On March 20, 2009, the United States Court of Appeals for the Federal Circuit ruled, in a 2-1 plurality opinion, that the U.S. Patent and Trademark Office ("PTO") did not exceed its authority in promulgating certain new patent rules in 2007. (Tafas v. Doll, 08-1352).

However, the otherwise split panel unanimously affirmed the lower court's ruling that the PTO's proposed rule limiting a patent applicant's ability to file continuation applications ("Final Rule 78") was inconsistent with Section 120 of the Patent Act and thus impermissible. While the Federal Circuit decision represents a partial victory for the PTO, the decision rejecting Final Rule 78 alleviates some of the most significant concerns in the patent community. Moreover, whether the other three challenged rules ever will go into effect is hardly a certainty because, apart from a possible en banc appeal of the panel decision (or Supreme Court review), the Federal Circuit made clear that the District Court on remand should consider other potential arguments that might block implementation of the new patent rules.

The rules at issue in this case, in addition to Final Rule 78, would limit an applicant's ability to file Requests for Continued Examination ("RCEs") ("Final Rule 114") as well as rules that would limit the number of claims that can be presented for examination without conducting a prior art search ("Final Rules 75 and 265"). Tafas and GlaxoSmithKline filed separate suits against the PTO in the Eastern District of Virginia to enjoin the implementation of these rules and to declare them invalid. The District Court issued a preliminary injunction barring the rules from taking effect, and then granted summary judgment in favor of plaintiffs on the ground that all of the rules were invalid. The District Court found the rules to be "substantive" in nature and thus to exceed Congress's grant of rule-making authority to the PTO.

The Federal Circuit panel agreed with the plaintiffs' contentions the PTO has no authority to promulgate "substantive" rules, but the plurality and concurring opinions rejected the argument that the rules were "substantive." The two judges in the majority then analyzed whether any of the rules were invalid because of a conflict with the Patent Act. The dissenting opinion considered all four of the rules to be "substantive" and thus outside the PTO's rule-making authority. The Court found that Final Rule 78, which would have allowed only two continuation applications as a matter of right, conflicts with Section 120 of the Patent Act. (Under the statute, there is no limit on the number of continuation applications that can be filed by a patent applicant). Under Final Rule 78, an applicant seeking to file more than two continuations would have had 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." Slip. Op. at 2 [quoting Final Rule 1.78(d)(1)(i)].

If an applicant failed to make such a showing, the PTO could delete a claim of priority from the continuation application, which, in some cases, could be fatal to patentability ­- for example, because of intervening prior art. The Federal Circuit found that language in Section 120 that each application in a chain of applications "shall have the same effect, as to such invention, as though filed on the date of the prior application" when conditions enumerated in the statute were satisfied provided clear and unambiguous direction to the PTO to permit continuation applications in the enumerated circumstances. Because Final Rule 78 would have created an additional requirement for a continuation application not found in the statute, the Federal Circuit concluded that the PTO's limitation on the number of continuation applications improperly conflicted with the Patent Act.

The majority found no conflict between the other rules and the Patent Act. There was no conflict found with Final Rule 114's limitation of one RCE per family of applications because the statute does not unambiguously require the PTO to grant unlimited RCEs. As a result, the majority found the agency's interpretation that the statute does not grant unlimited RCEs to be reasonable and gave it deference.

The Federal Circuit also held there was no conflict with Final Rule 75's requirement that an applicant submit an Examination Search Document (ESD) when submitting more than five independent claims or 25 total claims, as specified in Final Rule 265. While the majority acknowledged a patent applicant ordinarily has no duty to conduct a prior art search, the majority concluded that the ESD requirement does not alter the fact that a patent examiner still has the burden of persuasion in determining whether a prima facie case of patentability exists.

The majority also found that Final Rule 75 does not place an absolute limit on the number of claims but simply places an additional burden on applicants who choose to exceed the "5/25" limit. The panel was not prepared to find that burden unreasonable on its face, but indicated that the Court would deal with the PTO's implementation of Final Rules 75 and 265 on a case-by-case basis.

There are several possible next steps in the case. One likely possibility is en banc review by the full Federal Circuit. Chief Judge Michel has recently encouraged the bar to seek such review more often in patent cases. But even without such review, this case is far from over, for the plurality decision identified several issues to be decided on remand that could affect implementation of the rules: (1) whether any of them is arbitrary and capricious; (2) whether any conflicts with the Patent Act in ways not specifically addressed in the Federal Circuit's opinion; (3) whether PTO rule-making is subject to notice and comment under 5 U.S.C. § 553; (4) whether any of the rules is impermissibly vague; and (5) whether any is impermissibly retroactive. Upon remand, the preliminary injunction presently remains in place. It is thus difficult to predict if and when Final Rules 114, 75, or 265 might go into effect.


With the limitation on continuation applications (Final Rule 78) having been held invalid, the RCE limitation (Final Rule 114) can be readily avoided because an applicant still will be able to file unlimited continuation applications. Because co-pending applications may trigger the "5/25" requirement under Final Rule 75, applicants may wish to abandon the patent or wait until the patent is close to issuance. However, each continuation application provides the applicant an opportunity to amend the claims in an attempt to overcome an examiner's prior rejections.

This path has certain downsides, including the increased expense of multiple applications and, more importantly, probable further delays in prosecution. Ultimately, the term of the patent may be significantly shorter if the patent matures from a series of continuation applications instead of from a series of RCEs, particularly where delays are insured to avoid the "5/25" requirement. Notwithstanding these drawbacks, preserving the applicant's ability to continue prosecution without the need to show that amendment, argument, or evidence could not have been submitted as part of the prior application is a significant victory for the plaintiffs in the case.

The remaining rules face several obstacles going forward - one big question mark, of course, is what the PTO now will do. In his concurring opinion, Judge Bryson suggested a possible path for the PTO to limit the number of serial continuations that can be filed, which might be pursued through new rulemaking. If his suggestion were adopted by the PTO and upheld by the Court, it might close the opportunity for continuing examination that the Court's invalidation of Final Rule 78 now leaves open.

It is entirely possible, on the other hand, that the new Obama administration will chart a different path and perhaps even pull back on the three rules that the Federal Circuit has, for the moment, given new life. If and when new rules are implemented, we will apprise patent applicants of potential strategies going forward.