I am sitting in a Starbucks just outside the District of Columbia, across the river in Virginia. I attended the oral arguments this morning at the United States Court of Appeals for the Federal Circuit regarding the matter of the United States Patent & Trademark Office v. Tafas, the appeal of the claims and continuations rules promulgated by the USPTO back in August of 2007, which were preliminarily enjoined and ultimately permanently enjoined by Judge Cacheris of the United States District Court for the Eastern District of Virginia. The hearing in Courtroom 201 was scheduled for 10:00am this morning, and was third on the list of cases to be addressed. The oral arguments started at 11:00am in this case and concluded just after 12:00pm, with the Court giving additional time to both the GlaxoSmithKline representative, Attorney John M. Desmarais and the representative of the USPTO, James Toupin, who is also the General Counsel for the USPTO. For a complete chronology leading up to this point see USPTO v. GSK & Tafas Chronology.
It is hard to imagine that GlaxoSmithKline and Dr. Tafas could have drawn a better three judge panel then the did for thisappeal of Judge Cacheris’ ruling. The judges assigned to the panel hearing the case were Judges Rader, Bryson and Prost, who took turns laying it on the government attorney, USPTO General Counsel Toupin. It is hard to imagine based on the barrage of questions thrown at Toupin that this panel is going to do anything other than affirm Judge Cacheris’ decision and rule that the claims and continuations rules were beyond the authority of the Patent Office and cannot be implemented.
I almost could not believe my ears when Attorney Toupin opened his presentation by saying that the district court erred by failing to look to the rule making authority explicitly provided to the Patent Office by Congress for the purpose of expediting patent applications. This lead Judge Rader to ask whether the real issue in this case is whether the PTO is entitled to Chevron deference and whether the rules were procedural or substantive. If the Patent Office would be entitled to deference under the Supreme Court’s decision in Chevron that would mean essentially that what the Patent Office did would stand, but based on what I was hearing it certainly does not seem that the Federal Circuit is going to find that these rules packages are entitled to any deference, let alone Chevron deference.
Judges Rader and Bryson peppered Toupin with questions about Chevron deference and took turns explaining (as opposed to actually asking questions) that the Patent Office is only entitled to Chevron deference if it is acting within the statutory mandate of authority provided by Congress. Toupin danced around this for a moment and then ultimately started to make the argument that the Federal Circuit must defer to the Patent Office with respect to whether what the Patent Office has done is within the scope of its statutory authority. This lead Judge Bryson to ask “if the question is a legal question about whether the statute delegates authority to the Agency then the Court would not defer to the agency to define the limits of Agency power.” To this Toupin responded: “The Agency should receive deference with respect to determinations made by the Agency with respect to the scope of authority under the statute.” Of course, this is completely incorrect legally and is ridiculous. The Court must determine whether the Agency is acting withint he scope of the power granted to the Agency by Congress, not the other way around. Under this reasoning any Agency would be able to determine their own authority and such determinations could hardly be reviewed by any court for any reason. That is not what the Chevron case or any other US Supreme Court precedent holds, so for the Patent Office to make such an argument signals that they understand they are grasping at straws.
Much was also made of the statutory language under 35 USC 120, which states in relevant part:
An application for patent for an invention disclosed in the manner provided by the first paragraph of section 112 of this title in an application previously filed in the United States, or as provided by section 363 of this title, which is filed by an inventor or inventors named in the previously filed application shall have the same effect, as to such invention, as though filed on the date of the prior application, if 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 if it contains or is amended to contain a specific reference to the earlier filed application.
The catch phrase here is “shall have the same effect,” which refers to the ability of applicants to file subsequent patent applications that claim the benefit of the filing date of a previously file application. Such applications are continuing applications, or simply continuations. The statute does not provide any limitation on the number of continuations that can be filed, so Judge Rader wanted to know why the Patent Office thought a statute that was clear on its face and would entitle the first, second, fifth or even sixth continuation to all enjoy the same filing date. Of course, Toupin did not have an answer for him to his rhetorical question, and Judge Prost interjected to save Toupin the indignity of having no answer and asked simply and straight forward: “So the PTO has the authority to amend the law?” It was at this moment that I almost started feeling bad for Toupin, who was stuttering and grasping. Had this been a game show, or even a Saturday Night Live sketch he would have said “I would like to use one of my life lines please and I would like to call Undersecretary Jon Dudas.” Not that Dudas would have had any answers, but it was he who lead the PTO into this morass in the first place and it should have been him getting drilled with questions. I would have paid admission to see that!
Judge Rader also was interested in the text of 35 USC 112, which requires that the specification of an application “shall conclude with one or more claims.” Judge Rader simply asked “how many is ‘or more’?” To which the gallery errupted in laughter for the first time. In my experience when the judges are being comedians and the gallery is laughing without any scolding from the bench it is not a good thing for whoever is standing at the podium, and repeatedly that person was Attorney Toupin.
Judge Rader then went on to talk about the Examination Support Document that would be required if more than 25 claims were requested by an applicant. Rader said “wouldn’t you be crazy to use the ESD procedure…” His focus was on inequitable conduct and the fact that any ESD would provide the rope necessary to later hang any applicant for having said something that was potentially misleading and thereby render any patent issued useless. Rader pressed Toupin over and over again asking whether if he represented any pharma companies he would advise them to submit an ESD in a case. Toupin said he would have no problem providing such advice, to which Judge Rader said: “I bet you are not going to be hired by pharma anytime soon. You have just relegated yourself to the electronics industry.” This caused the second erruption of laughter.
After ten minutes of grueling cross examination of Toupin he yielded the podium to Attorney John M. Desmarais, who represented GSK. Attorney Desmarais was pushed a couple times by the court, but nothing like the grilling exchanges between the Judges and Toupin. In fact, Desmarais was allowed to speak for over 25 minutes, responding politely and directly to question after question. Had Desmarais been a politician he would have been on message for sure. His entire case centered around the theme that if a rule created by the PTO changes established law or policy, or affects rights, the rule is substantive and beyond the ability of the PTO to enact. He also pointed out that the predecessor to the Federal Circuit, the CCPA, has repeatedly told the Patent Office over the years that the Office could not place a limitation on the number of continuations filed, yet this rules package did exactly that.
Ultimately, Judge Rader took Desmarais into the direction of public policy asking him what these rules would do to the pharma industry. Desmarais explained that as a chemical engineer and now a patent attorney he has worked within the pharma industry his entire career and felt he could unequivocally say that these rules ‘will cripple the pharma industry.” Desmarais explained that it takes decades to find out what drugs will work and pharma companies need to be able to file more than 2 continuations in order to get protection for the generic drug, various species of the drug, dosages, treatment regimes and more. He also pointed out that there is no evidence or allegations that GSK or any pharma company has been abusing the continuation practice within the office and that GSK simply needs to avail themselves of rights granted under the statute to protect their business.
After Desmarais left the podium Stephen Moore, representing Dr. Tafas was given time to present additional issues and he tended to focus on issues that many would consider to be “inside baseball,” but his presentation was effective. He pointed out that these rules are certainly substantive because right now the burden is placed on patent examiners to document a relationship between inventions and applications before they are allowed to issue a double patenting rejection, which basically says you have already patented this or an obvious variation of what you are seeking protection for now. Under the rules proposed by the Patent Office a relationship would be presumed, so the standards that operate within the Office would be turned on their head. Moore also spoke about the ESD requirement and said that it is not an Examination Support Document, but rather an “Express Suicide Document.” It would waive attorney-client privilege and would open every applicant who uses it up to inequitable conduct arguments later whether there was any real intent to decieve or not.
The only thing that I wish that Desmarais or Moore had brought up was the fact that these rules would have done nothing to expedite the patent process. In testifying before Congress in February of 2008, Undersecretary Jon Dudas explained to Congressman Berman that these rules would have minimal impact on the number of new applications filed and estimated that even with the rules there would only be a reduction in the number of application on the order of about 5,000 applications. So all of this to expedite the patent process and address the backlog for a benefit of about 1%? And the rules affect the most commercially relevant of all patents.
All in all I will say that the arguments were good. I am predisposed to believing that the right outcome is to affirm Judge Cacheris and never let these rules see the light of day. Nevertheless, Toupin did about as good a job as anyone could have being dealt this losing hand.
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.