The Federal Circuit largely reversed a district court ruling and found that the USPTO did not exceed the scope of its rulemaking authority.

In a decision issued on March 20, 2009, the U.S. Court of Appeals for the Federal Circuit shocked the patent prosecution community by issuing a decision that is, for the most part, favorable to the U.S. Patent and Trademark Office (USPTO) and the rules it promulgated that have sparked fierce debate within the user community. Writing for a three judge panel, Judge Sharon Prost, with Judge Rader dissenting, overturned most of the district court’s decision that the August 2007 rules exceeded the scope of the USPTO’s rulemaking authority as being substantive, not procedural. The dissent by Judge Rader raises the specter of a possible request for an en banc review of this decision.


The USPTO attempted to implement a series of major rules to limit both the number of continuation applications an applicant could file as well as the number of claims that could be included in each, unless the applicant undertook to essentially self-examine any application that exceeded the claim limit by means of a required examination support document (ESD).

The district court blocked the rules, holding on summary judgment that the final rules affected substantive changes to existing law and altered the rights of applicants and were therefore beyond the scope of the USPTO's rulemaking authority. The district court struck down four of the rules. Final Rule 78 purported to limit the permitted number of continuations per application as a matter of right to two. For additional continuations, the applicant was required to file a petition showing that the amendment, argument or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application. Final Rule 114 purported to limit the number of RCEs (Requests for Continued Examination) to two, allowing for additional RCEs if the applicant could demonstrate that the desired amendments or arguments could not have been submitted before the close of prosecution. Final Rule 75 purported to limit the number of independent claims and claims per application to five and 25, respectively, while companion Final Rule 265 allowed for additional claims (i.e., beyond the 5/25 limit) but only if the applicant supplied an ESD. The vastly unpopular ESD would require a pre-examination prior art search, a list of the most relevant references, the identification of which claim limitations are disclosed in each reference, an explanation of how each independent claim is patentable over the references and a showing of where in the specification each claim limitation is supported. The USPTO appealed to the Federal Circuit.

USPTO's Rulemaking Authority

At the Federal Circuit, the USPTO argued it was entitled to Chevron deference with regard to the interpretation of 35 U.S.C. § 2(b)(2), the provision that allows the USPTO to establish regulations as long as a propounded rule is consistent with the law. The USPTO argued that the substantive/procedural distinction was not relevant to the new final rules, because § 2(b)(2) is silent on whether a rule is substantive or procedural. On this issue, the Federal Circuit agreed with the district court, holding that § 2(b)(2) does not grant the USPTO substantive rulemaking power, and that therefore, the substantive/procedural distinction is relevant. The court also held that if a rule is procedural, the USPTO is entitled to Chevron deference, (i.e., the USPTO's interpretation of statutes that pertain to the USPTO’s delegated authority is entitled to a degree of deference).

The Federal Circuit declined to set forth a definitive rule for distinguishing between a substance and a procedural rule. However, citing the DC Circuit’s approach in JEM Broadcast, the court agreed that a rule was procedural where it did not "foreclose effective opportunity to make one’s case on the merits." The court acknowledged that compliance with these rules would not be easy, but noted that was not enough to invalidate the rules. A rule could pass muster "so long as the effort required is not so great that it effectively forecloses the possibility of compliance."

Based on this standard, the Federal Circuit found that three of the final rules were procedural because while they “govern the timing of and materials that must be submitted with patent applications,” they “do not, on their face, ‘foreclose effective opportunity’ to present patent applications for examination.” For these rules, the court reasoned that the USPTO should be accorded Chevron deference.

Final Rule 78 (Continuations)

In Final Rule 78, the USPTO attempted to limit the number of continuation applications to two. The Federal Circuit agreed with the district court that Final Rule 78 was inconsistent with 35 U.S.C. § 120. Section 120 clearly states the requirements for a continuation application and that an application that meets the requirements "shall have the same effect, as to such invention, as though filed on the date of the prior application." Since Final Rule 78 attempted to impose additional requirements, the court found that it conflicted with § 120 and was therefore invalid.

Final Rules 114, 75 and 265 (RCEs Claims, ESDs)

The Federal Circuit overturned the district court's finding of invalidity of Final Rules 114, 75 and 265, reasoning that these rules do not alter an inventor’s rights under the Patent Act.

Final Rule 114 limited RCEs in a manner similar to the way Final Rule 78 limited continuations. However, since RCE applications are not governed by § 120, the Federal Circuit held this rule was valid.

Final Rules 75 and 265 would require an applicant to either adhere to the 5/25 rule or to provide an ESD. The court noted that since the rules imposed no hard limit on the number of claims (which would violate § 112, ¶ 2), Final Rule 75 was valid and Final Rule 265 imposition of an ESD on an applicant that chose to include more claims was procedural.

Recognizing the potential for inequitable conduct allegations in litigation involving any patent maturing from an application in which an ESD was filed, the court was unsympathetic: "doubts about the judiciary's ability to apply its own doctrine in a way that yield fair results and discourages frivolous allegations should not preclude the USPTO from promulgating rules that are within its statutory authority."


In remanding the case back to the district court for further proceedings in connection with Final Rules 75, 114 and 265, the Federal Circuit cautioned that it was not deciding whether the final rules are arbitrary or capricious; whether they conflict with the Patent Act in ways not addressed in the opinion, whether the USPTO's rulemaking might be subject to notice and comment rulemaking rules, or whether any of the final rules were impermissibly vague or impermissibly retroactive. Each of these issues presumably remains open on remand.


In dissent, Judge Rader would have found the final rules to be substantive as they "drastically change existing law and alter an inventor's rights and obligations under the Patent Act." Judge Rader would therefore have held the rules to be beyond the scope of the USPTO's rulemaking authority.


The USPTO, apparently prepared for any decision, quickly released the following statement:

The United States Patent and Trademark Office is pleased that the United States Court of Appeals for the Federal Circuit confirmed that the Final Rules are within the agency's rulemaking authority and that the rules regarding requests for continued examination, claims, and examination support documents are consistent with the law. We are further considering other aspects of the opinion, including the Federal Circuit's conclusion that the rule regarding continuations conflicts with the Patent Act.