USPTO Acted Within its Rulemaking Authority

The following summary was provided by Joseph R. Robinson of Darby & Darby, New York, NY.

The U.S. Court of Appeals for the Federal Circuit released its opinion in the lawsuit challenging the implementation of the proposed USPTO rules on continuation applications and other USPTO procedures. Tafas v. Doll, Appeal No. 2008-1352 (Fed. Cir. March 20, 2009).

The Federal Circuit has held that Final Rules 75, 78, 114, and 265 are procedural rules that are within the scope of the USPTO’s rulemaking authority. However, Final Rule 78 conflicts with 35 U.S.C. § 120 and is invalid. The lower court’s summary judgment with respect to the invalidity of Final Rules 75, 114, and 265 has been vacated, and these rules have been remanded to the lower court for further proceedings. The Federal Circuit did not decide whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in the Federal Circuit’s opinion; whether all USPTO rulemaking is subject to prior notice and comment; whether any of the Final Rules are impermissibly vague; or whether the Final Rules are impermissibly retroactive.

Final Rule 78 pertains to continuation applications. Final Rule 78 provides that an applicant was only entitled to file two continuation applications as a matter of right. If an applicant wanted to file more than two continuation applications, he would need to file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application.”

Final Rule 114 pertains to requests for continued examination (“RCEs”). Under this rule, an applicant is allowed one RCE as a matter of right. For each additional RCE, the applicant must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted prior to the close of prosecution in the application.” The limitation on RCEs is applied on the basis of patent families rather than individual applications.

Final Rules 75 and 265 require an applicant who submits either more than five independent claims or twenty-five total claims to provide the examiner with information in an examination support document (“ESD”) which requires the applicant to conduct a preexamination prior art search, provide a list of the most relevant references, identify which limitations are disclosed by each reference, explain how each independent claim is patentable over the references, and show where in the specification each limitation is disclosed in accordance with 35 U.S.C. § 112, ¶ 1.

The lower court had found that these four rules exceed the scope of the USPTO’s rulemaking authority and had preliminarily enjoined the enactment of these new rules. The USPTO appealed.

The Federal Circuit first discussed whether the Final Rules were procedural or substantive rules. It agreed that the USPTO has the authority to make procedural rules, but not to make substantive rules. The Federal Circuit has held that the Final Rules challenged in this case are procedural. They govern the timing of and materials that must be submitted with patent applications Although they alter the manner in which the parties present their viewpoints to the USPTO, they do not foreclose effective opportunity to present patent applications for examination.

Regarding Final Rules 78 and 114, 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. Therefore, applications that are submitted in compliance with these timing requirements will be fully examined and given all of the benefits of the U.S. patent laws. The Federal Circuit did not believe that requiring applicants to raise all then-available amendments, arguments, and evidence by the second continuation application or the first RCE is so significant a burden that applicants will be effectively foreclosed from obtaining the patent rights to which they are entitled.

Final Rules 75 and 265 provide 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. The Examiner cannot substantively reject claims on grounds that the ESD did not prove that the claims are patentable. The Examiner still must set forth his own prima facie case of unpatentability. This rule may put a burden of production on the applicant, but the Examiner maintains the burden of persuasion. A procedural rule does not become substantive simply because it requires the applicant to exert more effort to comply, so long as the effort required is not so great that it effectively forecloses the possibility of compliance.

Judge Rader concurred and dissented because he believed that each of these final rules is substantive, not procedural. Therefore unlike the majority opinion, he would have found all of these Final Rules invalid on this point alone.

The Federal Circuit next considered whether the Final Rules are consistent with the U.S. Patent Act. The lower court had found that Final Rule 78’s requirement for the third and subsequent continuation applications was inconsistent with the portion of 35 U.S.C. § 120 that mandated that qualifying applications “shall have” the benefit of the priority date of the initial application. The lower court also found no statutory basis for fixing an arbitrary limit to the number of continuing applications and that whether there should be such a limit was for Congress to decide, not the PTO.

The Federal Circuit has agreed that Final Rule 78 is inconsistent with 35 U.S.C. § 120. However, the Federal Circuit based its ruling on the fact that Final Rule 78 attempts to add another requirement to 35 U.S.C. § 120 - that the application not contain amendments, arguments, or evidence that could have been submitted earlier. The statute only required four conditions for a continuation application - [1] the invention claimed in the application must have been properly disclosed in a prior-filed application; [2] the application must have been filed by inventor(s) named on the prior-filed application; [3] the application must have been “filed before the patenting or abandonment of or termination of proceedings on the first application or on an application similarly entitled to the benefit of the filing date of the first application”; and [4] the application must contain or be amended to contain a specific reference to the prior-filed application. The USPTO could not add a fifth condition, and Final Rule 78 is invalid.

Judge Bryson, in a concurrence, also believed that Final Rule 78 might be invalid because it would change the current law that all continuances in a series are deemed to have the same effective date as the first application, as long as at least one parent application is pending when the continuation application is filed. However, the majority did not address this point.

The lower court had found that Final Rule 114 (the availability of RCEs) conflicted with the Patent Act because it limits RCEs by application family rather by individual application and because it gives the USPTO Director the right to grant an unlimited number of RCEs per application at the USPTO’s discretion. The Federal Circuit has disagreed and has held that Final Rule 114 can properly be applied on a per family basis. Nothing in the U.S. Patent Laws prevents the USPTO from limiting the availability of second and subsequent RCEs.

The lower court had found that the ESD requirement violated 35 U.S.C. §§ 102, 103, 112, and 131, as well as the Federal Circuit’s precedent that applicants have no duty to search the prior art. However, the Federal Circuit has found that Final Rules 78’s and 256’s requirement for an EDS does not limit the applicant’s right to have as many claims as he desires. They simply require the applicant to submit an EDS. Additionally, the Federal Circuit found that requiring applicants to conduct a prior art search in conjunction with an EDS was within the PTO’s powers. Finally, the Federal Circuit found that requiring an EDS does not change the burden of proving unpatentability from the PTO to the applicant.