Federal Circuit Grants U.S. Patent and Trademarks Office Power to Limit Patent Applications
By Sharona Hakimi – Edited by Caitlyn Ross
Tafas v. Doll
Federal Circuit, March 20, 2009, No. 2008-1352
On March 20th, the Federal Circuit affirmed in part and vacated in part a decision by the United States District Court for the Eastern District of Virginia in a suit that challenged rules proposed by the U.S. Patent and Trademarks Office (USPTO). Tafas, the plaintiff, contested the USPTO’s proposed rules that limited the number of continuation applications petitioners may file and the number of claims they can include within each application. Judge Prost, writing on behalf of the Federal Circuit, held that the new rules were procedural and thus “within the scope of the USPTO’s rulemaking authority.” However, the case was remanded to determine if the rules should be invalidated on other grounds. The court’s decision confirmed that USPTO does have the power to change its rules and restrict the way patent applications may be filed.
Patent Docs summarizes the case and outlines the Federal Circuit decision. Patently-O highlights and explains the proposed changes to USPTO rules 78 (Continuations), 114 (Requests for Continued Examinations), and 75 and 265 (Claims). Bnet Pharma discusses the potential effect of the decision on drug companies who rely heavily on their ability to patent chemicals.
The conflict arose in 2007 when, in an effort to decrease the backlog of patent applications, the USPTO proposed rules that would limit patent applications to 5 unique claims and 25 total claims per invention. The proposed rules would also limit the number of requests to reconsider patent applications as well as requests for continuations, thereby curbing the number of chances to amend a patent application. In a summary judgment hearing in May 2007, the District Court for the Eastern District of Virginia blocked implementation of the new rules, finding the changes to be substantive and beyond the scope of the USPTO’s authority.
On appeal, the Federal Circuit first addressed the rulemaking authority of the USPTO. 35 U.S.C. § 2(b) provides USPTO with procedural and not “general substantive rulemaking power.” The court refused to grant Chevron deference to the USPTO with regard to substantive rulemaking. However the court did grant Chevron deference to the USPTO’s interpretation of “statutory provisions that relate to the exercise of delegated authority.”
The court then looked to the proposed rules offered by the USPTO, which it found to be procedural and thus within the scope of the USPTO’s rulemaking authority. However, it found that one of the proposed final rules, Rule 78, conflicts with 35 U.S.C. § 120 and is therefore invalid. Thus, the Federal Circuit affirmed the summary judgment with regard to invalidating Rule 78, but it vacated the ruling for Rules 75, 114, and 265.
Notably, the case was ultimately remanded back to the lower court to determine “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.”
The Federal Circuit acknowledged that these new rules assign a large amount of power to the USPTO to grant or reject petitions: “[W]e are mindful of the possibility that the USPTO may in some cases attempt to apply the rules in a way that makes compliance essentially impossible and substantively deprives applicants of their rights.” However, the court emphasized that judicial review will be available under 5 U.S.C. § 706, so petitioners may appeal to courts on a case-by-case basis to overturn results.
Judge Rader notably dissented, stating that he would affirm the decision of the district court, holding that the rules were substantive: “Because the Final Rules drastically change the existing law and alter an inventor’s rights and obligations under the Patent Act, they are substantive and the PTO exceeded its statutory rulemaking authority.”
This case was followed closely by multiple industries that rely heavily on patents such as the drug and tech industries. Some larger companies including IBM and Apple favored the new rules, claiming that they will increase efficiency and thereby improve patent quality and remove unnecessary paperwork for the USPTO. Critics of the rules largely include biotech and pharmaceutical companies, since they tend to accrue large numbers of patent claims and continually amend their applications as their research develops.