1. CaliforniaCalifornia  TexasTexas  New JerseyNew Jersey  North CarolinaNorth Carolina
1
Tafas/GSK: The Trail From Preliminary Injunction to
the Federal Circuit and Beyond
Presented by: Jerry R. Selinger
Patterson & Sheridan, LLP
jselinger@pattersonsheridan.com

2. 2
Timeline Overview
 January 3, 2006 - PTO publishes proposed new
rules dealing “Continuing Applications” and
“Patentably Indistinct Claims”
 500+ comments over four months
 August 21, 2007 - PTO publishes the “Final
Rules,” to be effective as of November 1, 2007
 August 22, 2007 - Tafas lawsuit filed
 October 9, 2007 - GSK suit filed

3. 3
Overview of Final Rules 78/114
 Final Rules 78 and 114
 two continuations or CIPs, plus one request for
continued examination, are allowed as a matter of
right
 Applicants may request additional examination with a
“petition and showing”
 Why the argument, amendment or evidence could not
have been presented in a prior application
 Applicants may file a “suggested restriction requirement”
 If accepted, the divisional is treated as an initial
application

4. 4
Overview of Final Rules 75/265
 Final Rules 75/265
 Permits 5/25 as a matter of right
 Applicants can present additional claims by
filing an “examination support document”
 Because of Final Rules 78/114, an applicant
can file up to 15/75 claims without an ESD
 But all patentably indistinct claims from all
commonly owned applications get included in
the total

5. 5
Crib Notes Version of GSK’s PI/TRO Brief
 The Final Rules are ultra vires
 They constitute substantive rules for which the PTO
lacks statutory authority
 No Chevron deference
 The Final Rules are inconsistent with the Patent Act
 The Final Rules are arbitrary and capricious
 The Final Rules have impermissible retroactive impact
 Pre-examination search obligation is impermissible
vague

6. 6
Crib Notes Version of PTO Response
 History of the Final Rules
 Applicants delaying conclusion of examination to
assess commercial viability of inventions
 Applicants filing deficient initial applications and using
continuations to work out issues of patentability
 GSK discloses a broad array of inventions, but delays
claiming them until it is advantageous for it to do so.

7. 7
PTO Response continued
 Plaintiffs are not likely to succeed on the merits
 PTO acted within its statutory grant of
rulemaking authority, 35 U.S.C. § 2(b)(2), in
enacting the Final Rules
 “The rules do not affect the truly substantive rights of
the patent applicant.”
 The rules govern application processing, just as
terminal disclaimer practice and the threshold showing
for reissue of a patent

8. 8
PTO Response continued
 Plaintiffs are not likely to succeed on the merits
 Final Rules are Consistent with the Patent Act
and are Reasonable
 Under Chevron, 467 U.S. 837, the court must defer to
the PTO’s rule because it is based on a “permissible
construction” of the statute [§ 120]
 Section 120 is not absolute, citing Symbol Techs., 277
F.3d 1361 (Fed. Cir. 2002) and In re Bogese, 303 F.3d
1368 (Fed. Cir. 2002)

9. 9
PTO Response continued
Rule 78 (continuing application rule)
 In re Henriksen, 399 F.2d 253 (CCPA 1968)
involved an absolute limit, unlike the PTO
rules. (Its also very old.)
 Section 120 cannot be construed as
absolutely unlimited in view of § 112 and §
251 (reissue)
 Section 120 does not authorize purposeful
delay

10. 10
PTO Response continued
 Rule 114 (request for continued examination)
 Section 132 cannot be construed as
absolutely unlimited
 PTO has complied with the mandate in
Section 132(b) to prescribe regulations for the
continued examination of applications
 Rules 75/265 (claim limits rules)
 Chevron deference
 Not incomprehensibly vague; and no
constitutionally-protected interest

11. 11
PTO Response continued
 Final Rules are not retroactive
 A regulation is impermissibly retroactive only if it “[1]
would impair rights a party possessed when he
acted, [2] increase a party’s liability for past conduct,
or [3] impose new duties with respect to transactions
already completed.” Landgraf, 511 U.S. 244, 280
(1994) (emphasis added).
 Filing of applications do not create any rights; patent
applications do not give rise to property rights.
Marsh, 128 U.S. 605, 612 (1888).

12. 12
Amicus briefs are not a matter of right
 Motions for leave to file amicus briefs, by
 AIPLA (October 25)
 HEXAS et al. (October 26)
 Elan Pharma. (October 29)

13. 13
The road to oral argument
 PTO initial position on amicus briefs – untimely
 PTO also objects to AIPLA as containing new
arguments
 So, I went to DC to argue the motion for leave
 Where the Judge invited oral argument by amici
on the merits

14. 14
AIPLA Position at the PI/TRO Stage
 The retroactive impact of applying the Final
Rules to pending applications will cause
irreparable harm – loss of trade secrecy through
publication
 The public interest favors interim injunctive relief

15. 15
10/31 District Court Opinion
 PTO does not have general substantive
rulemaking authority
 GSK created “a colorable question” as to
whether the Final Rules are truly substantive.
 GSK raised “serious concerns” as to whether
the rules comport with the Patent Act.
 Rule 78
 Symbol Techs. suggests PTO cannot limit the
number of continuing applications
 Petition option does not tip the balance.

16. 16
10/31 District Court Opinion
 Rule 114
 Neither party showed strong likelihood of
success
 Rules 75/265
 Neither party showed strong likelihood of
success
 GSK has not shown a real likelihood of success
on whether the rules are arbitrary and capricious

17. 17
10/31 District Court Opinion
 The Landgraf presumption against statutory retroactivity
is not limited to cases involving “vested rights.”
 Petition requirement “imposes new duties” on completed
transactions, i.e., with respect to initial applications
 Rules retroactively alter the bargain on which inventors
rely in surrendering their trade secret rights [citing AIPLA
amicus brief].
 GSK has a “real likelihood of success” on this issue

18. 18
10/31 District Court Opinion
 GSK has shown likelihood of success on
prevailing on claim that Rule 265 (ESD) is
unconstitutionally vague
 Public interest is served by continuing the status
quo- noting all three amicus briefs support a PI

19. 19
Cross Motions for Summary Judgment
 Tafas
 The Final Rules Are Contrary to the Patent
Act
 Violate 35 U.S.C. § 120
 Substantive rules - violate 35 U.S.C. § 2
 Violate International Treaties
 Violate 35 U.S.C. §§ 41, 112 by altering duties and fees
 Violate 35 U.SC. §§ 121, 122, 132
 Violate 35 U.SC. §§ 101, 111, 112, 131 and 151 by
altering the burden of proof and causing loss of
substantive rights
 Violate Bayh-Dole Act

20. 20
Cross Motions for Summary Judgment
 Tafas (continued)
 The Final Rules violate the U.S. Constitution
 The Final Rules were proposed and enacted
contrary to the APA
 The Final Rules were promulgated in violation
of the Regulatory Flexibility Act

21. 21
Cross Motions for Summary Judgment
 GSK
 PTO cannot promulgate rules inconsistent with established law
and is entitled to no deference when it seeks to do so
 Arbitrary and mechanical limits in Final Rules 78, 114 and 75 are
contrary to established patent law
 Pre-exam search requirement for ESDs is incomprehensibly
vague
 PTO has no authority to implement the Final Rules retroactively
 Because the PTO failed to adequately consider the Taking of
Constitutionally protected property rights in patent applications,
its actions are arbitrary, capricious and contrary to law
 Rule 75 is not a logical outgrowth of the proposed rules
 Limits as a whole are arbitrary and capricious

22. 22
Cross Motions for Summary Judgment
 PTO
 Final Rules do not violate the Patent Act
 PTO is entitled to Chevron deference, whether they are
procedural or substantive (but they are procedural)
 Final Rules are consistent with the Patent Act [§§ 111,
112, 120, 131, 132 and 151]
 Tafas challenges
 PTO did not act in an arbitrary or capricious
manner
 Final Rules are not retroactive

23. 23
Cross Motions for Summary Judgment
 PTO (continued)
 Final Rules constitutional under the Fifth Amendment
 Tafas cannot prevail on his Patent Clause claim
 GSK does not raise an actionable constitutional
vagueness challenge
 The Final Rules did not require notice under the APA,
but in all events are a logical outgrowth of the
proposed rules
 PTO complied with the regulatory flexibility act

24. 24
Amicus Briefs
 Three filed in support of the PTO
 Far more filed in support of Tafas and GSK, including
AIPLA

25. 25
Amicus Briefs
 AIPLA – focused on retroactivity
 Trade secrets have been published, and trade
secrecy thus surrendered, in reliance on
fundamental principles of law that have
applied for more than a century
 Retroactive impact on common prosecution
practices
 PTO’s options for mitigating the harsh new
restrictions are for the vast majority of
applicants illusory [“SRR,” “ESD,” and petition]

26. 26
Amicus Briefs
 AIPLA (continued)
 The retroactive Application of the Final Rules
violates Landgraf
 They “impair rights a party possessed when he acted”
 Rights are not limited to vested rights
 Owners of patent applications have sufficient rights to
trigger Landgraf
 35 U.S.C. §§ 261, 181, 183, 154(d), treated as
property by the IRS, and in bankruptcy
 They impose new duties with respect to transactions
already completed
 The retroactive application of the Final Rules
violates Bowen

27. 27
Summary Judgment Decision
 The “Final Rules are substantive in nature and
exceed the scope of the PTO’s rulemaking
authority under 35 U.S.C. § 2(b)(2).”
 The Final rules are “void” as “’otherwise not in
accordance with law’” and “’in excess of
statutory jurisdiction [and] authority’”
 Court declines to reach the other issues raised
by the parties.

28. 28
Decision Details
 Section 2(b)(2) empowers the PTO to establish
regulations ‘not inconsistent with law” to “govern
the conduct of proceedings in the Office,”
 This does not vest the PTO with any general
substantive rulemaking authority.
 Merck, 80 F.3d 1543 (Fed. Cir. 1996) and its
progeny
 Animal Legal Def. Fund, 932 F.2d 920 (Fed.
Cir. 1991)
 Recent congressional debate about whether
to grant the PTO substantive rulemaking
authority

29. 29
Decision Details
 PTO efforts to abolish the substantive-procedural
distinction rejected as contrary to Federal Circuit and
Supreme Court case law
 PTO does not have authority to issue substantive
rules
 PTO does not have authority to make substantive
declarations interpreting the Patent Act.
 PTO argument that Final Rules are procedural because
they do not alter substantive requirements for novelty,
nonobviousness or definiteness rejected

30. 30
Decision Details
 Final Rules are not rules relating to application
processing that have substantive collateral
consequences
 They are substantive rules that change existing
law and alter the rights of applications under the
Patent Act

31. 31
Decision Details
 Changes “constitute a drastic departure from the
terms of the Patent Act as they are presently
understood.”
 Final Rule 78
 Petition standard “effectively imposes a hard limit on
additional applications.”
 This “may also impact applicants’ rights under Sections
102 and 103”
 Final Rule 114
 “clear departure” from the plain language of section 132
 “shall” in the statute allows for an unlimited number of
RCEs at the applicant’s discretion

32. 32
Decision Details
 Final rules 75/265
 Section 112 does not place any mechanical limits on
the number of claims an applicant may file
 ESD requirement changes existing law and (contrary to
existing Federal Circuit law) shifts the examination
burden from the PTO to applicants
 Applicants have no duty to conduct a prior art search
 Language in §§ 102, 103, 131

33. 33
THE BROAD ISSUES ON APPEAL
 What deference must the court give to the PTO’s
position that it has the authority to promulgate
the Final Rules?
 What deference must the court give to the PTO’s
position that the Final Rules are “consistent” with
the Patent Act?
 Are the Final Rules substantive rules and/or
non-substantive rules inconsistent with the
Patent Act?

34. 34
THE APA AND THE PTO
 5 U.S.C. § 553(b) defines different process
requirements depending on whether a regulation
is (a) “substantive” or (b) “interpretative” or
“procedural”
 More importantly, congress has not authorized
the PTO to issue “substantive” regulations.
 Chevron, 467 U.S. 837, defines “explicit” and
“implicit” legislative delegations of authority to
agencies.

35. 35
THE FEDERAL CIRCUIT DECISION
 Agreement that the PTO lacks substantive
authority
 Majority rejected PTO demand for deference to
its view of whether it has authority to issue
substantive regulations
 Majority agreed that PTO interpretations of
statute pertaining to its delegated authority get
Chevron deference.

36. 36
THE OPINION CONTINUED
 Critical point of departure between majority and
dissent start from Chrysler Corp. v. Brown, 441
U.S. 281 (1979).
 Majority limited Chrysler to distinguishing
substantive from interpretative rules, and “not
dispositive on the issue of whether the Final
Rules are procedural.”
 Majority relied on JEM, 22 F.3d 320 (D.C. Cir.
1994) which held that rules dismissing
applications for FCC licenses without a right to
cure were not substantive.

37. 37
THE OPINION CONTINUED
 Majority relied on JEM, 22 F.3d 320 (D.C. Cir.
1994) which held that rules dismissing
applications for FCC licenses without a right to
cure were not substantive.
 Noted statement in JEM that agency actions that
do not themselves alter rights or other interests
of parties are procedural, even if they alter the
way in which parties present themselves or their
viewpoints.

38. 38
THE OPINION CONTINUED
 And on statement in JEM that rules did not
change substantive standards by which FCC
evaluates licenses, even thought they might
result in loss of substantive rights.
 Then, the Majority held that the Final Rules were
procedural because “[i]n essence, they govern
the timing of and materials that must be
submitted with patent applications.”

39. 39
THE OPINION CONTINUED
 It dismissed impact of Rules 78 and 114,
because “applicants who include all arguments,
amendments and evidence available at the time
of filing” will not be limited by Rule 78.
 And with like reasoning for RCEs.
 The Majority refused to accord weight to the
PTO’s published responses which strongly
suggest the PTO intends to deny additional
continuations in almost all instances.
 Responses are “not binding on the PTO”
 Phrased as “likely” or “unlikely”
 The courts are “free to entertain challenges”

40. 40
THE OPINION CONTINUED
 Turning to the ESD rules, Marjority disagreed with district
court that they shifted the burden to applicants.
 Distinguished burdens of proof and persuasion
 Looked at 2 other PTO rules that required applicants to provide
some information in specific circumstances.
 Declined to draw line between procedure and substance based on
distinctions between the prior rules and those under challenge
 If PTO applies Rules in draconian fashion, “judicial review will be
available”
 Rebuffed inequitable conduct concerns – not within the PTO’s
control and “applicants are expected to be forthright about their
inventions”

41. 41
THE OPINION CONTINUED
 But even a procedural rule that is inconsistent with an
express provision of the Patent Act is invalid
 Rule 78 is inconsistent with 35 U.S.C. § 120 because it added
an additional requirement to those set forth in the statute.
 But accepted argument that there is an ambiguity in section 120
concerning permissible length of a chain of serial continuation
applications
 But deferred to PTO’s “reasonable interpretation” of 35 U.S.C. §
132 concerning RCEs
 And found that the ESD rules merely add an additional
procedural step for the submission of applications

42. 42
THE CONCURRING OPINION
 It is neither necessary nor helpful to consider
whether the regulations are “substantive,”
“interpretative,” or “procedural”
 The question of whether the PTO could enact a
rule addressing only serial continuations and
limiting such continuations to two remains open.

43. 43
THE DISSENT
 The Final Rules are substantive
 The case involves determining whether the Rules are
substantive or other, so Federal Circuit precedent
concerning rules classification remains relevant
 The majority took a sentence from JEM out of context
 JEM held the rule was “not so significant” as to be
classified substantive
 Proper test is a “case by case” inquiry

44. 44
THE DISSENT CONTINUED
 Chamber of Commerce, 174 F.3d 206 (D.C. Cir.
1999)
 rule imposing on employers “more than the incidental
inconveniences of complying with an enforcement
scheme” was substantive
 Here, many of the 500+ comments evidenced more
than incidental inconveniences
 Agreed with the district court that the Final Rules
constitute “a drastic departure from the terms of the
Patent Act.”

45. 45
THE DISSENT CONTINUED
 The potential loss of priority date for failing to
meet the ESD requirements was “sufficiently
grave” to mark Rule 78 as substantive
 Rule 114 (RCE), as it interacts with Rule 78,
imposes a new burden on inventors that require
more than adherence to existing law, and is
substantive

46. 46
THE DISSENT CONTINUED
 ESD rules “drastically affects” an applicant’s
rights and obligations under the Patent Act
 With less ability to protect the subject matter
disclosed, “an inventor will have less incentive to
disclose the full dimension of the technological
advance.”
 “Final Rule 75 frustrates the quid pro quo
contemplated by the Patent Act.”

47. 47
THE DISSENT CONTINUED
 Rules 265 imposes a new obligation of
conducting a prior art search and opining about
patentability over the closest prior art.
 These burdens go beyond “adherence to
existing law” and are more than “incidental
inconveniences of complying with an
enforcement scheme”
 The district court got it right

48. 48
OBSERVATIONS
 Politics at play
 Concern that the district court decision might limit
future reasonable actions by regulation
 But the PTO took a knowing risk
 Regulations promulgated under one administration
left to another to deal with

49. 49
OBSERVATIONS CONTINUED
 Chrysler, 441 U.S. 281
 “the central distinction among agency regulations
found in the APA is that between ‘substantive
regulations’ on the one hand and ‘interpretative rules,
general statements of policy, or rules of agency
organization, procedure, or practice’ on the other”
 Characteristic inherent in concept of substantive rule
– is “affecting individual rights and obligations”
 Facts in Chrysler
 Reverse FOIA
 Was disclosure “authorized by law” based on a substantive
agency regulation?
 Regulations seemed substantive but were not properly
promulgated as such

50. 50
OBSERVATIONS CONTINUED
 Chrysler draw a critical distinction between substantive
and non-substantive regulations
 Regulations were regarded as substantive because they
impacted, among other things, the confidentiality rights
of those who submit information to the government
 While some procedural regulations also affect
substantive rights, the Chrysler test remains controlling
law
 The test for whether a regulation is substantive should
be “case by case” based on the overall impact


51. 51
OBSERVATIONS CONTINUED
 Reminder of circumstances not likely to be
sufficient to justify an additional continuation
 Submitting newly discovered prior art
 Amending claims as a result of newly discovered prior
art
 Learning the examiner is under a misunderstanding
 The examiner changing position on claim construction
 Realizing a limitation is unduly limiting
 Tailoring claims to protect a newly commercially
viable product
 Tailoring claims to react to a newly discovered
competing product

52. 52
OBSERVATIONS CONTINUED
 Acquiring the necessary financial resources
 Responding to an adverse court decision
 Finding errors made by a practitioner
 Physical disability of the applicant
 Theory v. Reality?? What strategy for patent
protection do practitioners adopt in the face of
thesePTO signpoints?
 ESD – additional costs of compliance
 Is that merely procedural?

53. 53
OBSERVATIONS CONTINUED
 Consider effect on remand issues of decision
that
 continuation rule is invalid
 ESD rules are not so draconian as to make
compliance impossible
 RCE and claim limitation rules are procedural and
valid

54. 54
What Now?
 PTO Options
 Appeal – Fed. R. App. P. 4 (a)(1)(B) – 60
days after the judgment or order appealed
from is entered -
 Lobby congress for substantive rulemaking
authority
 Consider alternatives such as enhanced fees
 Work with users?

55. 55
What Now?
 GSK/Tafas Options
 File petition for rehearing en banc
 Lobby the new administration
 March 24, 2009 letter from AIPLA

56. 56
The Saga Continues
 Thanks for your attention