Number of Continuation Applications a Patentee May File Can't Be Restricted by USPTO, but Other New Rules Limiting the Number of Claims and Requests for Continued Examination Are Within USPTO's Rulemaking Authority

On March 20, 2009, the United States Court of Appeals for the Federal Circuit (the "Federal Circuit") ruled on the USPTO's rulemaking authority to promulgate four new rules (the "Final Rules 75, 78, 114 and 265") that were originally proposed by the U.S. Patent Office on August 21, 2007, and were to become effective November 1, 2007. Under the theory that the Final Rules would reduce backlog for the USPTO, the Final Rules intended to (i) limit the number of claims that may be filed without an accompanying Examination Support Document (ESD), (ii) limit the number of Requests For Continued Examination ("RCEs") that may be filed for a respective patent family, and (iii) limit the number of continuation patent applications that may be filed.

In a split panel decision, the Federal Circuit in Tafas v. Doll (Docket No. 2008-1352, Fed. Cir. Mar. 20, 2009) agreed with the district court that Final Rule 78 improperly attempted to restrict a patentee's right to file continuation applications under 35 USC § 120 and, thus, held that Final Rule 78 was invalid. Conversely, the Federal Circuit found that Final Rule 114, which limits the number of RCEs per patent application family to two, is within the scope of the USPTO's rulemaking authority and can properly be applied on a per family basis. The Federal Circuit also concluded that the USPTO was within its authority to set forth Final Rules 75 and 265 to require the applicant to perform a prior art search and file a corresponding Examination Support Document (ESD) when seeking to file more than five independent claims or 25 total claims.

While these Final Rules remain on hold pending a request for rehearing en banc or an appeal to the Supreme Court, should the Final Rules 75, 114 and 265 be imposed, the costs to prosecute a patent application and the difficulty in obtaining a patent will likely increase due to the added burden of preparing an ESD when seeking to file claims beyond the prescribed limit and in view of the limitation on the number of RCEs that may be filed.

I. District Court Invalidates USPTO's Proposed Final Rules:

On August 21, 2007, the USPTO sought to adopt the four Final Rules at issue in this case in an effort to reduce the backlog of unexamined patent applications and address the USPTO's difficulty in examining applications that contained a large number of claims. Shortly after the Final Rules were published in the Federal Register, the Appellees filed suit against the USPTO alleging that the Final Rules were "substantive rules that change existing law" and "created limits on continuation applications, RCEs, and claims that were inconsistent with several sections of the Patent Act and well as Federal Circuit judicial precedent." The district court agreed with the Appellees and granted the Appellees' motion for summary judgment that the Final Rules are invalid.

II. Federal Circuit's Majority Opinion

Although the Federal Circuit agreed with the district court that the USPTO's rulemaking authority under 35 U.S.C. Section 2(b)2 "does not vest the USPTO with any general substantive rulemaking power," the Federal Circuit held that the four Final Rules at issue were procedural in nature and, thus, fell within the scope of the USPTO's rulemaking authority.

However, with respect to Final Rule 78, the Court found that the limitation on the number of continuation applications that can be filed under this rule conflicts with the statutory provisions of 35 U.S.C. Section 120, which does not include the USPTO-suggested requirement that "the application not contain amendments, arguments, or evidence that could have been submitted earlier." Thus, the Court affirmed that Final Rule 78 is invalid.

On the other hand, with respect to Final Rule 114, the Federal Circuit found that the statutory authority for filing an RCE under 35 U.S.C. Section 132 did not require that its provisions be applied on a per application basis. Instead, the Court deferred to the USPTO's interpretation of the statute and held that Final Rule 114 can be applied to limit the number of RCEs that may be filed on a per family basis. This RCE limitation rule is offset to a degree by the invalidation of Final Rule 78, which leaves an applicant with the option (albeit a more expensive option) of filing a standard continuation rather than an RCE.

The USPTO's Final Rule 75 specified that an applicant who submits either more than five independent claims or 25 total claims must provide the examiner with an Examination Support Document. Final Rule 265 provided the following requirements for the Examination Support Document: (i) conducting a preexamination prior art search, (ii) providing a list of the most relevant references, (iii) identifying which limitations are disclosed by each reference, (iv) explaining how each independent claim is patentable over the references, and (v) showing where in the specification each limitation is disclosed. The Federal Circuit concluded that these two rules do not place an absolute limit on claim numbers in violation of 35 U.S.C. Section 112 (2) as the district court determined. In addition, the Court found "no persuasive reason to prohibit the USPTO from requesting [from the applicant] the information required by Final Rule 265, even if the applicant must take action to acquire that information" to generate the Examination Support Document. The Court stated "[w]e do not believe applicants have a right to remain silent throughout prosecution in order to maximize their advantage in later litigation," to suggest that if applicants want more claims, the applicants have to forfeit their right to not comment on existing art when filing an application. The Court further concluded that Final Rules 75 and 265 did not improperly shift the burden away from the examiner and onto the applicant as the district court found. The Court held that, "while creating an additional procedural step for the submission of applications, the ESD requirement does not alter the ultimate burdens of the examiner or applicant during examination" of a patent application.

Rather than authorize the USPTO to immediately impose the Final Rules limiting ESDs and number of claims without an ESD, the Federal Circuit expressly identified the following issues to be decided on remand to the district court:

  1. "whether any of the Final Rules, either on their face or as applied in any specific circumstances, are arbitrary and capricious;"
  2. "whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in this opinion;"
  3. "whether all USPTO rulemaking is subject to notice and comment rulemaking under 5 U.S.C. Section 553;"
  4. "whether any of the Final Rules are impermissibly vague;" and
  5. "whether the Final Rules are impermissibly retroactive."

III. Conclusion

The Federal Circuit's split decision in this case and the potential impact on patent practice in the future in view of the USPTO's Final Rules suggests that a request for a rehearing or a rehearing en banc by the Appellants or a petition for certiorari to the Supreme Court may be granted. Thus, with the added delay of remand to the district court, the USPTO may not be able to put the Final Rules into effect for at least another year or more. Moreover, the Obama administration may not want to continue to pursue these unpopular Final Rules and appoint a new Director of the Patent Office to withdraw these rules in favor of more acceptable rule changes.