On March 20, 2009, the Court of Appeals for the Federal Circuit handed down its decision in Tafas v. Doll, reversing in part a decision of the U.S. District Court for the Eastern District of Virginia that permanently enjoined the United States Patent and Trademark Office (USPTO or the “Office”) from implementing its highly controversial proposed claims and continuation rules.1 In its decision,2 the Federal Circuit found that the final rules being challenged are procedural changes, not substantive ones and therefore within the purview of the USPTO to promulgate. But the Federal Circuit held that Final Rule 78 restricting “continuing applications” including continuation and continuation-in-part applications runs contrary to the Patent Act.3  

Although the USPTO’s proposed rules included a number of restrictions on various aspects of patent practice, the appellees’ challenge to the rules focused on four rules, namely Final Rules 75, 78, 114 and 265 (“Final Rules”). Final Rule 78 generally permits an applicant to file two continuing applications in an application family, but places restrictions on any continuing application filed thereafter, and Final Rule 114 places a similar restriction after one Request for Continued Examination (RCE) in an application family. The district court, and similarly the Federal Circuit, referred to these aspects of Final Rules 78 and 114 as the “2+1 rule.”  

Final Rule 75 generally permits an applicant to present up to five independent claims or 25 total claims in an application, without further obligation. For an application including more than five independent claims and/or 25 total claims (the “5/25 rule”), the applicant is required to conduct a pre-examination prior art search and submit a substantive examination support document (ESD) before a first action on the merits. Final Rule 265 governs the ESD which, in addition to a statement acknowledging the applicant’s pre-examination search, generally requires an identification of all the limitations of each of the claims that are disclosed by the references from the pre-examination search deemed most closely related to the respective subject, and a detailed explanation particularly pointing out how each of the independent claims is patentable over the cited references.  

In its decision permanently enjoining the Final Rules, the district court stated that the Patent Act vested the Patent Office only with procedural, not substantive, rulemaking authority.4 In the district court’s opinion, the Final Rules are substantive in that they change an applicant’s rights in a “substantive” way under the Administrative Procedure Act (APA)5 and case law interpreting it. And further, the district court found that the Final Rules run contrary to several sections of the Patent Act. The district court therefore concluded that the Final Rules exceeded the USPTO’s rulemaking authority, and declared them null and void.

The Federal Circuit agreed with the district court that Congress vested the Patent Office only with procedural, not substantive, rulemaking authority, but disagreed with the district court’s conclusion that the Final Rules are substantive. Although acknowledging that the Final Rules may have a substantive effect, the Federal Circuit found that the Final Rules are procedural. In reaching its conclusion, the Federal Circuit noted that “[t]he 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.”6  

Finding that the Final Rules are procedural and not substantive, the Federal Circuit addressed the issue of whether the Final Rules conflict with sections of the Patent Act, while affording the USPTO Chevron7 deference as to the Office’s interpretation of the respective sections of the Patent Act and its belief that the Final Rules are consistent with those sections. Under this standard, the Federal Circuit found that Final Rules 75, 114 and 265 were not inconsistent with the Patent Act insofar as the district court found them inconsistent. As to Final Rule 78, however, the Federal Circuit agreed with the district court and found the restriction on the number of continuing applications contrary to 35 U.S.C. § 120, which authorizes the filing of continuing applications.8 The court noted that § 120 of the Patent Act sets forth a number of requirements qualifying an application to benefit from the filing date of an earlier-filed application, and provides that an application meeting these requirements “shall have” the benefit of the priority date.9 The requirements of § 120 are exclusive and, as Final Rule 78 attempts to add a further requirement (i.e., petition and justification for additional continuing application after the first two continuing applications), the court found Final Rule 78 invalid.10  

Although the Federal Circuit overturned the district court on a number of grounds, it is important to note that the court did not find that the Final Rules are valid. Rather, the court limited its opinion to issues specifically addressed by the district court, and only to the extent that the district court addressed those issues. Thus, the Federal Circuit remanded the case back to the district court to address any of a number of issues specifically not addressed by the court, but that might impact the validity of the Final Rules. These issues, as noted by the court, include “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 [of the APA]; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive.”11  

Judge Bryson joined the majority with a concurring opinion; Judge Radar concurred-in-part and dissented-in-part. The full opinion can be accessed at http://www.cafc.uscourts.gov/opinions/08-1352.pdf.