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Saratoga Business Journal, February, 2008

U.S. Patent Law Changes Are On Hold

By Gerald F. Dudding

The United States Patent and Trademark Office (USPTO) published a final rule notice in August, 2007, in the Federal Register, to revise the rules of practice in patent cases relating to continuing applications and requests for continued examination practices, and for the examination of claims in patent applications.

The rule changes were proposed to make the patent examination process more effective and efficient by reducing the amount of rework by the USPTO and reducing the time it takes for the patent review process.

The final rule notice published in the Federal Register indicated that the effective date for the changes to the rules of practice in the Claims and Continuations Final Rule was November 1, 2007. However, the United States District Court for the Eastern District Court of Virginia granted a preliminary injunction against the USPTO on October 31, 2007 in the consolidated cases of SmithKline Beecham Corp. v. Dudas and Tafas v. Dudas, enjoining the USPTO from implementing the changes.

USPTO employees have been instructed to continue processing and examining patent applications under the rules and procedures in effect on October 31, 2007.

The 128-page rules package, finalized by the PTO Aug. 21 had drawn criticism from the patent community since it initially was proposed in January 2006. The final rules relaxed some of the more controversial proposals.

The new rules as revised in response to criticism allow applicants to file two continuing applications and one request for continued examination as a matter of right. Abandoning the proposed requirement that applicants designate certain “representative claims” in applications with multiple claims, the final rules instead allow a threshold of 25 claims and five independent claims before requiring an additional support document.

But opponents of the Final Rules, including the plaintiffs before the Eastern District of Virginia as well as hundreds of prior commentators, assert the USPTO acted outside its rule-making authority in adopting these rules and that the Final Rules amount to an unconstitutional taking under the Fifth Amendment or under Article 1, section 8 by failing to "promote the progress of science and the useful arts".

The many comments included those of the Patent Public Advisory Counsel (PPAC), established by the American Intellectual Property Act of 2000 to advise the USPTO on such matters. The PPAC strongly urged the USPTO not to implement the proposed rules, listing among six troubling aspects "a serious concern that the USPTO has exceeded its statutory and rule-making authority . . . ." (PPAC comments page 16).

Even Senator Charles Schumer, a co-sponsor of the Senate's Patent reform bill, wrote to Undersecretary Dudas urging delay in implementing the Final Rules, questioning USPTO authority for such rule-making, and suggesting the Final Rules may have the unintended consequence of stifling innovation. ( Copy available on PLI website.)

Despite the best efforts of the United States Patent and Trademark Office to convince many in the patent field otherwise, the proposed changes have run into substantial opposition from small businesses as well as the patent bar itself. Copies of the comments provided by these groups are found at:

1. Continuation comments

2. Claim comments

The Small Business Administration has come out against the proposed rules since "[s]mall entity representatives indicated that limiting applicants to ten representative claims would make it very difficult to properly identify a potential patent, could create future liability concerns, and would weaken potential patents."

Additionally, the Small Business Administration indicated that "[s]ome small entities also stressed that continuation applications are used frequently by small businesses to secure the most commercially successful inventions. Therefore, limiting the number of continuations could severely weaken small entities’ ability to protect their patent."

SBA suggested that the United States Patent and Trademark Office instead provide incentives, such as accelerated examination of cases with less than ten representative claims and increasing fees for each successive continuation application. Copies of the Small Business Administration comments are found at Letter from Office of Advocacy (Advocacy) of the U.S. Small Business Administration (SBA) of April 27, 2006 Re: Changes to Practice for the Examination of Claims in Patent Applications, 71 Fed. Reg. 61 (January 3, 2006).

The American Intellectual Property Law Association (AIPLA) has also come out squarely against these proposed changes. The specific criticisms include that there has been no evidence that the proposed changes will have the desired effect of reducing the backlog of cases, would hamper the legitimate uses of continuations to obtain claim scope to which applicants are entitled under the law, and could increase the workload instead. The AIPLA took specific issue with various "flawed" assumptions that appear to be the basis of the rule, and also noted that, in not examining some of the claims, the United States Patent and Trademark Office may be operating ultra vires since the rule changes are outside of their statutory authority under 35 U.S.C. Copies of the AIPLA Comments on these rules are found at Letter from AIPLA to USPTO of April 24, 2006 Re Comments on Proposed Rules: “Changes to Practice for Continuing Applications, Requests for Continued Examination Practice, and Applications Containing Patentably Indistinct Claims” 71 Fed. Reg. 48 (January 3, 2006) and Letter from AIPLA to USPTO of April 24, 2006 Comments on Proposed Rules: “Changes to Practice for the Examination of Claims in Patent Applications” 71 Fed. Reg. 61 (January 3, 2006).

The American Bar Association (ABA – Intellectual Property Law) also came out against this rule change. To date, no major association has come out in support of the proposed rule change.

The USPTO defended its statutory authority under 35 U.S.C. § 2(b)(2) to govern the conduct of proceedings in the Office, arguing the Final Rules do not affect the substantive rights of patent applicants, and emphasizing (among other arguments) that the Final Rules are not retroactive.

However, prior to the new rules proposed by the PTO, the rules for patent prosecution imposed no limits to continuations or claims, and neither the PTO revisions, nor a subsequent clarification by the agency explaining them, put to rest charges that at least some of the new rules are overreaching and unduly limit patent prosecution.

The Consolidated Cases Of Tafas V. Dudas And Smithkline Beecham Corp. V. Dudas, October 31, 2007

According to the Association of Patent Law Firms, the decision delivered by Judge James C. Cacheris in the U.S. District Court for the Eastern District of Virginia may be the most significant ruling in U.S. patent law this year (including the Supreme Court’s decision in KSR Inc. v. Teleflex Int’l. Inc.). See “Perhaps The Most Significant Ruling In U.S. Patent Law in 2007 - No Change in Practice”, 2007/31, Nov. 1, 2007.

The Court granted Plaintiffs’ (”GSK”) motion for a preliminary injunction, enjoining the U.S. Patent and Trademark Office from implementing its new continuation and claims rules entitled “Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications,” 72 Fed. Reg. 46716 (Aug. 21, 2007). The new continuation and claims rules were scheduled to take effect on November 1, 2007.

The Court also enjoined the Patent Office from issuing new regulations restricting the number of continuing applications, the number of requests for continued examination, or the number of claims that may be filed with the Office.

The Court denied the Patent Office’s motion to strike the declaration of former Commissioner of Patents Harry F. Manbeck, Jr. See Gene Quinn, “USPTO Moves to Strike Declaration of Harry Manbeck in GSK Challenge”, GlaxoSmithKline v. USPTO Court Documents & PLI Blog Posts, 27 October, 2007 (stating in part “The Federal Circuit has long highlighted, and recently reaffirmed, that Section 2(b)(2) [of Title 35] does not confer on the PTO the power to issue substantive rulemakings. See Merck & Co. v. Kessler, 80 F.3d 1543, 1549-50 (Fed. Cir. 1996)("As we have previously held, the broadest of the PTO's rulemaking powers --- 35 U.S.C. 6(a) (now 35 U.S.C. 2(b)(2)(A)) --- authorizes the Commissioner to promulgate regulations directed only to the conduct of proceedings in the PTO; it does NOT grant the Commissioner the authority to issue substantive rules." (citations omitted).

The Court granted the motions of the American Intellectual Property Lawyers Association (AIPLA), HEXAS, LLC, The Roskamp Institute, Tikvah Therapeutics, Inc., and Elan Pharmaceutical Corp. for leave to file amici curiae briefs in support of GSK’s motion for a temporary restraining order and preliminary injunction.

In a thorough and well-reasoned opinion (especially in view of the compressed time frame that saw parties filing briefs as late as Tuesday), the Court found in GSK’s favor on all four prongs of the legal test for granting a preliminary injunction.

First, the Court found that GSK had demonstrated a likelihood of success on the merits on its allegations that the rules exceed the Patent Office’s statutory authority; the rules are contrary to the Patent Act; the PTO’s application of the rules to pending applications implicates the prohibition on retroactive application of agency regulations; and the standards for submitted an examination support document are impermissively vague.

Second, the Court found that GSK would be irreparably harmed by implementation of the new rules, stemming from the uncertainty that the rules would create, and the negative impact on investment that would follow from such uncertainty.

The Court found this harm to be greater than any harm visited on the Patent Office by delaying implementation of the rules, satisfying the third, “balance of the hardships” prong.

Finally, the Court found the public interest rested in preventing the rules from being implemented while the Court decided the merits of GSK’s complaint, specifically noting the amici from across the spectrum of technology companies that joined in opposing the rules.

The Court’s consideration of the merits will not proceed as quickly as anticipated. Before GSK filed its complaint and its case was consolidated with the Tafas action, the Patent Office and Dr. Tafas had agreed on an accelerated briefing schedule for summary judgment motions in exchange for Dr. Tafas withdrawing his request for preliminary injunction. In view of the court’s decision, this agreement has been terminated, and the Court asked the parties to submit a briefing schedule in the near future.

Accordingly, the Court’s determination on the merits of whether and to what extent the new continuation and claims rules will be implemented has been delayed indefinitely. For most patent prosecutors, however, the important thing is that the new continuation and claims rules did not go into effect on November 1st.

At present, the Final Rules are pending in the Courts, and much uncertainty remains. This presentation seeks to summarize the issues and views of those involved, and proposes ultimately that now is the time for all involved to assist the USPTO with its backlog issues while maintaining the integrity of the U.S. Patent system.


GFD Patents LLC
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Gerald F. Dudding, J.D., Ph.D. Mark K. Dudding, B.S.
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