The GSK Case: An Administrative Perspective

By, Arti K. Rai*

 

The already voluminous discussion of GSK[1] has not focused sufficiently on the court’s reasons for concluding that the PTO continuation rules (for reasons of brevity, I focus here only on continuation rules) probably violate the patent statute.  This reasoning is important because the court ruled against GSK’s argument that the rules were a bad idea as a policy matter (or, in the language of administrative law, “arbitrary and capricious”).  The court’s reasoning about the alleged conflict between the statute and the rules contains several errors of administrative law. 

 

With respect to the prospective application of the continuation rules (the very thorny issue of retroactivity in administrative law is best left for another day), analysis of whether the rules are contrary to the patent statute turns on two issues that should be decided sequentially.  First, do the rules fall within the scope of the PTO’s procedural rulemaking authority?  Second, do the rules violate the statute?

 

One mistake in the court’s opinion is that it appears to assume that analysis of the second question can be done without a complete answer to the first.   After equivocating briefly on the first question, the court jumps immediately to the alleged inconsistency with section 120 of the Patent Act.  In agreeing that GSK has “raised serious concerns” about whether the restrictions on continuations conflict with the Act, the court’s opinion relies heavily on In re Henriksen.[2]  That 1968 decision by the CCPA overturned a PTO limit on the number of continuation applications entitled to an earlier filing date under Section 120.

 

But Judge Cacheris should not have avoided deciding the question of substance vs. procedure.  If the PTO’s rules are in fact procedural, then the question of alleged inconsistency with statutory language does not turn on a 1968 CCPA case that makes no mention of administrative law principles (and, indeed, was decided at a time before it was clear that the Administrative Procedure Act even applied to the PTO).  Rather, it turns on the enormous case law that the Supreme Court has developed under its 1984 decision in Chevron v. Natural Resources Defense Council.[3]  Under Chevron and its progeny, an agency acting pursuant to authority delegated to it by Congress (here, procedural rulemaking authority under Section 2(b)(2) of the Patent Act) is entitled to interpret its organic statute so long as Congress has not “directly spoken to the precise question at issue” (Chevron step 1) and the agency’s interpretation is reasonable (Chevron step 2).

 

Assuming that Chevron applies, it is far from clear that Section 120 “speaks directly” to the limits enunciated in the PTO’s continuation rules.  Even if we assume that Section 120 does speak directly to the issue of whether the PTO can impose a bright-line bar, the PTO has argued that it does not intend an absolute limit.  According to the PTO, it will evaluate requests for a third continuation application on a case-by-case basis. Importantly, the PTO interpretations of its own regulations are entitled to very strong deference under the Supreme Court decision in Bowles v. Seminole Rock.[4]  Seminole Rock deference, which was recently reaffirmed in the 1997 Supreme Court case Auer v. Robbins,  says that an agency interpretation of its own rule is “controlling unless plainly erroneous or inconsistent with the regulation.”[5]

 

Indeed, the very strong deference of Seminole Rock is relevant even if the rules in question are substantive and thus not entitled to the application of Chevron.  Yet the opinion by Judge Cacheris does not even cite Seminole Rock.

 

These are more than fine lawyerly arguments about details.  Given the highly uncertain prospects for patent reform, and the reality that Section 2(b)(2) already gives it some rulemaking authority, the PTO has an understandable desire to engage in “self-help.”  Its current and future efforts at self-help must be judged according to the appropriate legal standards.

---

* Professor, Duke Law School.  Professor Rai’s 2003 Columbia Law Review article on patent reform focused on the balance of power between the PTO and the Federal Circuit. Arti K. Rai, Engaging Facts and Policy: A Multi-Institutional Approach to Patent System Reform, 103 Colum. L. Rev. 1035 (2003).

 

Preferred citation: Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36, http://www.patentlyo.com/lawjournal.

 

[1] Tafas v. Dudas, 2007 U.S. Dist. LEXIS 80474 (E.D. Va. Oct. 31, 2007).

[2] In re Henriksen, 399 F.2d 253 (C.C.P.A. 1968).

[3] Chevron U.S. A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).

[4] Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945).

[5] Auer v. Robbins, 519 U.S. 452 (1997)

Comments

[curious]

Dear Ms. Rai:

You write "the PTO has argued that it does not intend an absolute limit. According to the PTO, it will evaluate requests for a third continuation application on a case-by-case basis."

My understanding is that as a practical matter ALL requests for third continuations would be denied.

Fellow patent attorney colleagues, do you agree?

[LGB]

Yes, I agree - this argument by the PTO that unlimited continuations are available, upon filing a simple petition, is a sham. Evaluating requests for a 3rd con on a case by case basis is a far cry from allowing con's unconditionally.

While I am very pleased, like 99.9999% of the rest of the patent bar, with the PI, I do wish the PTO would offer some guidance about what this means for any applications filed after Aug. 21 and Nov. 1, in the event the rules are upheld. Probably another notice, which is really no notice (like the Aug. 21 notice re: one more con), will issue sometime next year. But in the meantime, do we draft app's to abide by the 5/25 rule or include SRR's? I feel little bit in limbo right now. Of course, the PTO has screwed up so badly with the attempted implementation of these rules and its antagonism against patent applicants, that I don't expect any guidance or assistance any time soon.

[anonymousAgent]

Prof. Rai,
You wrote: "the PTO has an understandable desire to engage in “self-help.” "

So you understand the USPTO's motivation for doing this.

Have you considered that there are OTHER OPTIONS for reducing the backlog other than the one the USPTO tried to foist on the patent community. NONE of these solutions were properly addressed by the USPTO.

MANY of these solutions have been discussed on this blog and other patent blogs.

Some examples:
a) opening satellite offices to attract more examiners (YOU trying living on $60 K in Northern Virginia);
b) delayed examination;
c) raising fees (and concomitantly crediting Examiners for checking extra claims);
ETC ETC.

With all due respect to JDs and ivory-tower academics, this is REALLY a problem which requires the help of MBA's and IT people with "real-world" experience running large IT-based organizations (and that's what the PTO is). Also some management with proper "soft-skills" for managing PTO examiners wouldn't hurt either.

ANOTHER ISSUE -
Prof. Rai - have you ever actually drafted a patent appliaction????? Prosecuted a patent application ??? (1-2 continuations are burned up immediately by the Examiner giving the "broadest reasonable interpretation of the claims" using defintions that noone in the art would ever use.

Sincerely,
AnonymousAgent

[real anonymous]

Ms. Rai, thank you for your article.

Firstly, regarding your assertion that "analysis of whether the rules are contrary to the patent statute turns on two issues that should be decided sequentially", didn't the Court in Seminole Rock say:

"We do not, of course, reach any question here as to the constitutionality or statutory validity of the regulation as we have construed it, matters that must in the first instance be presented to the Emergency Court of Appeals. Lockerty v. Phillips, 319 U.S. 182 , 63 S.Ct. 1019; Yakus v. United States, 321 U.S. 414, 427-431, 64 S.Ct. 660, 668-670"?

It thus seems that issues of statutory validity of the rules would have been separate and distinct from the agency's interpretations of its rules, and not conditioned thereon or foreclosed thereby.

Secondly, your logic is difficult for me to follow. Particularly, your phraseology "turns on two issues that should be decided sequentially" does not make it clear whether you think the second question need be answered "conditioned on" or (in the alternative) "regardless of" the answer to the first (i.e. does the second question act as a limiter of the first question or as an alternative thereto in your analysis?)*

If you were a practitioner, perhaps you would understand that the problem with the patent system today stems largely from the "self-help" that the USPTO has attempted to engage in in the past decade (e.g. appointing unqualified political players to top positions, looking to fictional "allowance error rates" for substantiation of ill-conceived office policy, attempting to embark on courses where essential agency functions such as the search are "outsourced" to contractors rather than improved, seeking to lobby Congress for ex-post support of rule changes rather than following the APA notice and comment procedures). Allowing more such "self-help" (with the emphasis on "self") without addressing the clearly manifest agency problems (unqualified managers and dissatisfied examiners) will only ensure the destruction of the American patent system and American competiveness in the world market-place.

*Perhaps you would clarify your logic for us. I thought a Patently-O commenter (agent007) framed the two relevant questions clearly, logicly, and succinctly, though I am not well-versed in administrative procedure:

"1) Are these rule changes substantive as opposed to procedural? --- YES

2) Does the PTO have power to set policy via substantive rule making? --- NO

Case closed, PTO loses. This should take all of 5 minutes."

http://www.patentlyo.com/patent/2007/10/emergency-motio.html#comment-88170848

[real anonymous]

P.S. Ms. Rai, I hope you saw the excellent video presentation on "self-help" given by Solicitor Whealan at:

http://www.kelleydrye.com/news/press/0170

(Please watch the video entitled, "Whealen-making-policy.wmv". Would this be what you are suggesting as the solution to our nations patent woes?)

[More]

Prof. Rai:

Were the rules "procedural" to help the Patent Office reduce its backlog or were they to help Intel, Microsoft, etc. when accused of infringing patents issuing many years after the original filing date?

[step back]

I agree that 35 USC 120 was the wrong statute to emphasize.
The statute of interest is 35 USC 131:

"The Director **shall** cause an examination to be made of the application and the alleged new invention; and if on such examination it appears that the applicant is entitled to a patent under the law, the Director **shall** issue a patent therefor."

I don't see anywhere between the "Shalls" some wiggle room for the Director to say, well OK, but only if this "application" is not a 3rd or later continuation. An application is an application, and it MUST be examined, and a patent MUST issue if the applicant is entitled "under law" (not under rules) to such patent for the alleged new invention. See also 35 USC 102 first sentence.

Moreover, Chevron is not the be all and end all to administrative agency law. How about Mead deference?

Here is some background info:
http://www.law.whittier.edu/pdfs/cstudents/wlr-v27n3-sweeny-abstract.pdf

[curious]

Dear Step Back:

I like your 35 USC 131 argument.

[A]

Is the entire Whealan presentation available somewhere for viewing?

[494 U.S. at 649-50]

"Moreover, Chevron is not the be all and end all to administrative agency law. How about Mead deference?"

Further, didn't GSK properly point out that Chevron is innapplicable to judicial review of all PTO decisions, because the PTO lacks substantive rulemaking authority? I believe the PTO gets only "Adam's Fruit" deference. (Maybe Mead and/or Skidmore deferrence too, but that doesn't seem to help the PTO).

[anonymous]

"With respect to the prospective application of the continuation rules (the very thorny issue of retroactivity in administrative law is best left for another day), analysis of whether the rules are contrary to the patent statute turns on two issues that should be decided sequentially. First, do the rules fall within the scope of the PTO’s procedural rulemaking authority? Second, do the rules violate the statute?"

I disagree. The issue should be decided concurrently because Section 2(b)(2) of Title 35 empowers the PTO to “establish regulations, not inconsistent with law". Maybe APA law allows most agencies to interpret their organic statutes so long as Congress has not directly spoken to the precise question at issue. However, in this instance, Section 2(b)(2) specifies that the regulations may not be inconsistent with the law, which would include the entire body of case law. Accordingly, the PTO cannot pass regulations that are inconsistent with the case law.

[Points to Ponder]

A, Yes. The entire Whealan video is available here:
http://realserver.law.duke.edu/ramgen/spring06/students/02172006a.rm
and here
http://realserver.law.duke.edu/ramgen/spring06/students/02172006b.rm

Mr. Whealan expressly concedes that the PTO was attempting to "make policy," that the ESD is a poison pill that "under the current law of inequitable conduct, nobody's going to want to do." There are several more totally outrageous statements, which I will leave for your delight to discover.

The one poor soul in these two videos with any practical "background and experience in patent law" (as opposed to purely academic claptrap), is Wendy Verlander. You can see her in the second session biting her lip, and only occasionally hinting that the ivory tower data-free nitwits (Rai, Dreyfuss, and Kahin) are talking complete nonsense.

Arti Rai heard Mr. Whealan's remarks - she introduced him. Her remarks here in the lead article, that the PTO was acting entirely "procedurally," are as disingenuous as anything the PTO itself put in the Notice of Final Rulemaking.

[anonymousExaminer]

anonymousAgent,

I don't know a single examiner that makes as little as 60k. Examiners are doing OK these days. I made more than 100k in my second year. The attrition problems are not primarily driven by salary issues.

anonymousExaminer

[anon]

I believe the real problem with the analysis is that everyone presumes that the rule of law is applicable here. We have an executive administration that does not believe there are any limits on its powers. This is plainly seen with the FDA executive agency. Bush could not get the immunity from product liability lawsuits passed by Congress. As a result, the FDA has now interpreted its rules so that the same occurs: pharmaceutical companies have been granted immunity from product liability lawsuits. I believe the question that we must all ask ourselves is do we want executive agencies to continue. I sumbit not. I believe that there is no enough democracy and/or accountability in the Federal Government. Every person of managerial rank in any executive agency should be subject to election. The present system is certainly a mess. This can be seen from the present FDA and USPTO.

[Mark Nowotarski]

"My understanding is that as a practical matter ALL requests for third continuations would be denied.

Fellow patent attorney colleagues, do you agree? "

Curious,

I agree to the extent that the USPTO, to the best of my knowledge, has refused to give a single example of where a petition for a third continuation would be granted.

[Lionel Hutz]

anonymousExaminer,

RU serious? Are these recent (the last 5 - 10 years)? Is your degree BS, MS, or PhD?

If you could have started at over $50k I would have seriously considered joining back in the 90s, but they were hiring PhDs for less than that then and I have a BS (although I could have easily gotten a Masters).

[Anon E. Mouse]

re: Chevron....

I thought the Fed. Cir. said in Merck (80 F.3d 1543) that Chevron deference is n/a to the PTO b/c they have only procedural rulemaking authority under 35 USC 2 (excepting some tiny little directly enumerated grants of substantive power):

"Under Chevron, where Congress has authorized an agency to promulgate substantive rules under a statute it is charged with administering, we must uphold the agency's interpretation of an ambiguity or omission in that statute if the interpretation is a reasonable one. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984). As the Seventh Circuit recently had occasion to note, however, “only statutory interpretations by agencies WITH RULEMAKING POWERS deserve substantial deference.” Atchison, Topeka and Santa Fe Ry. Co. v. Pena, 44 F.3d 437, 441 (7th Cir.1994) ( in banc ) (emphasis added), aff'd, 516 U.S. 152, 116 S.Ct. 595, 133 L.Ed.2d 535 (1996). See also 1 KENNETH CULP DAVIS AND RICHARD J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 6.3 (1994); Michael Herz, Deference Running Riot: Separating Interpretation and Lawmaking Under Chevron, 6 Admin. L.J. Am. U. 187, 200-03 (1992).

As we have previously held, the broadest of the PTO's rulemaking powers-35 U.S.C. § 6(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. Animal Legal Defense Fund v. Quigg, 932 F.2d 920, 930, 18 USPQ2d 1677, 1686 (Fed.Cir.1991).n6 Because Congress has not vested the Commissioner with any general substantive rulemaking power, the “Final Determination” at issue in this case cannot possibly have the “force and effect of law.” Chrysler Corp. v. Brown, 441 U.S. 281, 302, 99 S.Ct. 1705, 1718, 60 L.Ed.2d 208 (1979) (“[T]he exercise of quasi-legislative authority by governmental departments and agencies must be rooted in a grant of such power by the Congress and subject to limitations which that body imposes.”). Thus, the rule of controlling deference set forth in Chevron does not apply. Such deference as we owe to the PTO's interpretive “Final Determination” regarding the interrelationship by the URAA and the Hatch-Waxman Act thus arises, not from the rule of Chevron, but solely from, inter alia, the thoroughness of its consideration and the validity of its reasoning, i.e., its basic power to persuade if lacking power to control. See E.E.O.C. v. Arabian American Oil Co., 499 U.S. 244, 257, 111 S.Ct. 1227, 1235, 113 L.Ed.2d 274 (1991); General Elec. Co. v. Gilbert, 429 U.S. 125, 140-46, 97 S.Ct. 401, 410-13, 50 L.Ed.2d 343 (1976); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944)."

[Anon E. Mouse]

BTW, 35 USC 6 in the Merck quote is now 35 USC 2.

[Anon E. Mouse]

anon,

As much as I agree Bush is incompentent, please keep your eye on the ball. The ball is the PTO, and we need to hit it with a bat. Hard.

Counting on this to go away when the administration changes is attractive, but dangerous.

[NPE]

First with the salary discussion, in my second year, I am going to be earning over 100k (after overtime) with a bachelor degree. Salary is not a real problem (and I was making ends meet with my 50k starting salary before). A lot of my cohorts that left were enticed by different jobs with less production requirements with a comparable (sometimes lesser, sometimes greater) salary. I believe only one out of ten examiners who left did so because of location, and that was simply because of a distaste of the area.

Second, the 35 USC 131 argument does not seem to be a sound one for the continuation rules, as the Office would not have been denying the third continuation application, rather the Office would have denied the filing date. Therefore, the application must meet all of the other statutes without the priority date, in which case, the application would issue. On the other hand, 131 does seem to speak volumes against the ESD and the 5/25 rule.

[Anon E. Mouse]

This is what puzzles me. 35 USC 2 says that the PTO has the power to make procedural (not substantive) rules. But then it says that it must do its rulemaking according to notice and comment of the APA (5 USC 553).

Well, 553 has an exception to notice and comment for procedural rules--there's no notice and comment needed for informal rulemaking regarding procedures under 553. The PTO cites to it in the final rules in the federal register. They say their rules are procedural, thus no notice and commment is necessary, but they do it any to be nice (just like a cat covering it up with kitty litter).

But back to the statutes: did Congress kick the PTO over to 553 just to be in the exception in 553? That makes no sense.

Here's the section of 35 USC 2:
-----------
(b) Specific Powers.— The Office—
(1) shall adopt and use a seal of the Office....;
(2) may establish regulations, not inconsistent with law, which—
(A) shall govern the conduct of proceedings in the Office;
(B) shall be made in accordance with section 553 of title 5;
(C) shall facilitate and expedite the processing of patent applications, particularly those which can be filed, stored, processed, searched, and retrieved electronically, subject to the provisions of section 122 relating to the confidential status of applications; ...;... .

------------------

What am I missing?

[real anonymous]

"Arti Rai heard Mr. Whealan's remarks - she introduced him."

Thanks, Points to Ponder. Her introduction of him starts at approximately 47:50 in the first video. (She is first introduced at approximately 6:15, moderating a discussion, "Are you Afraid of Patent Trolls?". She talks about "administrative" as opposed to legislative patent reform beginning at approximately 8:30.)

[anonymousExaminer]

Lionel,

I'm serious, and I honestly don't work very hard. I got the job with a MS.

-anonymousExaminer

[Kevin E. Noonan]

Dennis:

I know you are a professor now, but continued emphasis on the academic rather than the practitioner risks reducing the relevance of this blog for actual patent attorneys.

And as much as I appreciate reading Professor Rai's analysis, it is curious (in view of the furor Mr. Whealan's remarks have caused on this blog) that it took Points to Ponder's comment before we knew that the good professor introduced Mr. Whealon at the conference that has received so much attention.

[Jeff Spangler]

Scholarly analysis, injudiciously referred to as "academic claptrap" above, is interesting but largely irrelevant to practicing Registrants, especially when it comes from a non-Registrant, whether in academia or the PTO front office. I think part of the solution is to turn the PTO back to seasoned patent attorneys and agents, not career hacks and political appointees. Just another opinion.

[Opampman]

"Dennis: I know you are a professor now, but continued emphasis on the academic rather than the practitioner risks reducing the relevance of this blog for actual patent attorneys."

I respectfully disagree; a good mix of the theoretical and practical is good for us practitioners. It's like eating our vegetables. Bring it on, Dennis.

[Budge]

Yet another professor who does not practice patent law chiming in!

Read the statute: its pretty clear, particularly the part about "continuations". Note the "s". Read section 131. How can we analyze whether the USPTO had authority if what htey want is illegal?

How would you come out whether USPTO can establish a slush fund to talk to aliens in outerspace? Would you go through the two step analysis? "We must, and I mean must, first decide whether the PTO had rulemaking authority to establish a slush fund. Well it does not say they can't so lets go on to the second question, whether it contravenes the statute. Ah, Congress should have said "Don't talk to space aliens." So it is legal"

The way you present your analysis that you know something for fact that a Judge, AIPLA, the Patent Bar and everyone else who know patent prosecution seems to miss is really arrogant and annoying. Do you even know what a continuation is? A real life example?

[MaxDrei]

Nice initiative, Dennis, to draw our attention back to this 2003 Paper on self-help. I am awed by the degree of self-help displayed by the EPO some years ago, in putting in place the Rules and procedures to manage and steadily eat up the backlog which in those days was out of control (but isn't any more). No wonder the USPTO thought "I want some of that too"! But common law USA is not civil law Europe. If facts are oxygen, and 70% of the earth's surface is aquatic, civil law courts have gills and common law judges have lungs. They perish in each others' domains (civil solutions don't work in a common law environment, and vice versa). I had always thought that the great merit of common law fact-finding is that it's over when the first instance decides (whereas civil law appeal courts do fact-finding de novo). When Arti Rai points out that, in patent cases in USA today it's the CAFC that is doing the heavy breathing, I think she performs a useful service, in pointing this out as the root problem that has to be addressed, if the USPTO backlog is to be beaten back. For as long as the facts are in issue till one gets to the CAFC, every Applicant and every prosecuting attorney will argue to the ends of the earth for yet one more continuation, and will be acting rationally when doing so. No wonder people are outraged, when told that their rational behaviour is unacceptable.

[Budge]

My belief is that Arti Rai has never actually practiced patent law. Maybe someone through her an application when she was a clerk somewhere, but thats it. She is commentator needing an angle to make a name for herself and have herself be heard.

[patent leather]

Oh boy, so many things wrong with this article. But first, I respect Arti Rai's opinion and don't want to chase her out of here. But...

"But Judge Cacheris should not have avoided deciding the question of substance vs. procedure. If the PTO’s rules are in fact procedural..." -- The rules are clearly both procedural AND substantive. They are procedural because they affect practice before the USPTO but also substantive because they deny the right of an applicant to claim priority after his quota of continuations are used up. Thus, the rules are clearly substantive. Matter closed.

"Assuming that Chevron applies,..." -- Chevron clearly doesn't apply here because Congress never gave the USPTO power to make substantive rules. This was clearly argued by GSK and this isn't a live issue either.

"the PTO has argued that it does not intend an absolute limit. According to the PTO, it will evaluate requests for a third continuation application on a case-by-case basis" -- The PTO enumerated the circumstances where a request for a third continuation will not be granted, and stated only in rare cases would the petition be granted. This is a defacto absolute limit. The petition requirement was a sham to avoid the holding in Henrickson.

"Seminole Rock deference, which was recently reaffirmed in the 1997 Supreme Court case Auer v. Robbins, says that an agency interpretation of its OWN RULE is “controlling unless plainly erroneous or inconsistent with the regulation.” (emphasis added)" -- 35 U.S.C. 120 is not the PTO's "own rule" and is not subject to agency interpretation.

GSK's arguments are solid. While GSK did not succeed in showing the rules were "arbitrary and capricious," this is more fact intensive and I suspect GSK will make a stronger showing of this upon discovery of USPTO internal communications (discovery of which, the USPTO will object to vigorously).

[T]

Dear Professor

I respectfully submit that far from "ruling against" GSK’s argument that the rules were a bad idea as a policy matter (or, in the language of administrative law, “arbitrary and capricious”), the court indicated that there was not enough information in the briefs to rule one way or another.

I additionally submit that as soon as the court gets down to an analysis the nitty gritty, through-the-looking glass insanity of the new rules, the court will side with GSK, and the rest of the patent application filing community. Ignoring the "arbitrary" selection of 2 continuations, 5 independent claims and 25 total claims, please consider the following summary (by the PTO) of just one of the new rules:

37 CFR 1.75(b)(1) (new) provides that an applicant must submit an examination support document (ESD) before the issuance of a first Office action on the merits if the application contains more than five independent claims or more than twenty-five total
claims. 37 CFR 1.75(b)(1) also provides that an application may not be amended to contain more than five independent claims or more than twenty-five total claims if an ESD has not been submitted before the issuance of a first Office action on the merits in
the application.

Please also consider the video provided here:

http://www.kelleydrye.com/news/press/0170

which clearly shows that the PTO understands that no one will or can file an ESD (for which the PTO graciously provided a 16 page outline available here: http://www.uspto.gov/web/offices/pac/dapp/opla/presentation/esdguidelines090607.pdf of things to do in an effort to comply with the ESD requirement).

That aside, "new 37 CFR 1.75(b)(1)" would operate to prevent one from amending a patent application to place allowable dependent claims in independent form in order to allow the application to issue and capture for the inventor all the protection which the examiner concedes he/she is entitled.

Accordingly, "new 37 CFR 1.75(b)(1)" prevents one from amending and application to include more than 5 independent claims if an onerous ESD was not filed prior to the mailing of the First Office Action on the Merits. Therefore, if one filed an original application with say 3 independent claims and say 17 dependent claims depending directly from various ones of the independent claims, all well within 5/25, and the independent claims are finally rejected, but the dependent claims are found to be allowable, 37 CFR 1.75(b)(1) would prevent one from placing all 17 dependent claims in independent form. Indeed 37 CFR 1.75(b)(1) would force one to to select only 5 allowable claims and dedicate the subject matter of the other 12 allowable claims to the public.

I suppose the PTO might say that the inventor could (if he had a spare continuation left) file a continuation and an ESD, insanely duplicating the examiners search, to "support" the examination of claims already deemed to be allowable. However, that would involve paying application, search and examination fees for claims that have already been deemed to be allowable, not to mention the time, expense and other costs associated with the preparation and filing of the ESD. I submit that this shows that the new rules are arbitrary and capricious.

Alternatively, the PTO might say that the inventor could file 2 continuations without an ESD in order to collect 10 of the 12 claims and only have to forgo the protection provided by 2 allowable claims. I submit that this also shows that the new rules are arbitrary and capricious.

Of course, the situation would be aggravated if instead of 3 and 17, the original application included 1 independent claim which was ultimately finally rejected and 24 allowable directly dependent claims.

Do you see a way for the court to find that these rules are not arbitrary and capricious?

Thanks

[anon]

"First with the salary discussion, in my second year, I am going to be earning over 100k (after overtime) with a bachelor degree."

Please tell me how this is possible. What GS level are you? Are you getting the EE bonus? How many hours overtime are you working?

[real anonymous]

"I respectfully disagree; a good mix of the theoretical and practical is good for us practitioners."

Opampman, did you mean "theatrical and practical"? Either way, I would disagree. Its like two professors "dueling" with swords who never are likely to see a real battle... thinking they will be able to keep their swords sharp that way... when, actually, all it may be good for their egos.

The theatrical presentations are easy mental stimulus for the folks on the sidelines (politicians) who would rather watch choreographed fake duels (with conveniently captioned subtitles and/or advertisements as the case may be) than have to face and consider and analyze and understand the real thing... which would be much more difficult. It's no wonder the theatrical academia is well-received by their intended audience(s).

As we now say, "Those who can, do...." But in the old days of apprenticeships, perhaps they understood teaching much better than we do today. (They certainly did at the USPTO, when after 2 weeks of PEIT, you would be apprenticed for the next 4 years. And in Va., you can still take the bar without going to law school if you are apprenticed.)

(My apologies, Dennis, but the further you go away from the world of practice into the world of "fake duels", you will necessarily become less relevant in the world of practice. Please don't do it, Dennis. Thank you for Patently-O.)

[MisterAnonymous]

The PTO promulgated these rules (as it will promulgate others) because under the current way of doing things there are too many claims spread across too many applications for its examiner's to properly and comfortably examine. Yes, it could address this problem by hiring many more examiners, but that would require a lot of money, and that's not likely to happen. Besides, even if it were to get the money to do that, it would still have a hard time retaining the people it has invested money in recruiting and training, for a reason that few at the PTO or in the Patent Bar ever acknowledge: the work isn't just stressful, it is boring. Very, very boring. On the other hand, it requires fairly smart people to do properly, and smart people, being smart, generally don't last long at boring jobs unless the jobs either 1. pay a decent, if modest salary AND are easy (consider that there are MENSA types out there delivering the mail) or 2. pay very, very well (e.g. investment banking).

The job of patent examiner is boring (form paragraphs?) and stressful (production). You get slotted into a small area of technology, and that's that. The pay isn't terrible, but neither is it much of an inducement to stick it out for a full career. Hence the high attrition rate, which will always be a problem for jobs like these. One approach is to lower the stress level by rethinking (i.e., lowering) production requirements, and one way of doing that is to increase the hours/count. Reduce the number of claims that must be looked at and the number of attorney-submitted prior art references that must be considered, and presto! There's wiggle room for increasing the hours per balanced disposal. I suspect that this, in the end, is the goal of the PTO's current legislative and rule-making initiatives. Reduce the volume of claims coming in so that the examiners can be given more time in which to do their boring jobs.

[NPE]

anon-
GS level is 9.
No EE bonus.
40 hours of overtime a bi-week.

Overtime cap is about $36 per hour.
26 bi-weeks in a year.
40 hours a week.
70k Salary + (40*36*26) = 107k.

[T]

FYI -

At about the 1:05:27 mark, at the end of Solicitor Whelan's remarks in this video: http://realserver.law.duke.edu/ramgen/spring06/students/02172006a.rm , Professor Rai makes an interesting comment regarding the PTO's power to make rules with respect to procedure and how procedure can effect "substance".

[anon]

"First with the salary discussion, in my second year, I am going to be earning over 100k (after overtime) with a bachelor degree."

I thought examiners were still probationary in their second year and weren't allowed to work overtime, or does this vary by TC?

[real anonymous]

Anon E. Mouse wrote:

"Well, 553 has an exception to notice and comment for procedural rules--there's no notice and comment needed for informal rulemaking regarding procedures under 553. The PTO cites to it in the final rules in the federal register. They say their rules are procedural, thus no notice and commment is necessary, but they do it any to be nice (just like a cat covering it up with kitty litter).

But back to the statutes: did Congress kick the PTO over to 553 just to be in the exception in 553? That makes no sense."

I'm not an expert in admin law, but 5 USC 553(d) and 5 USC 553(e) don't appear to have any exceptions for "procedural" rules, contrary to the USPTO assertions below.

The USPTO's cite take on 5 USC 553 at FR 46830 is:

The changes being adopted in this notice do not change the substantive criteria of patentability and do not effectively foreclose the applicant’s opportunity to make a case on the merits (i.e., the changes being adopted in this final rule continue to provide patent applicants with numerous opportunities). Therefore, these rule changes involve interpretive rules, or rules of agency practice and procedure.... Accordingly, prior notice and an opportunity for public comment were not required pursuant to 5 U.S.C. 553(b)(A) (or any other law), and thirty day advance publication is not required pursuant to 5 U.S.C. 553(d) (or any other law). Nevertheless, the Office sought public comment on proposed changes to these rules of practice to obtain the benefit of such input prior to adopting the changes to the rules of practice in this final rule.

[Dennis Crouch]

For those of you versed in RSS feeds: I have created a 'comment feed' that you can used to follow comments on Patently-O.

http://feeds.feedburner.com/PatentComments

[Anon E. Mouse]

real anonymous:

5 usc 553(b):
---------
(b) General notice of proposed rule making shall be published in the Federal Register....
...
Except when notice or hearing is required by statute, this subsection does not apply—
(A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; ...
------------

that above part means no notice is required for the stuff listed in 553(b)(A) -- that is, for rules of agency procedure, such as the New Rules (so sayeth the PTO).

553(c) says "after the notice required by this section [do public comment]...."

-there is no notice required, thus no comment required.

553(d) says "the required publication of a substantive rule..." and "except....(2) interpretive rules...."

-not substantive, so no required publication.

[Dennis Crouch]

Another link: http://www.patentlyo.com/patent/comments.rdf. (This one is faster, but is not as easy to use).

[T]

MisterAnonymous
If I am remembering the PTO's comments correctly, there are currently 700,000 unexamined applications pending. Making a few assumptions and rounding down to $1000 per application in Filiing, Search and Examination fees, that means there is currently $700,000,000 in unused fees sitting in an accout somewhere, which could be used to hire examiners who would find reading and prosecuting patent applications interesting. That of course does not consider the billions in "maintenance" fees that are currently being collected on allowed patents or that would be collected if only the average 1/3 of those 700,000 applications were allowed.

If McDonald's has trouble keeping up with the demand for Happy Meals, they dont make you file a petition explaining why you didn't or couldn't have ordered extra fries earlier.

They continue to ask you if "you want fries with that" and they build another restaurant.

What happened to delighting the customer?

[real anonymous]

"At about the 1:05:27 mark, at the end of Solicitor Whelan's remarks in this video: http://realserver.law.duke.edu/ramgen/spring06/students/02172006a.rm , Professor Rai makes an interesting comment regarding the PTO's power to make rules with respect to procedure and how procedure can effect 'substance'"."

Here's the transcript of Ms. Rai starting at 1:05:26:

"...John's [Whealan] presentation pointed out one thing which is very important is that the PTO does have, ummm it may not be quite like other administrative agencies, but it does have a fair amount of power with respect to procedure in particular, and procedure as we all know in our post legal-realist era can also affect substance, so ummm I'm delighted that the PTO is choosing to exercise its power in this way, my personal prejudice, I'm a big fan of having the PTO take more authority."

A big fan of having the PTO *take* more authority.

Dennis, did you know about this "personal prejudice" before publishing the article in the Patently-O Patent Law Journal?

[real anonymous]

P.S. and as T correctly pointed out, the "affect" in the transcript could have actually been "effect", and hence her prejudice and the power grab she seems to promote could be even more damaging in the hands of a misbehaving agency.

[johng]

Why are these professors at the periphery of this business so eager to express such biased opinions? Is Professor Rai an old college chum of Whealan? Do they think this is a game? Geezus!

[BigGuy]

Folks,

Enough with the attacks on Professor Rai. I find it disappointing that the same nonsense that passes for political discourse these days turns every discussion, even on this board, into a futile exercise. Please keep in mind that ad hominem arguments aren't really arguments at all. Either Prof. Rai is correct, or she's not. Whether she "loves the PTO" is besides the point.

Likewise, whether Professor Rai has ever written a patent application is also beside the point. This case is about administrative law. How many of you are experts in that field? Yes, some of the details, such as whether the requirements of the ESD are so onerous as to be an illusory option, or whether the requirements are vague, might best be illuminated by practitioners. But the difference between "substantive" and "procedural", and whether the PTO really has been authority sufficient to promulgate these rules, will be determined from considerations beyond whether or not these rules make you unhappy.

Let's act like reasonable advocates for our clients, rather than whiney name-callers.

[PE]

"First with the salary discussion, in my second year, I am going to be earning over 100k (after overtime) with a bachelor degree."

NPE - by saying "in my second year", are you saying that you are not in your second year yet? You suggest that you (would) have a $70k salary as a GS-9. This would mean that you are either a step 9 or step 10. Unless you are initially hired as a GS-9 step 9/10, you will not be able to get to such a GS level/step combination (except through step increases without grade promotion). For example, if you are hired as a GS-7 step 10, then upon promotion you will be a GS-9 step 7. (and then the following year, a GS-11 step 5)

Also, by doing 40 hours of overtime each biweek, you are doing 150% of your expected production. Good for you if that's no problem for you, but please do not make it out to appear as if that is the norm. I myself do not have trouble doing 50 hours of overtime per biweek but I know for certain that 50 hours is viewed as a great amount of overtime amongst my peers.

Finally, you may come to find that trying to CONSISTENTLY produce 50% more than what you are expected to do (even if it is not too difficult to do so for a single biweek) may take a whole lot more discipline than expected.

[David Caracappa]

I went to the PTO briefing at the Partnering in Patents meeting. My feeling was that no petitions will be granted on a case-by-case basis unless REALLY exceptional circumstances exist. It was pointed out at that meeting that of all the examples given by the PTO, not one of them actually led to the granting of a petition - can the PTO representative give one example where the petition would be granted? The question was conspicuously dodged. Futher I would strongly counsel clients against submitting an ESD.

I'm very afraid that the same thing will happen to suggested restriction requirements: you file all your claims in a single application along with an SRR, but the PTO denies it, or limits the number of divisionals actually granted.
.
(Hey - at least she wasn't one of the Duke 88)

Dave

[real anonymous]

"Let's act like reasonable advocates for our clients, rather than whiney name-callers."

Big Guy, who are you calling whiney name callers?

[real anonymous]

Anon E. Mouse, 553(b) distinguishes between "interpretative rules" and "rules of agency organization, procedure."

553(d) only excepts interperative rules, not rules of agency organization, procedure.

To say (as has been said in the FR notice) the USPTO could have effected the final rules without a 30 day prior-publication of final rules is (in my mind at least) ludicrous.

[BigGuy]

Real - When I said "Let's act like reasonable advocates for our clients, rather than whiney name-callers," I was speaking prospectively, not retroactively. ;)

[realExaminer]

NPE,
if you're a real examiner, I would like to know which technology area you work in and see some samples of your work. Doing such amount of overtime as you claim is certainly not the norm. In actuality, the norm is working a lot of VOLUNTARY overtime. Please don't try to pump up your ego by posting such nonsense as if it's the norm.

[real anonymous]

"Real - When I said "Let's act like reasonable advocates for our clients, rather than whiney name-callers," I was speaking prospectively, not retroactively."

So, you're going to call us whiney name callers in the future?

[BigGuy]

"So, you're going to call us whiney name callers in the future?"

If it advances my argument...

[Anon E. Mouse]

real:

Yes, I agree.

The PTO's position is that they were procedural and interpretive...I guess interpretive rules of procedure.

All kidding aside, I'm pretty sure that there are rules that have been promulgated that would fall into that category.

Prof. Rai is doing us a great service, as is Dennis for giving her a forum.

This will be an Admin law case fought by Admin law lawyers. We patent folks will be most valuable filling in the underlying questions of fact and law--giving the admin folks the ammunition they need.

Prof. Rai is giving us insight into the PTO's case. We need her viewpoint.

[real anonymous]

How on earth could it advance your argument:

"Let's act like reasonable advocates for our clients, rather than whiney name-callers."

Are you an unreasonable advocate, or do you just judge others by standards you don't live by? We will all reap what we sow, eventually.

[Patentlyconcerned]

Following up on a comment above, I don't have a problem with this blog posting articles such as that of Prof. Rai, and other articles/news items that many of us would consider to advocate a viewpoint that is anti-patent (when I say anti-patent, I mean the viewpoint advocates changes that will make patents more difficult to obtain, more expensive, etc.). However, for better or for worse, some persons in the media etc. take this blog seriously as some sort of pulse of the in-the-know patent community. Maybe it's my own paranoia, but it seems to me that the majority of articles that we see on this website tend to be anti-patent. I can see how the media etc. who view this website could get an anti-patent vibe (certainly not from viewing the reader comments, but from viewing the headlines and articles), which may be imputed on the regular readers of this blog by association. I certainly cannot believe that this is intended by Dennis, and I hope to see more articles from those who support the patent system in the future, so that the blog isn't so one sided. There is plenty of such information out there on the web, particularly recently, as small tech, pharma, and others are starting to make their case against the current reform bill in the Senate.

[Kev]

Ms. Rai ... not sure that the basic assumptions of your article are even correct. You refer to the patent statute, which statute?? Do you mean the ´52 Patent Act? Substance vs. Procedure?? Your analysis in not clear and actually complicates, if not obfuscates the issues. At this stage, the court was only to consider the 4 factors in deciding whether or not to issue a preliminay injunction; you know them, or should ... No substantive patent law analysis needed ... yet.

[Kev]

Ms. Rai ... not sure that the basic assumptions of your article are even correct. You refer to the patent statute, which statute?? Do you mean the ´52 Patent Act? Substance vs. Procedure?? Your analysis in not clear and actually complicates, if not obfuscates the issues. At this stage, the court was only to consider the 4 factors in deciding whether or not to issue a preliminay injunction; you know them, or should ... No substantive patent law analysis needed ... yet.

[newerexaminer]

T-
The PTO is not allowed to carry over money from FY to FY. It must use all of its money it gets in one fiscal year within that said fiscal year. The PTO is actually heading towards having less money overall because of the "quality initiatives" causing less patents to issue (thus less issue fees and less maintenance fees, where the PTO gets most of its income).

[anonymous]

I get the feeling that Dennis Crouch and Arti Rai are shills of the Coalation for Patent Fairness (Intel, MS, HP, SAP, etc.).

[real anonymous]

"I get the feeling that Dennis Crouch and Arti Rai are shills of the Coalation for Patent Fairness (Intel, MS, HP, SAP, etc.)."

I don't.

[BigGuy]

Real - I thought we were engaging in good-natured banter; I'm not interested in a fight.

My suggestion that I would only call someone a whiney name caller if it advanced my argument was intended to be ironic - please see my original post regarding the fallacy of ad hominem arguments.

Sigh.

[real anonymous]

Sorry BigGuy - my fight isn't with you personally, but with the powers that be. (And I don't advocate name calling either.)

[X-Solo]

The legal arguments have yet to be made... after all, a TRO is an action in equity. Scholarly comments such as this are not particularly helpful from the patent bar's perspective. The enjoined rules would cause serious long term harm to the US economy and as such, the commerce clause rules here.

[anon]

Anon E. Mouse:
I have been trying to focus the issue by drawing attention to the source of the problem instead of the symptom. We have successfully dismantled near all of FDR's liberal socialism. The executive agencies are the last rubric of overly centralized government. It is the executive agencies in total that must be vitiated in their present form. We must seriously expand the judiciary and place ALL judicial functions of each executive agency under the direct control of the courts. Only then will problems such as these occur.
If you focus on the reality of the driving force behind these regulations, it is nothing more than an attempt to fix the litigation problem in this country from a substantive approach. They are attempting to fix the litigation problem, but only with patent cases.
If the companies have issues with litigation costs, then we should change litigation in this country. For example, the discovery rules, both old and the new e-discovery are simply ridiculous. Screw discovery in patent cases. Walk up with you patent look at the accused device you either infringe or not. Do it like the Europeans. For christ sake, don't give BS powers to a clearly unconsitutional fourth branch of government we call executive agencies.
So long as executive agencies exist in their present form, we are only a few steps of way from autocratic government.

[anon]

Mr. Whealan's ideology is inimical to the national character of the United States Government. Never should we allow unelected individuals establish policy. If Congress can't do it with the numbers they have, then maybe we are under-represented. I say we return to the original numbers of citizens per Congressman. We should have one Congressman for every 30,000 Americans. Then maybe there will be enough of them to address the needs of the nation. What we have here people, is yet another example of a group of government paid individuals who do not want to do their work. So the burden is upon the private individual. That is what these rules do. I say make the Congress do their job. Get enough Congressmen and then only they can promulgate regulations. If you have one one Congressman for every 30,000 citizens that would equation to about 30,000 Congressmen. With that many they would have time to pass the regulations needed. If we don't like the regulations we could then throw the bums out. Here we can't remove these people that we don't like in the USPTO. This is simply unAmerican.

[johng]

All of a sudden I feel like a republican again. Thanks anon!

[Just an ordinary inventor(TM)]

This strays a bit, but here is my question:
Dear Simple Fix,

Re:
“End the fee diversion process and put the 2 billion or more dollars taken from patent office revenues back into the system. Go after the congressmen who took the money in the first place. Imagine how the system would be today if the funds were spent on office infrastructure.”

( Simple Fix’s comment was made on this thread:

“Court Blocks PTO Rules on Eve of Effective Date …” on this link:
http://www.patentlyo.com/patent/2007/10/court-blocks--1.html )

Is $2 billion the real number?
If so, why didn’t many Patently-O commenters pick up on this?
It seems to me that Simple Fix hit a real sore spot underlying the PTO controversies.
Simple Fix is on to something.

Anyone have more info about this?

Given the obvious pis-por performance of PTO Management in the past, PTO generated money could be / should be used in myriad way to help solve PTO problems, such as hiring out-side services to manage the PTO business and perform some of the examining work.

Why do we seem to be ignoring Simple Fix’s ideas and suggestions?

[jwint]

TIMEOUT! I just saw that the Tafas lawyers have filed to depose Dudas and Doll! This should be good. Some accountability, finally?

[Malcolm Mooney]

"I know you are a professor now, but continued emphasis on the academic rather than the practitioner risks reducing the relevance of this blog for actual patent attorneys. "

Lighten up, Noonan.

[Kevin E. Noonan]

Malcolm:

You are entitled to your opinions, as I am to mine. Write when you have something constructive (or at least amusing) to say.

[Malcolm Mooney]

""So, you're going to call us whiney name callers in the future?"

If it advances my argument..."

BigGuy wins the Retort of the Month(TM) award!

Look, Professor Rai surely has made some reasonable points and has also shown us where the PTO is likely to proceed with its arguments as the case moves forward. It's not surprising that the judge's opinion was lacking in some respects, given the rushed nature of the proceedings and the complicated facts.

But it's those facts that are going to bite the PTO in the behind as this moves forward because the facts are that the PTOs alleged "goals" are not rationally related to its rules, and the rules themselves were so poorly drafted that they were being re-written (or "clarified" as the PTO clumsily spun it) right up to the date of enactment.

[Patent Medicine]

One note: Whatever her views, Ms. Rai's comments are helpful in that GSK needs to know if there are any holes in its arguments.

Second note: Regarding the non-granting of petitions, is there any use in studying the "Chinese laundry" cases of San Fransisco? My memory of them is dim, but I thought there were some cases that held that San Fransisco's zoning regulations, while fair as *written*, were *administered* in a way that was completely unfair (i.e., permits for laundries were simply never issued to Asians). It seems to me that the PTO's own guidelines on the circumstances under which they wouldn't grant a petition serve as evidence that the rules, while fair on their face, are not intended to be administered fairly. Furthermore, their examples actually interfere with an applicant's ability to comply with other rules, e.g., no RCE to bring in late-discovered prior art prevents one from complying with Rule 56). Or that the presumption that same-day-filed applications are patentably indistinct prevents an applicant from complying with 35 USC 101 in the first place (without the aid of divisional practice).

[ohmy]

Rai stated: With respect to the prospective application of the continuation rules... analysis of whether the rules are contrary to the patent statute turns on two issues that should be decided sequentially. First, do the rules fall within the scope of the PTO’s procedural rulemaking authority? Second, do the rules violate the statute?

What case HOLDS this and why was it not cited (if the case exists at all)? Why should the court not decide, first, whether the rules violate the statute? Or is Rai pulling this out of thin air. Pretty sloppy scholarship!

[ohmy]

Come to think of it, aren't all agencies's rulemaking authority granted via statues? Shouldn't there basically be only one step, whether the agency's action violated any statute?

[Dennis Crouch]

ohmy: On that note, I should let you know that I gave Professor Rae a strict word limit. There are many relevant cases, statutes, and articles that would be cited in a longer piece -- however those citations are not (in my view) appropriate for a Patently-O post.

Your question still stands as a good one: Is it truly clear error for a district court to merge the analysis of substance/procedure and authority into a single step?

[curious]

Dennis:

There probably are six or so distinct points made in the comments above in response to Professor Rai's post.

I hope that Professor Rai will take the time to respond each of them

[Noob Saibot]

This was a nice reminder of my good fortune in taking Admin Pro from a professor with experience as a registered patent attorney and as an examiner.

[Noob Saibot]

Dennis:

"Is it truly clear error for a district court to merge the analysis of substance/procedure and authority into a single step?"

I would condition that as, "Is it truly clear error for a district court to merge the analysis of substance/procedure and authority into a single step, in the context of an emergency motion for preliminary injunction (mere hours prior to the irreparable harm taking effect)?"

[T]

Curious -
As I recall, since the points were submitted in the same blog thread, there is a rebuttable presumption that the points are bloggedly indistinct. Accordingly, in order to get distinct replies, someone needs submit a Suggested Rethreadification Requirement and a showing as to why the points could not have been submitted in separate threads originally, or rebut the presumption of bloggedly indistinctiveness.

[Mark Protsik]

I believe the key words regarding the PTO's rulemaking authority granted in 35 USC 2(b)(2) are "not inconsistent with law". The PTO's rulemaking authority is not absolute and the substance/procedure distinction misses the whole point of the court's preliminary holding. If the rule indeed violates 35 USC 120, and thus is "inconsistent with law", then it automatically exceeds the granted authority. The PTO's remedy to overturn a nearly 40 year old precedent to which had long acquiesed should have been to seek amendment of 35 USC 120 by Congress rather than to act unilaterally.

[Arti K. Rai]

To all those who have responded,

1) Note that this post is intended to focus on **administrative** law. I express no opinion as to whether the rules are a good idea as a policy matter.

The administrative law question is very important because it is relevant not simply to this case but also to any future cases in which the PTO acts via a claim that it is using procedural rulemaking authority. There have already been such cases, and there will no doubt be more.

Post Dickinson v. Zurko, traditional principles of ad law apply to the PTO. So it's important to get the ad law right.

For those of you who are interested in "real-world" experience, I argued many administrative law cases as an attorney in private practice and also for the Department of Justice.

2) The central PTO argument (not necessarily a winning argument, but the central argument) is that the rules are procedural; Congress gave it procedural rulemaking authority; and thus its rules should be evaluated under the Chevron framework.

As Mead makes clear, the first step in this framework(Chevron step 0, as Professor Cass Sunstein of the University of Chicago Law School has called it) involves looking into whether the PTO's claim is in fact correct.

Contrary to some posts, not all statutes give agencies rulemaking authority. In fact, the issue of whether an agency has been given rulemaking authority, and is acting in the exercise of that rulemaking authority, is central.

3) Whether it is "reversible" error not to decide the question of Chevron step 0 is anybody's guess. But it is questionable opinion writing when the agency is making that argument as its major argument.

Deciding the procedure vs. substance question is also important for writing an opinion will be useful precedent for future cases.

At the PI stage, the hurriedness can perhaps be excused. But I certainly hope that Judge Cacheris addresses the question squarely later on.

5) The point about procedural rulemaking not necessarily being subject to notice and comment is interesting. But under Mead notice and comment certainly helps the PTO's claim that it passes Chevron step 0.

6) The Seminole Rock point goes directly to the question of whether the rules conflict with the statute. If the court gives deference to the agency's view of how the rule is going to be applied, it may reach a different conclusion about conflict than if it accepts the challenger's view.

[curious]

Professor Rai:

Thank you for your replies to the rather spirited postings by patent practitioners.

The "agency's view of how the rule is going to be applied" is that the PTO was unable to identify a single instance when a request for a third continuation would be automatically granted.

[Gideon]

I love professors. They're so analytical.

You can always count on a professor to make sure good sound judgment doesn't get in the way of stare decisis.

[T]

Professor Rai -

I would note that you did say, "... the court ruled against GSK’s argument that the rules were a bad idea as a policy matter (or, in the language of administrative law, “arbitrary and capricious”)" and your recent post does not respond to any of the several challenges to that statement that were posted in reply.

[Bill Blonigan]

In response to Ms. Rai's comment: "Indeed, the very strong deference of Seminole Rock is relevant even if the rules in question are substantive and thus not entitled to the application of Chevron. Yet the opinion by Judge Cacheris does not even cite Seminole Rock."

The judge did not cite Seminole for good reason--it appears to be irrelevant in this case.

The court's GSK opinion does not cite Seminole Rock as Ms. Rai suggests it should have because, as she points out, the court would have had to first decide that the rules were validly promulgated (i.e., whether they are substantive or procedural). The appropriate citation (that the court also missed) is United States v. Mead Corp., 533 U.S. 218, 150 L. Ed. 2d 292, 121 S. Ct. 2164, Syllabus (2001) (holding that "Administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of such authority.").

Granted, Seminole "says that an agency interpretation of its own rule is “controlling unless plainly erroneous or inconsistent with the regulation.” However, Seminole deals with administrative interpretation of VALID agency regulations. "The dispute in [Seminole] centers about the meaning and applicability of [an agency's] rule." The Seminole court did not address the rule's validity, stating that "[w]e do not, of course, reach any question here as to the constitutionality or statutory validity of the regulation."

No question that if the rules at issue in GSK are valid and if the PTO were interpreting them through application or otherwise, Seminole would be relevant. However, the issue in GSK is whether the rules are valid in the first place. This falls under Mead.

As for Ms. Rai's first point, that the court could have spent more time analyzing whether the rules are valid, there is another problem. Almost no case law guidance exists in this area because the Federal Circuit did not even recognize the PTO's administrative agency status until the Supreme Court forced it to in Zurko. After that, the PTO's powers have been generally minimized under the APA. See Zurko on remand (choosing to give the PTO the lesser of two possible modes of deference under the APA). Thus, whether the court reasoned through these issues in its opinion or not, it probably approximated the most likely Federal Circuit position. No doubt, the court's final opinion will have to clearly decide this issue. Hopefully it will consider all of the relevant Supreme Court case law in its final decision.

I appreciate Ms. Rai's comment not because it is infallible, but because it raises awareness about issues of administrative law that every patent attorney is hopefully ready to argue on a client's behalf.

[Michael L. Slonecker]

Ms. Rai,

Re: "For those of you who are interested in "real-world" experience...", while many posts have in large part been based on emotion, there is an essence of truth in the sense that the rules will have to eventually be examined with particularity. Agreed, this is a case whose outcome will be determined by principles of Admin Law, but its factual underpinings require a detailed understanding of the vagaries of Title 35, 37 CFR, and, possibly, the MPEP.

BTW, I do hope that as this matter progresses more portions of Title 35 are brought into play as they lend credence to the argument that the rules at issue impose substantive limitations contrary to statutory and case law.

[stepback]

Prof Rai,

Thank you for backing me up on the Mead issue.

I guess you are coming at this from a purely admin law perspective with little grounding in substantive patent law.

35 USC 111 defines what constitutes an "application".

35 USC 131 says the USPTO "shall" examine the application if properly filed --no wiggle room

35 USC 102 creates a statutory "entitlement" to a patent, the applicant is entitled to a patent unless--

Because of this statutorily imposed entitlement, it is the initial burden of the USPTO to present a prima facie case of unpatentability based on the law (35 USC 102, 103, 112 primarily). The PTO's job is to "examine" applications, not to legislate new laws that demote the progress of science by unsecuring from inventors the exclusive rights to their respective discoveries.

[Anon Moose]

Reading through the law review article and the arguments about whether the Patent Office’s new rules are procedural or not, lets look at the respective remedies for the issue regarding gaining another continuation.

For example, the patent office states under the new rules that one may file a petition in order to get such a continuation established. The question therefore is how is the petition going to be analyzed?

The patent office has basically stated that the bar for getting such a petition granted will be very difficult where the issue could not have been presented to the patent office prior in the previous responses.

Arguably, such a requirement leads to a “foreseeability” analysis which would be a substantive issue, not a procedural issue. That is, how could I, in view of rules promulgated, predict an art rejection (substantive) or other type of rejection?

Ok, let’s look at another component of the new rules which basically states that “related applications” (same inventor within 2 months) are assumed to be patentable indistinct unless the Applicant rebuts such an assumption. This is important for applying the 5/25 rule.

The analysis for understanding what “patentably indistinct” would probably mean is the standard used to apply an obviousness double patenting rejection (provisional rejection). I don’t know about anybody else, but the Examiner will typically provide a claim chart to me identifying the respective elements of claims between two applications (or issued patent) to apply such a rejection.

Under the new rules, such an analysis is not required because it is assumed that two applications falling under the “procedural rules” are in fact patentably indistinct. Yet, for the Examiner, the only way of asserting that two application are patentably indistinct is to conduct a claim analysis (a substantive analysis).

Hence, without drawing many pixels in these two examples above, I think that the thought that the new rules are in fact procedural and can be upheld is kind of weak. That is that the rules produce tests that concern substantive issues of law evaluated against 35 U.S.C. 102, 103, and 112, in order to be applied effectively.

[Arti K. Rai]

A few thoughts:

1) What I meant by the statement that the court "ruled against GSK" on the policy question was that it found GSK had not shown sufficient likelihood of success on the merits with respect to that question. So much of the case turns on administrative authority, not policy.

(Given Dennis's strict word limits, I needed to use shorthand.)

2) I appreciate the point that the Federal Circuit has shown resistance to the command in Zurko. (Indeed, I have a whole law review article in Georgetown about that . . .) However, Lacavera v. Dudas, a 2006 Federal Circuit case, explicitly applies Chevron to a case where the PTO argued that it was exercising its procedural rulemaking authority. (And found the rule reasonable under Chevron step 2.)

3) Although I think Chevron step 0 (i.e. Mead) is probably the more important point, I am not convinced that Seminole Rock is irrelevant. In order to determine conflict with the statute, one has to determine the meaning of the regulation. Recall that the Supreme Court opinion in Seminole Rock ended with:

"We do not, of course, reach any question here as to the constitutionality or statutory validity of the regulation **as we have construed it** . . ." (my asterisks).

As the Supreme Court indicates, if there is disagreement over what a regulation means, one has to construe the regulation before one can determine if it conflicts with the statute.

Of course, given some of the PTO's statements, it may be that their "litigation" position that a third continuation app will be decided on a "case by case basis" fails Seminole. However, since Cacheris does explicitly discuss the conflicting positions on what the regulation means, Seminole should be noted.

[Mark Protsik]

An earlier post (step back, Nov 04, 2007 at 7:33pm) suggested that the PTO rulemaking might also be inconsistent with 35 USC 131 ("The Director shall cause an examination to be made of the application") and thereby exceed the PTO's rulemaking authority under 35 USC 2. However, whether or not this stututory section leaves the PTO little, if any, "wiggle room" to refuse to examine a continuing application depends on a number of judicial cases over the years that have restricted when res judicata may constitute a proper ground of rejection (see MPEP 706.03(w) for a list of relevant cases). These may have a bearing on whether the substance of the rulemaking is proper. I believe that the essence of the PTO's argument boils down to denying that an applicant has any right to perpetual examination of his/her application. While I tend to agree with the PTO on that point, any rulemaking would still need to be consistent with the body of res judicata case law. If the PTO wishes to reverse this body of precedent, then 35 USC 131 itself may need to be amended.

[Mark Protsik]

An earlier post (step back, Nov 04, 2007 at 7:33pm) suggested that the PTO rulemaking might also be inconsistent with 35 USC 131 ("The Director shall cause an examination to be made of the application") and thereby exceed the PTO's rulemaking authority under 35 USC 2. However, whether or not this stututory section leaves the PTO little, if any, "wiggle room" to refuse to examine a continuing application depends on a number of judicial cases over the years that have restricted when res judicata may constitute a proper ground of rejection (see MPEP 706.03(w) for a list of relevant cases). These may have a bearing on whether the substance of the rulemaking is proper. I believe that the essence of the PTO's argument boils down to denying that an applicant has any right to perpetual examination of his/her application. While I tend to agree with the PTO on that point, any rulemaking would still need to be consistent with the body of res judicata case law. If the PTO wishes to reverse this body of precedent, then 35 USC 131 itself may need to be amended.

[Noob Saibot]

Dennis,

As an aside, Prof. Rai has had to resort to defending her original article by noting that she had to abbreviate her arguments to conform to your “strict word limits”. Given the already novel format you are (very usefully) promoting here for guest blog posts as “law journal” entries, the future success of this format relies on expert commentators not feeling like the format will put them at a disadvantage in explaining their analysis. I would have enjoyed reading Prof. Rai’s thoughtful commentary in a less hurried format, and the length that was given Casino & Kasdan for their article didn’t seem to frighten us private practice attorneys away from your blog. I hope you will loosen up your word limits for your guest experts. Thanks.

[Just Visiting]

"Of course, given some of the PTO's statements, it may be that their "litigation" position that a third continuation app will be decided on a "case by case basis" fails Seminole. However, since Cacheris does explicitly discuss the conflicting positions on what the regulation means, Seminole should be noted. "

I believe most practioners are willing to forgive Judge Cacheris for not devling into Seminole for exactly this reason. That doesn't excuse being rude though...

[Stan E. Delo]

A, Yes. The entire Whealan video is available here:
http://realserver.law.duke.edu/ramgen/spring06/students/02172006a.rm
and here
http://realserver.law.duke.edu/ramgen/spring06/students/02172006b.rm

Mr. Whealan expressly concedes that the PTO was attempting to "make policy," that the ESD is a poison pill that "under the current law of inequitable conduct, nobody's going to want to do." There are several more totally outrageous statements, which I will leave for your delight to discover.

The one poor soul in these two videos with any practical "background and experience in patent law" (as opposed to purely academic claptrap), is Wendy Verlander. You can see her in the second session biting her lip, and only occasionally hinting that the ivory tower data-free nitwits (Rai, Dreyfuss, and Kahin) are talking complete nonsense.

Points to Ponder... Thank you for the links, although I only got about a third of the way thru the first one before I started becoming very depressed. They actually Really Believe this stuff, and are apparently Teaching future practioners in the art and science of how to circumvent the rights of the holders of ostensibly validly granted patents. Scarey stuff.... Kahin was especially scarey, in his blithe dismissal of the value of new innovations, in the interest of *sharing them* with others, to avoid the IT industry having to suffer so painfully from all those nasty *Patent Trolls* that seem so peskily to insist that the IT guys need to Pay for willfully infringing patented inventions. Last I heard, the Constitution says that IP is considered to be *property*, much like the deed to a plot of land or a house, and if someone tries to take your *house*, they had better be prepared to pay for it, or they will be considered to be a theif. As regards trolls, does that mean that folks that buy and sell real estate for a profit are doing something *wrong* or reprehensible? An inquiring mind would really like to know...

Thanks for the great forum Dennis... Also to know thine enemy is half the battle.

[Also Curious]

Regardless of whether Chevron or Mead applies, the USPTO must comply US statutory law that obliges it to give merits consideration to patent applications lawfully filed. In the United States, the right of inventors to apply for patents is not the result of any statutory scheme, but rather is pursuant to a specific provision of the US Constitution that entitles inventors to letters patent protection on their inventions absent a showing by the government of a good reason such a letters patent should not issue. The U.S. Congress was therefore obliged to set up a process by which each and every lawfully filed application receives individualized consideration to determine whether any reasonable basis exists to refuse to a corresponding letters patent grant. Proceeding on the basis that the USPTO is similarly bound by this obligation, if at a given point in time the USPTO concludes that it must set a de-facto upper limit on the number of patent applications that may lawfully be filed in sequence based on a common specification, it would need to adopt a relatively liberal policy on the number of patent claims that may be submitted with each such patent application in order to avoid running afoul of the Constitution. Alternatively, and for the same reason, if at any given point in time the USPTO concludes that it must set a de-facto upper limit on the number of patent claims that may be submitted along with the as-filed version of a particular patent application, it would need to adopt a relatively liberal policy on the number of patent applications that may subsequently be submitted based on the same or similar disclosure to that of the initially-filed.

Does anybody else agree with me that it would have been well within the mandate of the USPTO to impose either of these limits separately, consistent with the above-described "relief valves"?

[concerned]

Also Curious:
Finally someone is talking about the claim limitation and continuation limitations together as the should be. Not covered well in the briefs so far.

[everywhere]

so a client asks you to include three embodiments in the patent application which you are preparing for him

and you reply that your firm only includes two embodiments at the most in the patent applications which they prepare for clients because the firm has a large backlog of cases

the client replies that he is willing to pay more for the application and suggests that your firm hire additional patent attorneys

you say that does not matter and tell him that if he wants you to include more than two embodiments that he must do a search and prepare a special disclosure document for you

fortunately, the client can go to another firm

we only have one patent office

[Bill Blonigan]

RE: "I appreciate the point that the Federal Circuit has shown resistance to the command in Zurko. (Indeed, I have a whole law review article in Georgetown about that . . .) However, Lacavera v. Dudas, a 2006 Federal Circuit case, explicitly applies Chevron to a case where the PTO argued that it was exercising its procedural rulemaking authority."

I am very familiar with the excellent Benjamin/Rai article, but given its lack of coverage (that I recall) related to Lacavera and that it published in 2007 whereas Lacavera was decided in early 2006, it seems that that article agreed that Lacavera does not provide much insight for a court trying to analyze the issue of deference to the PTO in a meaningful way. It has been some time since I read the article, however, and I could be missing something.

RE (3) above: "I am not convinced that Seminole Rock is irrelevant . . . . [O]ne has to construe the regulation before one can determine if it conflicts with the statute."

Interpretation is necessary, but as the court in Seminole noted, "a court must necessarily look to the administrative construction of the regulation **if the meaning of the words used is in doubt.**" Perhaps the the scope of the ESD requirements was ambiguous, but the meaning words of the proposed regulations were clear and agreed upon--applicants would have to submit an ESD. Contrast this type of ambiguity with the arguments relating to the words of 35 U.S.C. 120 and the ambiguity of "highest price" in Seminole and the proposed regulations do not appear ambiguous under Seminole. Of course, the final answer just depends on your preference since "ambiguity" is a fuzzy and easily manipulated concept, but the low practical value added should excuse the GSK court's decision not to cite Seminole Rock.