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: The Patent Prospector

Procedural Kowtow

By Gary Odom and Jordan Kuhn

The CAFC considers most everything a matter of law. Substance/facts are a legal inconvenience best boxed so that the entire container can be subject to rule-of-law disposition. With that mindset firmly entrenched, a confusion between substance and procedure is natural. So it was in Tafas v. Doll, formerly Tafas v. Dufas. At least the CAFC still ponders whether rules conflict with laws, though "consistency with the Patent Act is not the touchstone of whether the rules are procedural or substantive."

Triantafyllos Tafas and GlaxoSmithKline v. John J. Doll (CAFC 2008-1352) precedential

Penned by Judge Prost, joined by Bryson, with Rader in substantial dissent.

The United States Patent and Trademark Office ("USPTO") appeals the April 1, 2008 decision of the United States District Court for the Eastern District of Virginia granting summary judgment that four recently promulgated rules exceed the scope of the USPTO's rulemaking authority. Because we conclude that the four rules are procedural, but that Rule 78 is inconsistent with 35 U.S.C. § 120, we affirm-in-part, vacate-in-part, and remand.

Rule 78 was a sphincter on continuations. Out it goes. But a similar rule, 114, on continuations, passed muster.

The effect of [Rule 78] is to remove the application from the scope of 35 U.S.C. § 120, which would otherwise entitle the application to the filing date of the prior-filed application. Final Rule 114 provides for similar treatment of RCEs.

Because § 132(b) does not unambiguously require the USPTO to grant unlimited RCEs, we defer to the USPTO's interpretation. See Cooper Techs., 536 F.3d at 1337-38.

[B]ecause we defer to the USPTO's reasonable interpretation of the statute, we conclude that Final Rule 114 can properly be applied on a per family basis. See Cooper Techs., 536 F.3d at 1337-38.

Swatting Rule 78 hung on a single word: "shall."

Section 120 unambiguously states that an application that meets four requirements "shall have the same effect, as to such invention, as though filed on the date of the prior application." 35 U.S.C. § 120 (emphasis added). These requirements, which correspond to the bracketed enumeration above, include [1] the invention claimed in the application must have been properly disclosed in a prior-filed application; [2] the application must have been filed by inventor(s) named on the prior-filed application; [3] the application must have been "filed before the patenting or abandonment of or termination of proceedings on the first application or on an application similarly entitled to the benefit of the filing date of the first application"; and [4] the application must contain or be amended to contain a specific reference to the prior-filed application. The use of "shall" indicates that these are the exclusive requirements, and that all applications that meet these requirements must receive the benefit provided by § 120. See Transco Prods., Inc. v. Performance Contracting, Inc., 38 F.3d 551, 556 (Fed. Cir. 1994) ("The plain and unambiguous meaning of section 120 is that any application fulfilling the requirements therein 'shall have the same effect' as if filed on the date of the application upon which it claims priority."). Thus, Rule 78 is invalid because it attempts to add an additional requirement--that the application not contain amendments, arguments, or evidence that could have been submitted earlier--that is foreclosed by the statute. Because the statute is clear and unambiguous with respect to this issue, the USPTO's reliance on Chevron and Brand X is unavailing.

Judge Bryson, concurring, suggested to the PTO a way to impose Rule 78, limiting continuations, in a different manner:

The court today properly strikes down Final Rule 78 because its restrictions on co-pending, or parallel, continuations is contrary to the plain language of section 120, which provides that such a co-pending continuation "shall" be given the same priority date as the original application and which contains no restriction on the numbers of such applications that are permitted. That is not to say, however, that a revised rule that addressed only serial continuances and limited such continuances to only two--the first co-pending with the original application and the second co-pending with the first--would be struck down as reflecting an impermissible interpretation of section 120.

Two other rules put more work on an applicant that wanted more claims.

The two other rules, Final Rule 75 and Final Rule 265, are intended to address the USPTO's difficulty in examining applications that contain a large number of claims. 72 Fed. Reg. at 46,721. Final Rule 75 requires an applicant who submits either more than five independent claims or twenty-five total claims to provide the examiner with information in an examination support document ("ESD"). 37 C.F.R. § 1.75(b)(1). The requirements for ESDs are set forth in Final Rule 265. To comply with Final Rule 265, an applicant must conduct a preexamination prior art search, provide a list of the most relevant references, identify which limitations are disclosed by each reference, explain how each independent claim is patentable over the references, and show where in the specification each limitation is disclosed in accordance with 35 U.S.C. § 112, ¶ 1. Id. § 1.265(a).

The district court had agreed with Tafas, who had in his peanut gallery every patent prosecutor in the land.

The district court agreed with Appellees that the Final Rules were "substantive rules that change existing law and alter the rights of applicants such as [Appellees] under the Patent Act." Tafas v. Dudas, 541 F. Supp. 2d 805, 814 (E.D. Va. 2008) ("Tafas II"). Specifically, the district court found that the Final Rules created limits on continuation applications, RCEs, and claims that were inconsistent with several sections of the Patent Act, as well as precedent from this court and its predecessor, the Court of Customs and Patent Appeals. The district court concluded that because the USPTO lacks substantive rulemaking authority under Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996), the Final Rules exceed the USPTO's statutory jurisdiction in violation of 5 U.S.C. § 706(2). Tafas II, 541 F. Supp. 2d at 814. Accordingly, the district court granted Appellees' motion for summary judgment that the Final Rules are invalid.

The CAFC on whether substance/procedure is just splitting hairs -

We agree with the district court that § 2(b)(2) "does not vest the USPTO with any general substantive rulemaking power." Tafas II, 541 F. Supp. 2d at 811... Accordingly, we must reject the USPTO's argument that the substantive/procedural distinction is immaterial in this case.

The PTO had argued the Chevron deference, which is that: "[a] court is indeed obligated to give deference to an agency acting within its scope of responsibility..."

We are not persuaded by the USPTO's arguments in this case that Chevron deference should be extended to the issue of whether § 2(b)(2) provides substantive rulemaking authority.

Now to this ruling's confusion between procedure and substance. The decision chews through the landscape of precedence before hitting the rock it looks under.

Substantive rules certainly "affect individual rights and obligations," but that inquiry does not necessarily distinguish most procedural requirements, which will also "affect individual rights and obligations."

The effect of a rule, therefore, says nothing about whether it is substantial. Don't think about that too much. It'll only hurt your head. The CAFC is a portal to a rarified universe, where cause and effect are so intertwined as to be irrelevant, and where the rules of mundane logic and reason don't apply. With that, out went a truckload of case law baggage.

We are most persuaded in this case by the D.C. Circuit's approach in JEM. At issue in that case were "hard look" rules adopted by the Federal Communications Commission ("FCC") in response to a significant number of "carelessly prepared and speculative applications" for broadcasting licenses. 22 F.3d at 327. Under those rules, applications that either failed to include necessary information or contained incorrect or inconsistent information that could not be "resolved within the confines of the application and with a high degree of confidence" were dismissed with no opportunity to cure the defect. Id. at 322. The D.C. Circuit rejected JEM's contention that the rules were substantive because they "deprive[d] license applicants of the opportunity to correct errors or defects in their filings." Id. at 327. In doing so, the court noted that a "critical feature of the procedural exception [in section 553 of the APA] is that it covers agency actions that do not themselves alter the rights or interests of parties, although [they] may alter the manner in which the parties present themselves or their viewpoints to the agency." Id. at 326 (emphasis added) (quotation marks omitted). The "critical fact" that was "fatal to JEM's claim," the court held, was that the "hard look" rules "did not change the substantive standards by which the FCC evaluates license applications." Id. at 327. The court recognized that the rules could result in the loss of substantive rights, but found that they were nonetheless procedural because they did not "foreclose effective opportunity to make one's case on the merits." Id. at 327-28 (quoting Lamoille Valley R.R. Co. v. Interstate Commerce Comm'n, 711 F.2d 295, 328 (D.C. Cir. 1983)).

Well, that's clear now. One can readily understand why a fish needs a bicycle. Substance is where supplicants must "alter the manner in which" they "present themselves or their viewpoints" to a government agency. It's not in the what-how, it's in the kowtow. Otherwise, it's all procedural.

The CAFC panel is cautious not to provide guidance, because that could be substantial, altering the manner....

While we do not purport to set forth a definitive rule for distinguishing between substance and procedure in this case, we conclude that the Final Rules challenged in this case are procedural. In essence, they govern the timing of and materials that must be submitted with patent applications. The 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. JEM, 22 F.3d at 326, 328.

So, barring that limiting continuations goes against statute, one government body watches the back of another. Long live the Chevron deference.

[T]he USPTO's interpretations of statutes that pertain to the USPTO's delegated authority are entitled to Chevron deference.

Because each of the rules is procedural, we must, as discussed above, give Chevron deference to the USPTO's interpretation of the provisions of the Patent Act that relate to "proceedings in the Office." Cooper Techs., 536 F.3d at 1337.

Try to whiff logic here - as time schedules are procedural, requirement for timely comprehensive response is procedural, so any rule in that realm is procedural.

Final Rules 78 and 114 provide requirements for when continuation applications will be accepted and RCEs will be granted. The D.C. Circuit has recognized time schedules as being "definitely at the procedural end of a spectrum running from 'procedural' to 'substantive.'" Lamoille, 711 F.2d at 328. Applicants who include in each continuation application all amendments, arguments, and evidence available at the time of filing will not be limited by Final Rule 78. Similarly, applicants who diligently present all of their amendments, arguments, and evidence as soon as possible during prosecution will be granted as many RCEs as they require. Thus, applications that are submitted in compliance with these timing requirements will be fully examined and given all of the benefits provided by the Patent Act. See JEM, 22 F.3d at 327. We do not believe that requiring applicants to raise all then-available amendments, arguments, and evidence by the second continuation application or the first RCE is so significant a burden that applicants will be effectively foreclosed from obtaining the patent rights to which they are entitled. See Lamoille, 711 F.2d at 328.

Adding to applicant burden is not substantial, as it affects not the manner of examination.

With respect to the ESD* requirement, Final Rules 75 and 265 require applicants who present more than five independent claims or twenty-five total claims to provide the examiner with information about the prior art and why they believe the claims are patentable over it. Once a satisfactory ESD is submitted, examination will proceed in precisely the same manner as it would have in the absence of the rule. It is important to note that an examiner is not permitted to substantively reject claims on grounds that the ESD did not prove that the claims are patentable. While an examiner is of course free to base a rejection on references disclosed in the ESD, he must nevertheless set forth his own prima facie case of unpatentability. Thus, while the rule may put a burden of production on the applicant, the examiner maintains the burden of persuasion.

*[E]xamination support document ("ESD"). 37 C.F.R. § 1.75(b)(1). The requirements for ESDs are set forth in Final Rule 265. To comply with Final Rule 265, an applicant must conduct a preexamination prior art search, provide a list of the most relevant references, identify which limitations are disclosed by each reference, explain how each independent claim is patentable over the references, and show where in the specification each limitation is disclosed in accordance with 35 U.S.C. § 112, ¶ 1. Id. § 1.265(a).

A procedural rule does not become substantive simply because it requires the applicant to exert more effort to comply, so long as the effort required is not so great that it effectively forecloses the possibility of compliance. See Lamoille, 711 F.2d at 328.

The concern about charges of inequitable conduct arising from an errant ESD were brushed aside as "too speculative to void the rules."

The panel left open Pandora's box for damning the rules.

This opinion does not decide any of the following issues: 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; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive.

Affirmed-in-part, vacated-in-part, and remanded.

If Judge Newman had been on the panel rather than Prost, a different ruling entirely. Judge Radar's dissent drives home that point: "[T]he Final Rules are substantive, not procedural."

Repeated rulings by the CAFC in recent years point to its instability and inanity as a locus of jurisprudence. Created in 1982 to end a contradictory cacophony of precedential rulings in patent law from disparate circuits, the net effect has been only centralizing the noise in the signal, not reducing it. This ruling is but one more chip on a pile.

Full post as published by The Patent Prospector on March 20, 2009 (boomark / email).