US Appeals Court Hears High-Profile Case On USPTO Power Over Patent Rules

By Dugie Standeford for Intellectual Property Watch
Before a packed audience, the United States Court of Appeals for the Federal Circuit (CAFC) Friday tackled the highly controversial dispute between the US Patent and Trademark Office (USPTO) and much of the patent bar over rules capping the number of continuation requests and claims patent seekers can submit without incurring additional expenses and paperwork.

Tafas v Dudas began in 2006, when the USPTO, facing a mounting backlog of patent applications, proposed restricting the number of continuing applications, requests for continued examinations (RCEs) and claims applicants can file as a matter of right. The rules limited the number of continuing applications to two, plus a single RCE, and allowed a total of five independent claims or 25 total claims. Over these thresholds, patent seekers were required to show why they needed additional continuations or submit supplementary information to support the need for extra claims.

In August 2007, Connecticut inventor Triantafyllos Tafas sued the USPTO, claiming the rules substantially changed the regulatory landscape by cutting off future continuing applications, causing him to lose potential rights to any inventions flowing from his work. Pharmaceutical company GlaxoSmithKline later joined the case.

The rules were to have become effective in November 2007 but were temporarily blocked (IPW, Patent Policy, 5 November 2007). In December 2007, the plaintiffs sought judgment on the ground that the USPTO lacked the authority to promulgate the rules. In April 2008, a US federal court in Virginia voided the rules, saying the agency overstepped its authority by issuing substantive, as opposed to procedural, rules (IPW, Patent Policy, 3 April 2008).

The USPTO appealed the decision. It contended that it not only has the statutory authority to carry out this kind of rulemaking, but that its ability to do so deserves deference pursuant to a landmark US Supreme Court decision, said Stephen Kunin, Oblon, Spivak partner and patent attorney, and former USPTO deputy commissioner for patent examination policy. The agency also challenged lower court rulings that placing a “hard limit” on continuation applications conflicts with law, Foley & Lardner patent attorney Harold Wegner said.

“This is all about power,” specifically the balance of power between the judicial and executive branches of US government, Kunin said. The administration wants the highest level of deference for its rulemaking, while the CAFC has historically held that the USPTO is not a regulatory agency and cannot make substantive rules, he said.

The court appeared to lean toward affirming the lower court ruling, attorneys who attended the argument said later.

The three judges seemed concerned about the substantive nature of the rules as well as whether the USPTO had the authority to make them, said Paul Rivard, a senior partner at Banner & Witcoff who attended the oral argument. Nevertheless, they were open to the agency’s legal and policy arguments as well, he said.

One judge told the USPTO that “it sounds like you need a new law,” said Woodcock Washburn attorney Jane Inglese.

An Obama Factor?

The CAFC will issue a decision in due course which could ultimately result in an appeal to the US Supreme Court. Meanwhile, attorneys said the incoming Obama administration likely will not have much of an impact on the issues of the case.

With a new director at its helm, the USPTO could voluntarily withdraw the rules and abandon its appeal, Rivard said. But he said that is unlikely. The agency believed it necessary to take the matter at least as far as the CAFC level to establish precisely what rulemaking authority it has, he said.

The new administration “will be no different” from previous ones in its desire to ensure that the executive branch retains as much power as it thinks it is entitled to, said Kunin. But there may be some appetite to take a fresh look at whether these specific rules are the right thing to do, he said.

From the CAFC’s perspective, the longer the case drags out, the better for everyone, because it will provide more clarity in the future, Kunin said. Not deciding it before Obama’s inauguration will allow the new administration to take a different action, such as retracting its appeal, but would leave the key deference-power issue unresolved, he said.

The underlying understanding is that “if change [in the rules] has to come, it has to come from Congress,” Inglese said.

The USPTO sought substantive rulemaking authority as part of a patent reform package offered this year by Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat. The measure stalled out in April (IPW, Patent Policy, 15 April 2008) and its future is uncertain.

The full House Judiciary Committee recently wrested control of intellectual property issues from its Subcommittee on Courts, the Internet and IP, but American Intellectual Property Law Association Executive Director Q. Todd Dickinson predicted the final intractable issues will be dealt with by the Senate, unless the courts step in to resolve them (IPW, 14 November 2008).

Leahy may be interested in giving patent reform one last try before Congress ends this year if he can break the deadlock, Kunin said. But the Judiciary Committee is likely to be much more focussed on vetting Obama’s cabinet selections than on controversial patent legislation, he added.

Dugie Standeford may be reached at info@ip-watch.ch.