Federal Circuit Decides Appeal of PTO Rules

The Federal Circuit has issued its long-awaited decision in Tafas v. Doll concerning the PTO’s proposed continuation and claim limitation rules.  The good news is that this case is far from over.  I have to admit that when I previously wrote about this case and the argument, I didn’t think that would be the good news.

In a 2-1 opinion written by Judge Prost, the Federal Circuit held that the PTO continuation rules are invalid as conflicting with 35 U.S.C. § 120, but reversed the district court’s ruling that the claim limitation rules and the RCE limitation rules were also invalid.  The court, along with a concurring opinion by Judge Bryson and a dissenting opinion by Judge Rader, makes a number of interesting statements.

Judge Prost’s OpinionJudge Prost

First, the court agreed that the PTO does not have general substantive rule-making power.  The court continues, however, by finding that the rules challenged in this case are procedural and not substantive.

[W]e conclude that the Final Rules challenged in this case are procedural. In essence, they govern the timing of and materials that must be submitted with patent applications. The Final Rules may “alter the manner in which the parties present . . . their viewpoints” to the USPTO, but they do not, on their face, “foreclose effective opportunity” to present patent applications for examination.

We do 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.

The court then makes some curious statements about the rules regarding filing additional continuations and RCEs.

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.

In this instance, the court seems to be saying that the PTO will act reasonably and permit additional continuations and RCEs that applicants may need to fully protect their inventions.

One of the responses to this position that the court noted and that was raised by the district court is that the PTO, in answer to comments raised on the rules and in other public settings, has made it clear that it “intends to deny additional applications in almost all circumstances.”  The court ignored this concern, stating that these statements are not binding on the PTO or on any court.  Applicants are free to challenge the PTO’s determinations by filing lawsuits in specific circumstances (yeah, that’s going to happen).

The court also made another enlightening statement when responding to concerns about Examination Support Documents (ESDs), which were part of the claim limitation rules.

We are aware that some applicants attempt to say as little as possible during prosecution so that the precise boundaries of their claims will be open to argument as competitors’ products enter the market and new prior art references are found during litigation. However, we consider this practice to be a burden on the patent system, not a right that can be invoked to void the Final Rules.

Uh, could this be because every time the Federal Circuit gets the opportunity, it uses applicants’ statements during prosecution against them?  See, e.g., Festo.

As noted above, the court did find that the continuation limitation rule conflicts with § 120.  This section sets forth the requirements for filing a continuing application that shall have the same effect as though filed on the date of the prior application.  None of these requirements includes that the application not contain amendments, arguments, or evidence that could have been submitted earlier.  Thus, the rule is invalid.

As to the other rules, the court found the PTO’s interpretation reasonabe and granted the agency deference under Chevron.

Remand Instructions

The good news is found at the end of the court’s opinion.

Because of the complexity of this case and the numerous arguments presented on appeal and before the district court, we think it is important to expressly summarize what we believe remains for the district court on remand. This opinion does not decide any of the following issues: 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.

Whoa!  The district court sure does have a lot of work ahead of it.

Judge Bryson’s Concurrence

Judge Bryson filed a concurring opinion where he argues that whether the PTO rules are substantive or procedural is not important and not helpful to his analysis of the issues in this case.  While he agrees with the court’s ruling on the particular rules, he provides the PTO with instructions on how it could draft a rule that, in his opinion, would limit “serial continuations”, i.e., continuations that are not co-pending with the original application.

Judge Rader’s DissentJudge Rader

Finally, Judge Rader wrote a vigorous dissent where he argues that he would affirm the district court on all grounds.  He argues that the rules are clearly substantive because they “affect individual rights and obligations, and mark a startling change in existing law and patent policy.”  Although he relies on the same case as the majority opinion, he reaches a different conclusion on the test for procedural versus substantive rules.

To my eyes, this question of degree must guide this court’s assessment of the substantive nature of the PTO’s Final Rules.

In the remainder of his opinion, Judge Rader agrees with the district court that the rules conflict with numerous provisions of the Patent Act and should be struck down as invalid.

What’s Next?

The plaintiffs in this case may request rehearing before the entire Federal Circuit.  It is difficult to gauge whether the court would take the case en banc, but just on this panel, the judges were split three ways on several of the issues in the case.  While the case does involve statutory interpretation, it doesn’t seem likely that the Supreme Court would hear the case.

In any event, the Federal Circuit has remanded the case to the district court and provided a list of issues that must be addressed by that court.  Is this list a compromise so that the Federal Circuit will not hear the case en banc at this time?  Who knows?

The district court relied on the fact that the rules were substantive, and thus beyond PTO authority, when it struck them down.  It didn’t address the many other arguments that the plaintiffs had raised to challenge them.  Presumably, the court will need to address those arguments on remand.

The short answer is:  the status quo remains in effect for now.  It’s possible that the Obama Administration will drop this case and the new rules.  If not, the district court is unlikely to lift the injunction while it continues to hear the arguments of the parties.  Assuming further rulings and appeals, it could be more than a year before this is finally resolved.

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7 Responses to “Federal Circuit Decides Appeal of PTO Rules”

  1. Implications of PTO Rules Decision « Inventive Step Says:

    […] Rules Decision The dust has settled a bit on the Federal Circuit’s terrible decision in Tafas v. Doll.  As some others have noted, this decision came as quite a shock to the patent community because […]

  2. Heartburn Home Remedy Says:

    Hey, cool tips. Perhaps I’ll buy a glass of beer to the man from that forum who told me to go to your site :)

  3. Tafas v. Doll Request for Extension of Time « Inventive Step Says:

    […] he believes the case will not return to the district court.  I tend to disagree.  I believe the original panel decision to be bad law in that it grants the PTO a large amount of rule-making authority that it did not […]

  4. Tafas Requests Rehearing En Banc in PTO Rules Case « Inventive Step Says:

    […] Dr. Tafas argues that the panel decision misapplied Supreme Court and Federal Circuit precedent in several ways.  First, the panel used the […]

  5. Federal Circuit to Hear PTO Rules Appeal En Banc « INVENTIVE STEP Says:

    […] agreed to rehear the PTO appeal in Tafas v. Doll over the PTO’s rule-making authority.  A Federal Circuit panel decided in March that the PTO did have the authority to limit the number of claims in patent applications, but its […]

  6. If Fee Diversion Continues, Kill the Bill « INVENTIVE STEP Says:

    […] whether a patent is a technological invention.”  The Federal Circuit earlier ruled that the PTO does not have general substantive rule-making authority.  Does this section of the bill grant the PTO such authority, or would such rules be merely […]

  7. White House Executive Action on Patent System | INVENTIVE STEP Says:

    […] Promoting transparency with the proposed convoluted rule to identify the attributable owner of a patent or application.  It is questionable whether the PTO has the authority to make such a rule, as the courts have held that the PTO does not have substantive rule-making authority. […]

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