules at issue are substantive.

Judge Prost (at left) begins her discussion by rejecting the USPTO's argument that the District Court erred for failing to give the Office's interpretation of its rulemaking authority under 35 U.S.C. § 2(b)(2) proper deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984).  However, with respect to the USPTO's argument that the District Court also failed to accord the Office Chevron deference with respect to its interpretations of various sections of the Patent Act, and its belief that the continuation and claims rules were consistent with such interpretations, Judge Prost finds that "the USPTO's interpretations of statutes that pertain to the USPTO's delegated authority are entitled to Chevron deference."  Thus, for rules that are within the scope of the Office's delegated authority (i.e., procedural rules promulgated under 35 U.S.C. §§ 2(b)(2) and 132(b)), the Court must "give Chevron deference to the USPTO's interpretation of statutory provisions that relate to the exercise of delegated authority."

Having decided that the USPTO is to be afforded Chevron deference with respect to procedural rules, Judge Prost next turns to the issue of whether the continuation and claims rules at issue are substantive or procedural.  Noting that the parties "vigorously disagree . . . as to how the boundary between 'substantive' and 'procedural' rules should be defined," Judge Prost disagrees with the District Court's "broad and absolute" reading of Chrysler Corp. v. Brown (1979) as defining as substantive "any rule that 'affect[s] individual rights and obligations.'"  Instead, she finds the D.C. Circuit's approach in JEM Broad. Co. v. FCC (D.C. Cir. 1994) to be more persuasive.  (In view of Judge Prost's use of JEM, it's interesting, but perhaps not surprising, that she cites Professor Mark Lemley and fellow Circuit Judge Kimberly Moore's article on "Ending Abuse of Patent Continuations" in a footnote on page two of the opinion.)

In JEM, the Federal Communications Commission adopted "hard look" rules in response to a significant number of "carelessly prepared and speculative applications" for broadcasting licenses.  Under the FCC's rules, applications that failed to include necessary information or contained incorrect or inconsistent information were dismissed with no opportunity to cure the defect.  Noting that the D.C. Circuit had "recognized that the rules could result in the loss of substantive rights, but found that they were nonetheless procedural because they did not 'foreclose effective opportunity to make one's case on the merits,'" Judge Prost concludes that the continuation and claims rules are procedural because "[i]n essence, they govern the timing of and materials that must be submitted with patent applications," adding that while the rules "may 'alter the manner in which the parties present . . . their viewpoints' to the USPTO, . . . they do not, on their face, 'foreclose effective opportunity' to present patent applications for examination."

With respect to Rules 78 and 114, Judge Prost states that:

Applicants who include in each continuation application all amendments, arguments, and evidence available at the time of filing will not be limited by Final Rule 78.  Similarly, applicants who diligently present all of their amendments, arguments, and evidence as soon as possible during prosecution will be granted as many RCEs as they require.  Thus, applications that are submitted in compliance with these timing requirements will be fully examined and given all of the benefits provided by the Patent Act.

As a result, Judge Prost finds these rules to be procedural under a JEM analysis.  While acknowledging that the Office's responses during the notice and comment period suggested that the USPTO would "deny additional applications in almost all circumstances" such that Rules 78 and 114 would create "hard limits" on continuation and RCE filings, the majority states that "we decline to rely on these responses, which are not binding on the USPTO," adding that courts "will be free to entertain challenges to the USPTO's application of the Final Rules, including its view of when amendments, arguments, and evidence could not have been submitted earlier."

With respect to Rules 75 and 265, Judge Prost states that:

Once a satisfactory ESD is submitted, examination will proceed in precisely the same manner as it would have in the absence of the rule.  It is important to note that an examiner is not permitted to substantively reject claims on grounds that the ESD did not prove that the claims are patentable.

As a result, Judge Prost finds these rules to also be procedural under a JEM analysis.  However, because she states that the search requirement of Rule 265 "does not necessarily require a visit to every library in every corner of the world," but rather only requires "[a] reasonable, cost-effective search," the implementation of Rules 75 and 265 would also lead to an inevitable increase in the number of lawsuits filed by applicants against the USPTO.  While Judge Prost is "mindful of the possibility that the USPTO may in some cases attempt to apply the rules in a way that makes compliance [with Rules 75 and 265] essentially impossible and substantively deprives applicants of their rights," she notes that in such circumstances, "judicial review will be available."  Judge Prost also dismisses the concern that "even the most diligently prepared ESD will inevitably open the applicant to inequitable conduct allegations that will entail costly litigation and a possible finding of unenforceability," as being "too speculative to void the rules."  As with the Office's interpretation of the new rules, the majority states that:

We recognize that the drafting of an ESD will entail browsing many references, that mistakes and omissions will inevitably occur, and that the courts will be asked to determine if there was inequitable conduct.  However, doubt about the judiciary's ability to apply its own doctrine in a way that yields fair results and discourages frivolous allegations should not preclude the USPTO from promulgating rules that are within its statutory authority.

Finding that the four rules at issue are procedural, Judge Prost turns to the question of whether the four rules are consistent with the Patent Act.  Judge Prost begins with Rule 78, which, like the District Court, she determines to be inconsistent with 35 U.S.C. § 120, albeit on "narrower grounds."  In particular, Judge Prost notes that while "Section 120 unambiguously states that an application that meets four requirements 'shall have the same effect, as to such invention, as though filed on the date of the prior application,'" new Rule 78 "attempts to add an additional requirement -- that the application not contain amendments, arguments, or evidence that could have been submitted earlier -- that is foreclosed by the statute."  With respect to In re Henriksen (C.C.P.A. 1968) and In re Bogese (Fed. Cir. 2002), Judge Prost dismisses these cases as being unhelpful to the USPTO's cause, the former concerning the permissible length of a chain of serial continuations, rather than the total number of continuations that may be filed, and the latter concerning prosecution history laches (Judge Prost notes that Rule 78 "simply captures too many applications that would not be even remotely susceptible to a prosecution history laches challenge").

As for Rules 114, 75, and 265, Judge Prost finds none of these rules to be inconsistent with the Patent Act.  First, she finds the application of an RCE limit to application families rather than individual applications to be not inconsistent with 35 U.S.C. § 132 because that section does not "unambiguously dictate[] that its provisions be applied on a per application basis."  In addition, with respect to the argument that Congress intended RCEs to be subject only to the applicant's discretion, Judge Prost states "[i]t is plausible that, as the USPTO suggests, § 132(b) simply directs the USPTO to 'prescribe regulations' to govern the applicant's ability to request continued examination which must, in some circumstances, be granted" (emphasis added).  As for the possibility that Rules 75 and 265 create a hard limit on the number of claims that an applicant can file, the majority states that:

[W]e need not decide whether the USPTO may impose a limit on the number of claims an applicant can pursue because we do not find that the ESD requirement creates any such limit.  Rather, it simply requires that an ESD be submitted if more than five independent or twenty-five total claims are included in certain sets of copending applications.

In response to the argument that Rule 265 creates a duty to conduct a prior art search, the majority states that "[w]e agree with the USPTO that [the cases cited by the District Court] do not speak to whether the USPTO may impose such a duty by regulation," and therefore, "[o]n this record, we see no persuasive reason to prohibit the USPTO from requesting the information required by Final Rule 265, even if the applicant must take action to acquire that information."  Reiterating her procedural analysis, Judge Prost also dismisses the argument that Rules 75 and 265 improperly transfer examination burdens from the Office to applicants, stating that these rules "do not require an applicant to make a prima facie case of patentability," adding that "[a]n examiner cannot reject an application because he believes that the applicant failed to find the most material references or if he is otherwise not persuaded by the applicant's view of the prior art."

After concluding that Rules 75, 78, 115, and 265 are procedural, and further, that Rule 78 is inconsistent with the Patent Act, Judge Prost notes that:

Because of the complexity of this case and the numerous arguments presented on appeal and before the district court, we think it is important to expressly summarize what we believe remains for the district court on remand.  This opinion does not decide any of the following issues:  whether any of the Final Rules, either on their face or as applied in any specific circumstances, are arbitrary and capricious; whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in this opinion; whether all USPTO rulemaking is subject to notice and comment rulemaking under 5 U.S.C. § 553; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive.

In his concurring opinion, Judge Bryson helpfully provides the USPTO with a roadmap for modifying Rule 78 to render it consistent with 35 U.S.C. § 120 -- at least as far as he is concerned.  Stating that "the most difficult question in this case . . . is whether Final Rule 78 is a valid regulation in light of 35 U.S.C. § 120," Judge Bryson notes that while he agrees that the rule is invalid, he thinks "it is important to emphasize the narrow scope of the court's decision."  Stating that "a rule limiting the number of continuances co-pending with the first-filed application is necessarily contrary to the statute and invalid," Judge Bryson argues that this "does not answer the question whether the rule is invalid as applied to serial continuances."  While he acknowledges that "[f]or the last 40 years, . . . section 120 has been understood to confer upon patent applicants the right to file any number of successive continuation applications after the first application has been abandoned or issued as a patent," he contends that "[i]t would not be unreasonable, however, to construe the phrase 'an application similarly entitled' [in § 120] to mean an application that satisfies all the preceding requirements set forth in section 120, including the requirement of co-pendency with the initial application."  Judge Bryson notes that while the majority properly struck down Rule 78, that does not mean "a revised rule that addressed only serial continuances and limited such continuances to only two -- the first co-pending with the original application and the second co-pending with the first -- would be struck down as reflecting an impermissible interpretation of section 120."  Thus, in view of Judge Bryson's analysis, the USPTO could impose a two-continuation limitation -- or whatever limit the Office deemed necessary to resolve its backlog -- on any continuation that was not filed while the original application was still pending.  In other words, for applicants wishing to file continuations serially, the 2+1 rule (two continuations + one RCE) would merely become the 3+1 rule.

Judge Rader (at right), writing in dissent with respect to all but the majority's finding that Rule 78 is inconsistent with the Patent Act, states that "in my view, the Final Rules are substantive, not procedural."  Noting that "[t]he distinction between substantive or non-substantive rules requires a difficult judgment," Judge Rader admonishes that he "would not so casually discard, as this court does today, this court's precedent for identifying a 'substantive' rule."  In particular, Judge Rader states that:

The Supreme Court provided valuable guidance on the substantive/non-substantive inquiry in Chrysler Corp. v. Brown, 441 U.S. 281 (1979).  In Chrysler, the Court defined an inherent characteristic of a "substantive" or "legislative-type" rule, namely, such rules "affect[] individual rights and obligations."  Id. at 302.  Contrary to this court's analysis today, the Chrysler Court's reasoning was in no way limited to defining the boundary between interpretative and substantive rules.  The Court sought to draw a broad distinction between substantive and non-substantive rules -- the same inquiry presented in this case.  Id.

* * *

Both this court and the Court of Appeals for the District of Columbia Circuit have relied on Chrysler in building a body of jurisprudence germane to the substantive/non-substantive inquiry.  Central to this jurisprudence is the recognition that classifying a rule as substantive or non-substantive is a case-by-case exercise, poorly suited for bright-line rules.

With respect to the majority's reliance on JEM, Judge Rader argues that "as JEM illustrates, the test for substantive, ultra vires rules is a case-by-case inquiry, not a rigid application of a sentence out of context in JEM."  Noting that the public participation during the notice and comment period was "overwhelming (itself an indication of the substantive impact of the rules?)," Judge Rader adds that "[m]any of the comments shared a common concern:  that the Final Rules 'had a significant effect on private interests, and marked a change in existing law or policy,'" and states that he "share[s] that concerned view."

Judge Rader concludes his dissent by outlining how each of the four rules at issue would have "sufficiently grave" effects.  His analysis regarding the probable impact of Rule 75 is of particular interest:

[L]imiting an applicant to five independent claims ignores the varying scopes and methods of claiming inventions across different technologies.  For example, in a pharmaceutical application, an applicant may claim not only the genus compound, but also a number of species, intermediates, methods of making, and methods of use.  Asking an inventor to limit her application to five independent claims disproportionately affects technologies with greater complexity and greater public interest in disclosure.

Judge Rader also explains that:

[Rule 75] has a similar effect to imposing a five-page limit on applications.  Although that notion is obviously too simplistic and problematic, this court's rationale would apparently make that hypothetical rule possible as a procedural rule that merely "[alters] the manner in which the parties present themselves or their viewpoints to the agency."  JEM, 22 F.3d at 326.  To my eyes, much more is at stake.

Tafas v. Doll (Fed. Cir. 2009)
Panel: Circuit Judges Rader, Bryson, and Prost
Opinion by Circuit Judge Prost, concurring opinion by Circuit Judge Bryson, opinion concurring in part and dissenting in part by Circuit Judge Rader

Anyone Remember What These "New Rules" Are All About?

    By Kevin E. Noonan --

It has been quite some time since most in the patent community have given much thought to the ill-advised "claims and continuation" rules promulgated by the Patent and Trademark Office on August 21, 2007 that were preliminarily enjoined on Halloween, 2007 (one day before they were to go into effect) and permanently enjoyed on April Fool's Day, 2008.  But with the Federal Circuit's decision last Friday overturning the bases for enjoining three of the four rules at issue, it is a good time to be reminded of what was (and now once again is) at stake.  A few caveats, however, are in order.

First, the injunction was imposed on summary judgment, so District Court Judge Cacheris has not heard the merits of the parties' arguments.  Second, Judge Cacheris based his ruling on only one of the grounds asserted by Dr. Tafas and GlaxoSmithKline, leaving several others that the Court never ruled upon.  Third, as pointed out on Patent Docs last week, Judge Prost, writing for the fractured majority, set forth a roadmap of issues for the District Court to consider, any one of which could be further grounds for invalidating and enjoining anew the "new rules."  Fourth, the delay in President Obama's appointment of a Commerce Secretary has also delayed the appointment of a new Director for the Patent Office, and there is no indication of who that individual might be or what that person's views on changing any of these rules might be.  Finally, the rules package was an interconnected whole, intended to block any "loopholes" that would permit an applicant (albeit at increased cost) from filing additional claims and continuations.  Thus, even if the Federal Circuit's determination that one of the proposed new rules (Rule 78) is contrary to statute (35 U.S.C. § 120) and thus outside the scope of the Office's rulemaking authority under 35 U.S.C. § 2(b)(2)(A) is the only aspect of the decision that survives the expected impending continued litigation, failure to implement this aspect of the rule might doom the entire endeavor.

The Federal Circuit considered four of the "new rules" in the continuation and claims package:  Rules 75, 78, 114, and 265.  Prior posts in this space have reviewed the metes and bounds of these rules extensively in the past, and this post is meant merely as a refresher; in-depth treatment can be found in those prior posts.

Rule 75(b):

The prior (and still current) version of Rule 75(b) merely requires that claims "differ substantially from each other and are not unduly multiplied."  The proposed changes to Rule 75(b), which increased the rule by 522 words and added 5 new subparts, embodied the limitation to 5 independent claims and 25 total claims in any application (Rule 75(b)(1)), unless the applicant supplied an examination support document (ESD) pursuant to proposed new Rule 265 (see below).  Rule 75(b)(2)(A) defined as an independent claim any claim that referenced another claim but did not incorporate by reference all the limitations of the referenced claim, or that was directed to a different statutory class ("a method of using the subject matter of claim x" would thus not be considered a dependent claim).  Proposed rule 75(b)(3) provided a notice provision to permit an applicant to amend an application to be in compliance with the rule (and thus bypass the need to submit an ESD).

Proposed Rule 75(b)(4) prohibited an applicant from avoiding the strictures of the claims limitations by filing more than one application; the rule provided that the Office would consider together the claims in commonly-owned applications that contained "patentably-indistinct" claims, and would then add together all the claims of the two applications to determine whether the applications were in compliance with the claims limitations.  The intent was explicit in the Final Rule Notice, where the Office stated that Rule 75(b)(4) is intended "to preclude an applicant from submitting multiple applications to the same subject matter (with claims that are patentably indistinct), each with five or fewer independent claims or twenty-five or fewer total claims, for the purpose of avoiding the requirement to submit an examination support document."

Rule 78:

This rule, which the Federal Circuit held was inconsistent with 35 U.S.C. § 120, embodies the limitations on continuation applications, and was even more expressly directed towards preventing applicants from avoiding the effects of the rules package.  It was also the most extensive of the rules, having the following relevant provisions:

Rule 78(d):  there are several subparts to this portion of the proposed rules, but the most important provision precludes an applicant from filing more than two continuation applications in any application family (wherein the definition of an "application family" includes continuation and continuation-in-part applications but excludes divisional applications). 

Rule 78(f) required an applicant prosecuting an application to identify all other commonly-owned applications having (a) a common inventor and (b) a filing or priority date within 2 months of the filing or priority date of the application in question.  This section of the proposed rule also created a rebuttable presumption that such commonly-owned applications sharing a common inventor and "substantial overlapping disclosure" contained at least one patentably-indistinct claim.  The Office under these circumstances could then require that the patentably-indistinct claims be cancelled in all but one of the related applications.

Rule 114:

This proposed rule would permit an applicant to file only a single request for continued examination (RCE) without a petition and showing, and this limitation would apply to an entire application family (i.e., an application and all continuation and continuation-in-part applications claiming priority thereto).  While divisional applications are not part of an application "family" for the purposes of this proposed rule, each such divisional application is also entitled to a single RCE.  This was the "+1" part of the "2+1" rule imposed in combination with proposed Rule 78.  The petition required for filing a second RCE would require a showing that an amendment, argument, or evidence sought to be entered with the RCE could not have been submitted earlier in prosecution.  Importantly, the requirement for a showing would not be satisfied by submitting an IDS containing art not known to anyone with Rule 56 duty prior to 3 months before the RCE is requested (including art identified, inter alia, by a foreign patent office in a counterpart application).

Rule 265:

This proposed rule describes the examination support document (ESD) required when an applicant files more than 5 independent claims and 25 total claims in an application.  The provisions are simple, and in view of the inequitable conduct implications, frightening; an ESD must contain:

• A preexamination search statement;
• Listing of references deemed most closely related to the subject matter of each claim;
• Identification of claim limitations disclosed by each reference;
• Detailed explanation of patentability; and
• Showing of support under 35 U.S.C. § 112, ¶ 1.

The preexamination search statement must contain:

• A statement that a preexamination search in compliance with 37 C.F.R. § 1.265(b) was conducted.
• An identification of:

• The field of search by U.S. class and subclass, the date of the search; and
• For database searches, the search logic or chemical structure or sequence used as a query, the name of the file(s) searched and the database service, and the date of the search (in the manner set forth in M.P.E.P. § 719.05).

Unlike current Information Disclosure Statements, an ESD requires that the content of the references be disclosed with particularity, especially with regard to the relevance of each reference to the claimed invention.  "The ESD must include a detailed explanation that particularly points out how each of the independent claims is patentable over the references cited in the listing of references," as well as explaining why the claims are novel and non-obvious with regard to the references, as well as evidence of support in the specification in compliance with 35 U.S.C. § 112, ¶ 1.

These are, in brief, the "new rules" given new life by the Federal Circuit's decision.  There is no reason to believe that the current Office administration does not remain committed to them.  Although that administration has indicated that the rules would not be imposed retroactively to pending applications (this was one of the grounds for GSK's opposition to the rules), any failure to impose any version of these "new rules" will do precisely what the Office was trying to avoid:  provoke a deluge of new filings intended to avoid the effects of the rules.  This is what happened immediately before the changes occasioned by implementation of the GATT provisions on June 7, 1995, and before the publication rules of the American Inventor Protection Act (AIPA) on November 28, 2000.  Two years ago we would have assumed that exacerbating the examination backlog was an important Office goal.  Today, in view of falling allowance rates (and maintenance fees) and falling application rates (down 5% in absolute terms and 10% less than Office expectations), these considerations may be less pressing for the Office.  They are no less important, however, for American innovation, especially because the Office has also stopped hiring new examiners due to budget shortfalls.  It would be ironic indeed if the Office eventually imposed some version of these rules in an effort to increase revenues by making worse the problem that provided the ostensible motivation for the rules in the first place.

Federal Circuit Issues Decision in Tafas v. Doll

    By Donald Zuhn --

In a 55-page opinion issued earlier today, the Federal Circuit determined that the four rules at issue in Tafas v. Dudas are procedural, but that Rule 78 is inconsistent with 35 U.S.C. § 120 (i.e., that portion of the rule which limits the number of continuation applications), and therefore, affirmed-in-part, vacated-in-part, and remanded.  Judge Prost authored the opinion for the panel, with Judge Bryson filing a concurring opinion and Judge Rader filing an opinion concurring in part and dissenting in part.  Judge Prost concluded that:

[T]he Final Rules 75, 78, 114, and 265 are procedural rules that are within the scope of the USPTO’s rulemaking authority.  However, we find that Final Rule 78 conflicts with 35 U.S.C. § 120 and is thus invalid.  Accordingly, we affirm the district court's grant of summary judgment that Final Rule 78 is invalid, vacate its grant of summary judgment with respect to Final Rules 75, 114, and 265, and remand for further proceedings consistent with this opinion.

Because of the complexity of this case and the numerous arguments presented on appeal and before the district court, we think it is important to expressly summarize what we believe remains for the district court on remand.  This opinion does not decide any of the following issues:  whether any of the Final Rules, either on their face or as applied in any specific circumstances, are arbitrary and capricious; whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in this opinion; whether all USPTO rulemaking is subject to notice and comment rulemaking under 5 U.S.C. § 553; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive.

Patent Docs will provide a more comprehensive analysis of the decision in a subsequent post.

USPTO News: Competency of ISAs -- Potential Delays for Applications filed with the RO/US

    By Christopher P. Singer --

In a pre-OG Notice dated March 13, 2009, the U.S. Patent and Trademark Office addressed some issues relating to the competency of certain foreign patent offices to act as an International Searching Authority (ISA) under the PCT.  According to the Notice, the USPTO has found that a number of international applications filed with the United States Receiving Office (RO/US) have elected an ISA which is not competent to search and examine the entirety of the claimed subject matter.  An improper election of an ISA can delay issuance of the International Search Report and Written Opinion from the ISA.  The delay arises after the RO/US forwards a PCT application to the elected ISA, and the ISA determines that the application contains claims drawn to subject matter for which it has declared that it is not competent to act.  The ISA then returns the application to the RO/US, and the RO/US must then notify and invite the applicant to select a different ISA that is competent to handle the claimed subject matter.  The newly selected ISA will perform the international search in accordance with Chapter I of the PCT.

The Notice made particular mention about the limited competency of the European and Australian Patent Offices for applications filed with the RO/US.  Specifically, the EPO will not act as an ISA/IPEA for applications with one or more claims to a business method, and the AU-IPO will not act as an ISA/IPEA for applications with one or more claims drawn to mechanical engineering or analogous fields of technology as defined by certain International Patent Classification classes (IPCs).  The USPTO suggests that applicants can avoid significant processing delays when filing international applications by reviewing applications which name either the EPO or AU-IPO as ISA and making sure those applications contain only claims that those offices are competent to search.

USPTO News: Patent Office Extends Deferred Examination Comment Period

    By Christopher P. Singer --

In a Federal Register Notice (74 Fed. Reg. 10036) published on Monday, March 9, the U.S. Patent and Trademark Office announced that it is extending the deadline for submitting written comments regarding issues raised at last month's roundtable discussion on deferred examination, or any issue relating to deferral of examination, to May 23.  As we previously reported the Patent Office had initially announced that the deadline for submitting comments was February 26, 2009.  The roundtable discussion was held on Thursday, February 12, 2009.  According to today's Notice, the motivation behind the extending the period for submitting comments was to allow the public additional opportunity to view the recorded roundtable discussion webcast (viewable here) before submitting any comments.  In the days following the roundtable, the Office failed to provide a clearly marked link to the recorded roundtable discussion.  Anyone interested in a quick overview of the roundtable can review our previous summaries of the various participant viewpoints here (deferred examination proponents) and here (deferred examination opponents). 

The USPTO encourages people to submit written comments by e-mail addressed to [email protected].  Alternatively, comments can be submitted by U.S. Mail addressed to:  Mail Stop Comments -- Patents, Commissioner for Patents, P.O. Box 1450, Alexandria, VA 22313–1450, marked to the attention of Robert W. Bahr.

White House Seeks Comments on Rulemaking and Rule Enforcement Policy

    By David Boundy --

A notice and comment period of great importance to the patent community opened last week, and this period is scheduled to remain open only until March 16th.  This period arises as a result of a "Memorandum for the Heads of Executive Departments and Agencies" (74 Fed. Reg. 5977) issued by President Obama on January 30, 2009, directing the Director of the Office of Management and Budget (OMB) to produce a set of recommendations for a new Executive Order on Federal regulatory review.  In a notice published in the Federal Register, the OMB Director has invited public comments on how to improve the process and principles governing Federal regulatory review.

Regulatory Oversight and Executive Order 12,866

Executive Order 12,866 [1] is one of a handful of laws administered by the OMB [2].  The Executive Order requires agencies to analyze costs, benefits, and effects (both economic and non-economic) and to do cost-benefit balancing.  The Executive Order gives the OMB the authority to review rulemakings and approve or disapprove rules.  Importantly, the Executive Order requires an agency to regulate for the benefit of "the American people," not for the benefit of the agency itself.  Before regulating, an agency must:

• Identify a "specific market failure," "compelling public need," or "other specific problem";

• Examine whether the problem arises out of existing regulations or other law;

• Consider all alternatives (including not regulating, and, presumably, internal reforms) to make sure that the problem is best addressed by regulation, and that the regulation proposed is the best and most cost-effective solution to the problem;

• Study the problem and the regulation to ensure that the regulation is cost-benefit positive, using the best reasonably obtainable information [3]; and

• "[T]ailor its regulations and guidance documents to impose the least burden on society . . . consistent with obtaining the regulatory objectives."

Guidance Documents and the Final Bulletin for Agency Good Guidance Practices

Executive Order 12,866 was amended in January 2007 to cover "guidance documents," those informal agency documents issued within the supervisory authority of agencies to their employees, and as nonbinding general guidelines for the public.  "Guidance documents" include agency manuals, agency personnel training materials, public notices interpreting agency rules or statutes, statements of policy that do not rise to hard-edged rules, and the like [4].

Concurrently in January 2007, the OMB issued the "Final Bulletin for Agency Good Guidance Practices" [5].  Together, Executive Order 12,866 and the Final Bulletin establish the following requirements for agency guidance documents:

• Guidance documents may not bind or impose requirements on the public -- except perhaps in the limited role of "interpretative rules" under the Administrative Procedure Act (APA).  When an agency wishes to bind the public, it must use the rulemaking procedures required by the APA, Paperwork Reduction Act, Regulatory Flexibility Act, etc.  Guidance documents may include the text of properly promulgated regulations in order to consolidate and provide notice of binding regulations, but may not themselves be treated as binding regulations.

• When a guidance document uses mandatory language with respect to an agency or agency employee, that language is binding on the agency or employee, unless the employee obtains pre-clearance from fairly high up in the agency (not necessarily the agency head, but higher than a first-line manager).

• The agency is required to post contact information for an office in charge of overseeing employees to ensure compliance, and to ensure that guidance documents are not improperly treated as binding.

• Modifications to "economically significant guidance documents" (the M.P.E.P. is such a document) require notice and comment.

• The agency must list all guidance documents (examiner memoranda, examiner training materials, and the like) on a web page, and clearly identify which are still in effect and which are not [6].

These commonsense requirements phased in over 2007, and went into full effect in August 2007.  The Department of Commerce designated the M.P.E.P. as a "significant guidance document," the category that requires the highest level of scrutiny and care by an agency, in spring 2007.

This Request for Comment

The Obama administration is currently reviewing Executive Order 12,866 as a central part of its reevaluation of Bush-era regulatory policy.  The current Executive Order is tailored around agencies that issue substantive regulations, for example, environmental and workplace safety agencies.  In previous revisions of regulatory review Executive Orders, the OMB received relatively little public comment on regulatory review processes for agencies that have only procedural rule making authority, and that have complicated adjudicatory processes governed by procedural regulations.  Additionally, current Executive Order 12,866 reflects Bush Administration priorities.  One expects that the Obama administration will generally give agencies greater freedom to regulate.

The Federal Register notice specifically requests comments on these topics:

• The relationship between the regulatory oversight office within the OMB and the agencies;
• Disclosure and transparency;
• Encouraging public participation in agency regulatory processes;
• The role of cost-benefit analysis;
• The role of distributional considerations, fairness, and concern for the interests of future generations;
• Methods of ensuring that regulatory review does not produce undue delay;
• The role of the behavioral sciences in formulating regulatory policy; and
• The best tools for achieving public goals through the regulatory process.

Thus, the patent bar has an unusually effective and unusually important chance to have a big impact on the process of rulemaking, and on White House oversight of the USPTO.  Even though this round of comment is specifically directed to an update of Executive Order 12,866, the OMB has treated the Executive Order and Good Guidance Practices as closely-related subject matter, and comments that addressing either document will be helpful to the OMB.  Comments that might be helpful to the OMB would include the following:

• What are the regulatory oversight and rulemaking concerns specifically applicable to the PTO?  Special consideration might be warranted for:

• Agencies that have only procedural rulemaking authority, and that do not participate in, oversee, or study proceedings relating to enforcement, conduct, or commercial transactions in their subject matter areas, might not understand how procedure can affect costs and outcomes, or what the practical economic effects are, and might be required to seek more external help before regulating.

• Agencies whose senior officials earn bonuses calibrated to "objective factors" that would be influenced by proposed regulations might have conflicts of interest.  When those objective factors have been omitted from the agency's annual report for several years, that undisclosed conflict might raise issues that should be disclosed as part of any rulemaking.

• Agencies that have very little "revolving door" inflow of personnel from the private sector and therefore have little insight into the real-life economic effects of agency rules.  Such agencies might be required to seek additional input before regulating.

• How should Executive Order 12,866 be strengthened so that agencies can't "cheat"?  For example, the economic effect of a regulation is classified by the agency in order to signal to the OMB how much scrutiny it should give the rule during regulatory review.  But this gives agencies great temptation to fail to evaluate economic effect (so the effect can be estimated at zero), or under-report.  How should the OMB ensure that agencies fairly and accurately assess and report economic effects to the OMB?  What key terms should be defined to prevent cheating?  Are there particularly egregious examples of cheating that the OMB should use as case studies to design anti-cheating mechanisms? [7]  How should OMB handle future rule making requests from agencies that have cheated in the past?

• When and how should an agency regulate its internal conduct, the procedures that its own employees are to follow?  If a statute provides that senior agency officials "shall be responsible for the management and direction of all activities" of the agency, and perform their duties in a "fair, impartial and equitable manner," and requires that the agency's rules be "cost effective," what implementing regulations should agencies be required to adopt?  What regulations for conduct of agency employees should the agency be required to provide so that agency employees are not left to their own devices?

• What can the OMB do to help agencies ensure that they enforce existing rules governing intra-agency conduct? [8]  What supervisory checks should agencies be required to provide to ensure that rogue employees cannot run wild?  How should an agency be required to account for the costs it imposes on the public by failing to supervise its employees?  For the costs of failing to provide predictable regular procedures?  How should those facts affect the agency's efforts to impose regulations on the public?  Are there agencies that the OMB should know about, so that the OMB can exercise supervisory authority over agency supervisors, and assist them in complying with Good Guidance Practices and the intra-agency provisions of Executive Order 12,866?  The OMB would be interested in examples of bad agency behavior that can be supported with a record -- pure anecdote is seldom helpful.

• What steps should agencies take to implement Good Guidance Practices?  What kinds of ombudsman or supervisory access should agencies provide to ensure that the public can quickly and efficiently gain employee compliance with agency guidance?  How should an agency's employee compensation systems be designed to ensure that they do not incentivize breaches of the agency's procedural rules?  Are there examples of bad agencies that the OMB should know about, to use as case studies to set standards and rules to be followed by agency supervisory personnel?

Comments Go to the White House Office of Management and Budget

Those interested in submitting comments should note that the comments go to the OMB, and not the USPTO.  The IDS Rule, Markush Rule, and Appeals Rule were "delayed" (likely indefinitely, until the USPTO starts over with new Notices of Proposed Rulemaking that cure major procedural defects in these Notices of Proposed Rulemaking and other submissions -- and omitted submissions -- to the OMB) due to helpful comments received by the OMB during its comment periods directed to these rules.  The Federal Register notice asks that comments be emailed to [email protected].  In addition, comment letters concerning the USPTO should be copied to the OMB Desk Office having oversight responsibility for the USPTO, at [email protected].

Notes:

[1]  As amended by Executive Orders 13,258 and 13,422.

[2]  Other regulatory oversight laws administered by the OMB include the Paperwork Reduction Act, 44 U.S.C. §§ 3501-3519, the Information Quality Act, and the Final Bulletin on Agency Good Guidance Practices.  These are the laws under which the OMB "delayed" the Appeals Rule, IDS Rule, Markush Rule, and a major revision to the M.P.E.P. that the USPTO was attempting to "fly under the radar" last month (see Harold Wegner, "Sub-Federal Register 'Rulemaking' Now at the PTO in Defiance of the Emanuel Memorandum?" January 21, 2009).

[3]  For the Continuations and Claims rules, the USPTO based its cost analysis solely on interviews with Office staff, and (at least based on the record produced in Tafas v. Dudas) never asked a single practicing patent attorney to estimate compliance costs or economic effects of impaired patent rights (see "Certification Analysis under the Regulatory Flexibility Act:  Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications").

[4]  This merely reinforces the general principle that the Administrative Procedure Act (APA) "broadly defines an agency 'rule' to include nearly every statement an agency may make," Batterton v. Marshall, 648 F.2d 694, 700–01 (D.C. Cir. 1980) (citing 5 U.S.C. § 551(4), definition of "rule").  A "regulation" is merely one species of the broader genus of "rule."

[5]  Executive Office of the President, "Final Bulletin for Agency Good Guidance Practices," OMB Memorandum M-07-07 (Jan. 18, 2007), 72 Fed. Reg. 3432 (Jan. 25, 2007); and "Implementation of Executive Order 13422 (amending Executive Order 12866) and the OMB Bulletin on Good Guidance Practices," OMB Memorandum M-07-13 (April 25, 2007).

[6]  Additionally, the APA requires that all rules be published, and the agency must run a Federal Register to inform the public where that publication may be found.

[7]  The USPTO classified the IDS, Markush, and Appeal rules as "not significant," that is, having essentially zero economic effect.  The USPTO classified the Continuations and Claims rules into the middle category, "other significant," (0 < economic effect < $100 million per year) by splitting the rules apart (but only for E.O. 12,866 purposes -- they were treated as a single rule for Paperwork Reduction Act purposes), and reporting to the OMB only the costs of each as if implemented separately.

[8]  For example, an email from the office of Deputy Commissioner for Examination Policy John Love recently stated that examiners have absolute freedom to ignore much of the M.P.E.P. (particularly Chapter 2100), because the USPTO refuses to provide any enforcement mechanism.  Though 37 C.F.R. § 1.181(a)(1) states that every non-appealable action of an examiner is petitionable (and the Board has repeatedly held that M.P.E.P. examination procedure is not appealable), 35 U.S.C. § 3 requires that the Director and Commissioner supervise "every aspect" of examination, and the White House requires agencies to require employees to obtain supervisory pre-clearance before departing from guidance, the apparent view of the Office of Patent Examination Policy is that there are no predictable or enforceable patent examination policies.

David Boundy (at left) is Vice President of Intellectual Property for Cantor Fitzgerald L.P.