USPTO Rule Changes Voided by District Court

The United States Patent and Trademark Office (“USPTO”) has been enjoined from implementing its controversial rules relating to the number of continuation applications that could be filed based on a single initial application and requiring that applicants carry out their own searches and analysis of the art if they desired more than twenty five claims or five independent claims.

Last summer the USPTO promulgated final rules that if implemented would have required applicants in most cases to limit the number of continuation or continuation-in-part applications in a patent family to two, confined applicant’s rights to file a request for continued examination (RCE) to one per family (the continuations rules) and imposed requirements to carry out a search and file an examination support document (ESD) to explain the patentability of independent claims prior to examination if the application contained more than five independent claims or twenty-five claims in all (the claims rules). The rules were due to come into effect on November 1, 2007. On October 31, following applications for judicial review of the rules by Triantafylos Tafas and Smithkline Beecham Corporation, the U.S. District Court for the Eastern District of Virginia issued a temporary restraining order and preliminary injunction preventing the rules from coming into effect and calling for briefing on the issues.

All parties filed motions for summary judgment. On April 1, 2008, the District Court issued its ruling on these motions holding that:

Because the USPTO’s rulemaking authority under 35 USC 2(b)(2) does not extend to substantive rules, and because the Final Rules are substantive in nature, the Court finds that the Final Rules are void as “otherwise not in accordance with law” and “in excess of statutory jurisdiction [and] authority” 5 USC 706(2).

US statutory law on judicial review as set out in 5 USC 706 (2), permits a court to hold the actions of an agency such as the USPTO unlawful and to set such actions aside if they are, inter alia, “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” or if they are “in excess of statutory jurisdiction, authority, …” The Patents Act in 35 USC 2(b)(2) grants the USPTO authority to

Section 553 of title 5 requires federal agencies to give notice of proposed rulemaking before rules come into effect, but “except when notice is required by statute” does not apply to “rules of agency organization, procedure or practice”.

Although other issues had been pleaded by the petitioners for judicial review, the court opted to decide the case before it solely on the question of whether the rules promulgated by the USPTO fell within the scope of its rule-making powers as set out above. Key issues therefore were whether the rules promulgated by the USPTO last summer simply governed “conduct of proceedings in the Office” and whether they were “otherwise not in accordance with law”.

The Court noted that prior case law had drawn a distinction between the powers of the USPTO to make procedural rules and substantive rules, holding that the USPTO had no authority to make rules of the latter type. The Court also noted that Congress had considered and declined to give the USPTO the power to make substantive rules. Consequently in the present case, if the rules promulgated by the USPTO were deemed to be substantive, they would be null and void.

The court found both the rules relating to continuations and RCEs and the rules relating to the requirements for a search and an examination support document for applications containing more than five independent claims or twenty-five claims in all to be substantive.

On the continuations rules, the Court noted that prior case law had held that “there is no statutory basis for fixing an arbitrary limit to the number of [continuing] applications that may be filed and retain the benefit of the priority date” In re Henriksen (CCPA 1968). After noting that the rules under consideration did not “completely prohibit” applicants from filing more than two continuations or continuations-in-part, the Court pointed to statements by the USPTO that the rules would be applied strictly to conclude that they “effectively impose a hard limit on additional applications”. As such the rules would change the existing law. Similarly on the imposition of a limit on the filing of RCEs, the Court found the limitation of one per family to be a clear departure from the language of 35 USC 132 which provides for the filing of an RCE for all applications. Furthermore Congress in enacting the American Inventors Protection Act had pronounced that the possibility of filing an RCE should apply to all applications filed on or after June 8, 1995.

On the claims rules, it was noted that many prior cases had held that the applicant should be allowed to determine the number and scope of his claims. The USPTO already had the right on a case by case basis to reject claims for multiplicity under 35 USC 112. In re Flint (CCPA, 1969). The new rule, however, imposed a “mechanical limit”. The court noted that the rule permitted more than five independent claims or twenty-five claims in all if a search were carried out and an examination support document (ESD) filed. However, contrary to the submissions of the USPTO, the Court saw the change as being more than procedural. The court held:

the ESD requirement 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. [The rule] demands that applicants conduct a broad search of patents, p[atent applications, and literature, and provide, among other things, a “detailed explanation” of “how each independent claim is patentable over the cited references”. However, the Federal Circuit has stated that applicants have “no duty to conduct a prior art search” … Frazier v. Roussel Cine Photo Tech, Inc. (Fed. Cir. 2005).

Furthermore, the Court noted that 35 USC 102 provides that a patent shall be granted “unless” certain conditions apply and 35 USC 131 states that the USPTO “shall cause an examination to be made.” Since the Court of Appeals has held that these provisions place the burden of proof on the examiner to set out a prima facie case of unpatentability (In re Warner, CCPA, 1967), it follows that “by shifting the examination burden away from the USPTO, the ESD requirement manifestly changes existing law and alters applicants’ rights.”

The court therefore held that both the continuations rules and the claiming rules had the effect of changing substantive law and so were beyond the USPTO’s rule-making powers.

If it chooses, the USPTO may appeal this decision to the Court of Appeals to the Federal Circuit.