Patent Docs

ACI Pharma/Biotech IP Due Diligence Conference

October 3, 2008

American Conference Institute (ACI) will be holding its 6th National Conference on Pharma/Biotech IP Due Diligence from January 28-29, 2009 in New York. The conference will allow attendees to:

• Define the company’s business goals before you begin a due diligence review;
• Navigate the dynamic labyrinth of cases that can impact the company’s IP rights;
• Ensure a data trail that tracks the disclosure of appropriate information;
• Gauge the effect of the patents in question on the company’s freedom to operate;
• Cultivate a sufficient search strategy to enhance your knowledge base of the IP’s strengths, weaknesses, and potential;
• Evaluate the benefits, disadvantages, and consequences of protecting the asset under a patent instead of a trade secret;
• Analyze the company’s options when discovering negative information in a late stage of the due diligence review;
• Uncover the vulnerable spots for ‘in licensing’ deals; and
• Craft an effective due diligence checklist.

In particular, ACI’s faculty will offer presentations on the following topics on January 28 and 29:

• Defining the company’s goals before you begin the due diligence review and crafting an accordant checklist;
• Navigating the dynamic labryinth of recent cases, rules, and regulations affecting the company’s due diligence analysis;
• Setting up an electronic data room to protect the company’s vital interests;
• Sweet land of liberty . . . Let freedom to operate ring!
• Uncovering the vulnerable spots for "in licensing" deals;
• I’ve got a trade secret: Incorporating the target ompany’s soft IP assets in your due diligence analysis;
• Using due diligence to reveal, analyze, and measure the specific risks for the pharmaceutical or biotech target or licensor;
• Dissecting the due diligence challenges for a pharma/biotech acquirer, licensee, or collaborator;
• Balancing between the company’s attorney-client privilege and the need to disclose information;
• Adjusting your due diligence approach in transactions with universities;
• Analyzing the needs of a venture capitalist in the company’s due diligence research; and
• Assessing the findings of the due diligence review upon its completion.

An additional master class entitled: "Drafting a Comprehensive Due Diligence Report – One Size Does Not Fit All" will be offered on January 30. In this master class, ACI faculty will penetrate the complexities of drafting an effective due diligence report.

The agenda for the Pharma/Biotech IP Due Diligence conference can be found here. A complete brochure for this conference, including an agenda, list of speakers, and registration form can be downloaded here.

The registration fee ranges from $2,195 (conference alone) to $2,795 (conference and master class). Those registering by November 21, 2008 will receive a $300 discount off the registration fee and those registering by December 31, 2008 will receive a $200 discount off the registration fee. Those interested in registering for the conference can do so here, by calling 1-888-224-2480, or by faxing a registration form to 1-877-927-1563.
Inequitable Conduct Standard Remains Fluid in Praxair v. ATMI

October 2, 2008

By Kevin E. Noonan —

The
Federal Circuit’s inequitable conduct jurisprudence has appeared for
some time to be unduly fact- and panel-dependent, straying in the
opinion of at least Judge Rader from the principle enunciated in the
Court’s en banc decision in Kingsdown Medical Consultants, Ltd. v. Hollister, Inc.,
863 F.2d 867 (Fed. Cir. 1988), that a finding of inequitable conduct
should be rare and the evidentiary requirements satisfy a "high bar."
This trend continues in Praxair, Inc. v. ATMI, Inc., where the
Court affirmed a finding of inequitable conduct as to one
patent-in-suit, but reversed as to another, based on the same "highly
material" prior art.

The case involved U.S. Patents Nos. 6,007,609; 6,045,115; and 5,937,895,
directed to pressurized storage containers that prevent accidental
discharges of hazardous gases. These containers were used to store
such hazardous gases under pressure and temperature conditions where
the compounds are in a mixture of gas and liquid phases. Important
claim limitations were directed to "flow restrictors" comprising
capillary passages that prevented rapid discharge of the gas.

The
District Court found the ‘609 and ‘115 patents unenforceable due to
inequitable conduct (but otherwise not invalid and infringed); and the
asserted claims of the ‘895 patent invalid for indefiniteness. The
inequitable conduct findings were based on the existence of "highly
material" prior art relating to the existence of restricted flow
orifice (RFO) art, known to the prosecuting attorney and at least one
of the inventors, coupled with the absence of any evidence of good
faith basis for withholding the uncited art, and in light of four
statements made during prosecution of the ‘115 patent that were
inconsistent with the teachings of the uncited art.

The Federal
Circuit, in an opinion by Judge Dyk joined by Judge Bryson, and over a
dissent on the inequitable conduct question by Judge Lourie, vacated
the District Court’s infringement decision on the ‘609 patent based on
a finding that the District Court’s claim construction was faulty, and
affirmed that defendant ATMI had not established that the ‘609 patent
was invalid by clear and convincing evidence. The CAFC also reversed
the District Court’s determination that the ‘895 patent was invalid for
indefiniteness. On the lower court’s inequitable conduct
determination, the Federal Circuit affirmed as to the ‘115 patent but
reversed as to the ‘609 patent.

Judge Dyk’s opinion affirmed the
District Court’s finding that the uncited prior art references were
highly material, in view of the following four statements made during
prosecution of the ‘115 patent:

(1) The prior art did not teach the claimed "extreme limitation in
flow" used "to provide a commercially practical container" that
prevents "the catastrophic discharge" of toxic contents;
(2) Existing safety measures were limited to "highly complex methods" and "elaborate systems;"
(3) There was no indication in the prior art to use "severe flow
restriction" to "overcome [ ] the problems of delivering highly toxic
fluids from portable containers;" and
(4) "[N]one of the prior art comes close to disclosing a restriction in
the flow path from a pressurized container that has a diameter that
does not exceed 0.2 mm.

The CAFC affirmed that the uncited art was contrary to these
statements, and thus that art was highly material because the patentees
could not have made these arguments if the uncited art had been before
the examiner during prosecution.

The Court also affirmed the
District Court’s finding that at least the prosecuting attorney and one
of the inventors had knowledge of the uncited art, based on trial
testimony (of the attorney) and deposition testimony (of the inventor)
introduced into the record. The CAFC also agreed that neither the
prosecuting attorney nor the inventor provided any evidence that they
had a good faith basis for nondisclosure; the attorney’s testimony that
he had "never" intended to deceive the Patent Office at any time during
his career was deemed to be merely "conclusory" and to be given "no
weight."

Based on this evidence, the Court majority held that it
was not an abuse of discretion for the District Court to conclude that
the ‘115 patent was obtained through inequitable conduct and was
unenforceable.

The same was not true of the ‘609 patent. There,
the evidence showed that the patentees did not make the "four
statements" during prosecution; indeed, the statements made during
prosecution of the ‘115 patent were made at a time after a Notice of
Allowability had been issued from the Patent Office for the ‘609
patent. The Court said that there was no evidence that the prosecution
of the ‘115 patent had any relevance or influence on the prosecution of
the ‘609 patent. Further, the Court held that the materiality of the
uncited references was high in the context of the four statements made
during prosecution of the ‘115 patent, and the absence of any
equivalent representations to the patent examiner during prosecution of
the ‘609 patent reduced the materiality of the uncited references
accordingly.

Judge Lourie (at right) dissented. In his view, there was no
evidence of an intent deceive, which precluded a finding of inequitable
conduct. In particular, he distinguished the precedent relied upon by
majority, Bruno Independent Living Aids, Inc. v. Acorn Mobility Services, Ltd.,
394 F.3d 1348 (Fed. Cir. 2005), as having "more egregious facts," such
as citing a reference to the FDA but not to the PTO. The Court’s
finding of knowledge, without more, is not enough, according to Judge
Lourie. "An inference of intent to deceive requires more than
knowledge of the existence of the nondisclosed art; it also requires a
finding that the applicant knew, or should have known, of the
materiality of that art." Moreover, in Judge Lourie’s view, the
District Court did not balance intent and materiality.

The
majority’s decision, and Judge Lourie’s dissent, illustrate why
inequitable conduct law remains an uncertain threat to patentees.
Unlike the "high bar" Judge Rader believes is required by Kingsdown Medical,
numerous individual panel decisions appear willing to find inequitable
conduct under less stringent criteria. Here, the majority believed
that the combination of the uncited art and the affirmative arguments
made during prosecution, in view of the contradictory nature of the art
and those arguments and the knowledge of persons under a Rule 56 duty
of disclosure, was enough to find inequitable conduct. This approach
resembles a "totality of the circumstances" or subjective viewpoint,
approaching a standard of "knowing inequitable conduct when we see it,"
i.e., when a court has a basis for believing that a patentee has
acted inequitably. Judge Lourie believes in a more rigorously
analytical approach, where the two components of inequitable conduct —
materiality and intent to deceive — are evaluated separately, and then
(and only then) balanced to make an inequitable conduct determination.
This is the framework of Kingsdown Medical, one that the
Federal Circuit has abandoned to varying degrees. This has resulted in
a wider scope of behavior being held to constitute inequitable conduct,
an outcome that only further encourages accused infringers to raise the
defense. This outcome is also contrary to the Federal Circuit’s
mandate to harmonize and bring a degree of certainty to U.S. patent
law. Both S. 1145, the failed patent "reform" bill of the 110th
Congress, and Senator Kyl’s bill (S. 3600, certain to be reintroduced
in the 111th Congress next year) contain provisions to provide a
statutory basis for inequitable conduct. It may be up to Congress to
finally resolve this unsettled area of patent law.

Praxair, Inc. v. ATMI, Inc. (Fed. Cir. 2008)
Panel: Circuit Judges Lourie, Bryson, and Dyk
Opinion by Circuit Judge Dyk; opinion concurring in part and dissenting in part by Circuit Judge Lourie
Nature Biotechnology Study Finds Declining Litigation Rates for DNA-based Patents

October 1, 2008

By Donald Zuhn —

A study in last month’s issue of Nature Biotechnology calls into question the perception that litigation rates — at least for one particular industry — are rising. The study, entitled "DNA-based patents: an empirical analysis" (the full text of the article can be obtained here for $32), was conducted by Ann Mills, Associate Professor of Medical Education and Director of Outreach Programs at the University of Virginia Center for Biomedical Ethics, and Dr. Patricia Tereskerz, Associate Professor of Medical Education and Coordinator of Research for the University of Virginia Center for Biomedical Ethics. The motivation behind the study was the suggestion by patent reform proponents that allegedly rising litigation rates justified the need for such reform. However, Ms. Mills and Dr. Tereskerz note that "[a]lthough there is anecdotal evidence supporting the perception that the rate of litigation is rising, there is little empirical evidence supporting this."

In their study, Ms. Mills and Dr. Tereskerz examined DNA-based litigated patents to determine whether the litigation rates for such patents are actually increasing. The researchers’ dataset consisted of 211 cases involving DNA-based patents issued between 1982 and 2005. Interestingly, Ms. Mills and Dr. Tereskerz found that in 163 of these 211 cases (77%), a complaint was filed with no further action being taken.

To determine litigation rates, Ms. Mills and Dr. Tereskerz divided the number of cases filed by the total number of DNA patents issued in a given year. The results of their analysis are shown in Figure 2 below:

(Mills and Tereskerz, Nature Biotechnology 26: 993-95 (2008)). The study indicates that "[b]etween 2000 and 2005, the rate of patent litigation for the patent classifications studied dropped significantly from 14/3,827 to 1/2,772 (P < 0.0006)."

While Ms. Mills and Dr. Tereskerz caution that the results of their study cannot necessarily be extrapolated to other types of patented subject matter, they suggest that the results "should call into question whether the perception of rising litigation rates is valid for some industries and whether this argument can continue to be used to justify patent reform without additional research." The authors argue that the need for additional research is particularly important "when passage of such legislation may be accompanied by introducing uncertainty as to patent validity, which may in turn discourage investment in younger industries and ultimately stifle innovation and commercialization."

Patent Docs thanks Dr. Larry Millstein of Holland & Knight for alerting us to the above article.
Dr. Tafas Files Brief in New Rules Appeal

September 30, 2008

By Donald Zuhn —

Last Wednesday, Plaintiffs-Appellees SmithKline Beecham Corp., SmithKline Beecham plc, and Glaxo Group Ltd. (GSK) filed their brief in the Tafas v. Dudas appeal (see "GSK Files Brief in Tafas v. Dudas Appeal"). As we previously reported, the Plaintiffs-Appellees had until September 24th to serve and file their brief. Also filing a brief on that day was Plaintiff-Appelle Dr. Triantafyllos Tafas (see "Brief for Plaintiff-Appellee Triantafyllos Tafas").

As noted in the brief, Dr. Tafas is a founder of Ikonysis, Inc., which manufactures a robotic microscope designed to automatically read microscope slides and provide tentative diagnoses (particularly with respect to early detection of tumors). Interestingly, Dr. Tafas also owns, and is currently prosecuting, several patent applications related to energy recovery from an automobile’s internal combustion engine manifold, for use in reducing carbon emissions and resultant global warming.

While the Tafas brief, which comes in at 60 pages, covers some of the same ground covered in the GSK brief, it also serves as a fine compliment to GSK’s brief. Tafas begins by listing the facts set out in the Patent Office’s brief with which he disagrees. Among the differences, as far as Tafas is concerned, is the Patent Office’s contention that "excessive use of continuation and continuation-in-part applications . . . has contributed . . . [to] the ‘large and growing backlog of unexamined patent applications.’" Tafas notes instead that one study has "clearly demonstrated, using a queuing model, that the Final Rules’ limitations on continuation applications, as well as RCEs, would not reduce the USPTO’s backlog." Tafas also notes that another study found that "continuation and divisional filings have remained fairly stable over the past seven years and the major cause of backlog of applications was due to the large number of non-final office rejections being issued per round of prosecution" (in a footnote, Tafas cites to Esther Kepplinger’s presentation at last June’s BIO International Convention, as reported in an earlier Patent Docs article). Tafas also disagrees with the Patent Office’s assertion that "a continued examination filing to correct an error or ‘deficiency’ in the claims or disclosure constitutes misuse of continued examination practice," arguing, for example, that "there is nothing abusive about obtaining claims of narrower scope from an obstinate examiner, and then seeking broader claim scope later." Tafas further disagrees with the Patent Office’s argument that the prosecution process "can continue without end," stating that "[a]s a practical matter, as any application approaches twenty years from the priority date it becomes less and less commercially viable."

As with the GSK brief, Tafas argues that Section 2(b)(2) of the Patent Act does not empower the Patent Office to restrict patent applicants’ statutory rights to file multiple continuation applications or claims. In particular, Tafas states that:

Section 2(b)(2) is not an open ended license to the USPTO to re-write the Patent Act to suit its own administrative convenience under the guise of its limited procedural rulemaking authority. Rather, Section 2(b)(2)(A)-(C) merely grants the USPTO strictly procedural rulemaking authority intended to expedite and/or facilitate the processing of patent applications. It does not authorize the USPTO to engage in informal rulemaking which the USPTO admits was calculated to restrict the number of continuation applications and/or the filing of multiple claims, in contravention of numerous provisions of the Patent Act.

The brief continues:

Congress only granted the USPTO limited authority under Section 2(b) of the Patent Act to make rules concerning the processing of patent applications. Congress never delegated authority to the USPTO to re-write other provisions of the Patent Act. There is also nothing to indicate Congress intended to make the USPTO the final interpreter/arbiter, in lieu of the Federal Circuit, as to whether any of the USPTO’s Final Rules enacted pursuant to Section 2(b) conflict with other parts of the Patent Act. Thus, the Final Rules, which are substantive in nature, constitute a[n] usurpation by the Executive Branch of Congressional power in violation of the Patent Clause and the constitutional principle of separation of powers.

On the subject of whether the Final Rules (sometimes referred to as the continuation and claims rules) are indeed substantive, Tafas points to a speech given by former Deputy General Counsel and Solicitor of the USPTO John Whealen, where he "confirmed the existence of the Final Rules’ substantive effects" by stating that "'[w]hat we have realized is that we are an agency, and we write rules, and we can actually change policy a lot quicker by making some rules that might change the patent system." With respect to whether the District Court "disregarded its obligations under Chevron" for even determining whether the Final Rules were substantive, Tafas responds that:

[S]uch complaint is ill-founded because the District Court would be unable to even reach the question of whether a preexisting right or obligation under the statute was being affected by a rule asserted by the USPTO to be procedural under 35 U.S.C. § 2(b)(2)(A) if it was required to simply defer to the USPTO’s self-serving, ipse dixit interpretation that the Final Rules are not substantive.

As in the GSK brief, Tafas reviews the substantive effect of new Rules 75, 78, and 114, which would have limited the number of claims, continuations, and RCEs that an applicant could file as of right. With respect to new Rule 78, Tafas argues that it "is substantive in nature because it removes [an applicant’s right under 35 U.S.C. § 120] to obtain priority in a subsequent application if certain new conditions are not met by an applicant filing the subsequent application." Tafas also observes that the interpretation that § 120 allows for an unlimited number of continuation applications is "in accord with the interpretation of former Federal Circuit Judge Giles S. Rich, as set forth in his 1952 commentary as a member of the drafting committee that promulgated Section 120 of the Patent Act: ‘Section 120 . . . on careful reading . . . [indicates] that the number of generations of the lineage is unlimited.’"

With respect to new Rule 114, Tafas argues that:

Nothing in Section 132(a) or 132(b) supports the USPTO’s assertion that it has the right to set the "conditions and requirements for continued examinations." Clearly, in using the word "shall" and "at the request of the applicant," and in requiring the Director to continue examination if the "applicant persists in his claims for a patent," Congress manifested its intent that RCEs be unlimited, and that continued examination be at applicant’s discretion, not the discretion of the USPTO.

Tafas also notes that the Patent Office itself acknowledged that applicants could file unlimited numbers of RCEs when the Office promulgated rules related to such filings following the creation of RCEs under the American Inventors Protection Act of 1999.

Tafas also attacks the Patent Office’s arguments concerning new Rule 265, which would have forced applicants to file Examination Support Documents (ESDs) if they wished to prosecute more than five independent or 25 total claims in a single application. Calling the requirement to file an ESD "not only burdensome, but actually an insurmountable barrier for most applicants," Tafas points to the Polestar/Norseman amicus brief for support. In that brief, Dr. Richard Belzer, who served as a civil service staff economist in the Office of Information and Regulatory Affairs within the Office of Management and Budget (OMB), calculated that if Rule 265 were to be applied to all applicable applications filed in a representative fiscal year that it "would consume the full time efforts of between 8,000 and 23,000 patent attorneys," with Tafas noting that there are only about 15,000 patent attorneys currently in practice in the United States. Tafas also points again to Mr. Whealen’s speech, where he stated that "[i]f you want all your claims examined up front, you can have it done, but it’s going to cost you, you’re going to have to do some work, which in the current law of inequitable conduct, nobody’s going to want to do."

The U.S. Patent and Trademark Office and USPTO Director Jon Dudas now have until October 15th to file their reply brief.

Patent Docs wishes to thank James Nealon of Kelley Drye & Warren LLP for kindly providing us with a copy of Dr. Tafas’ brief. In addition, we offer a belated thanks to Christopher Mizzo of Kirkland & Ellis LLP for kindly providing us with a copy of GSK’s brief.

For additional information regarding the appeal, please see:

• "GSK Files Brief in Tafas v. Dudas Appeal," September 25, 2008
• "Tafas v. Dudas Update," September 2, 2008
• "Public Interest Groups Back USPTO in Tafas v. Dudas Appeal," August 5, 2008
• "USPTO Files Opening Brief in Tafas v. Dudas Appeal," July 22, 2008
• "Save the Date — Initial Scheduling of the Tafas/GSK v. Dudas Appeal," May 21, 2008
• "USPTO to Appeal Tafas/GSK v. Dudas," May 7, 2008
USPTO News: USPTO and JPO Sign Statement of Enhanced Mutual Cooperation

September 29, 2008

By Christopher P. Singer —

The U.S. Patent and Trademark Office issued a press release on September 26, 2008 announcing that it had signed a statement of understanding with the Japanese Patent Office (JPO) which memorializes the existing cooperation between the two Offices and enhances the cooperative efforts on work sharing and international harmonization of patent and trademark matters. The two Offices have already established cooperative efforts through such programs as the Patent Prosecution Highway (PPH) and Priority Document Exchange which are aimed at harmonizing
patent procedures and to enhance consistency in the quality of patent examination. This statement, as well as the recently announced memorandum signed with the Korean Intellectual Property Office (KIPO) (see "USPTO and KIPO Sign Memorandum on Cooperative Patent Examination"), arose out of recent talks held in Geneva, Switzerland.
USPTO News: IP Australia to Provide International Search and Examination Services for Certain PCT Applications

September 29, 2008

By Christopher P. Singer —

In a September 25, 2008 press release the U.S. Patent and Trademark Office announced that it has entered into an agreement with IP Australia (IPAU), whereby IPAU will act as an International Searching Authority (ISA) and an International Preliminary Examining Authority (IPEA) for certain Patent Cooperation Treaty (PCT) applications filed with the USPTO. The agreement is scheduled to go into effect on November 1, 2008, and is intended to help reduce the growing backlog of U.S. national patent applications waiting to be examined. An IPAU-based international search (as the ISA) will cost $1514 for applicants, which is less than the corresponding USPTO fee to act as the ISA ($1800, as of Oct. 2, 2008). Applicants further selecting IPAU as the Preliminary Examination Authority will pay an international preliminary examination fee of $550 (AUS) and a handling fee of $196 (AUS) directly to IPAU. Applications relating to mechanical engineering or similar technology fields could be excluded from eligibility.
Court Report

September 28, 2008

By Sherri Oslick —

About
Court Report: Each week we will report briefly on recently filed
biotech and pharma cases, and a few interesting cases will be selected
for periodic monitoring.

Sepracor Inc. and University of Massachusetts v. Pharmaceutical Associates, Inc.
3:08-cv-04718; filed September 19. 2008 in the District Court of New Jersey

Infringement of U.S. Patent Nos. 7,214,683 ("Compositions of Descarboethoxyloratadine," issued May 8, 2007) and 7,214,684 ("Methods for the Treatment of Allergic Rhinitis," issued May 8, 2007), licensed to Schering-Plough, following a Paragraph IV certification as part of Sandoz’s filing of an ANDA to manufacture a generic version of Schering-Plough’s Clarinex® Oral Syrup (desloratidine, used to treat allergies). View the complaint here.

Bayer Schering Pharma AG et al. v. Sandoz, Inc. et al.
1:08-cv-08112; filed September 18, 2008 in the Southern District of New York

Infringement of U.S. Patent No. 5,569,652 ("Dihydrospirorenone as an antiandrogen," issued October 29, 1996) following a Paragraph IV certification as part of defendants’ filing of an ANDA to manufacture a generic version of Bayer’s Yaz® (drospirenone & ethinyl estradiol, used for oral contraception). View the complaint here.
Conference & CLE Calendar

September 28, 2008

October 6-7, 2008 – Patent Litigation 2008 (Practising Law Institute) – McLean, VA

October 7-8, 2008 – Global Patent Litigation*** (American Conference Institute) – New York, NY

October 15, 2008 – Developments in Pharmaceutical and Biotech Patent Law (Practising Law Institute) – San Francisco, CA

October 15-16, 2008 – Pharmaceutical Congress on Paragraph IV Disputes*** (Center for Business Intelligence) – Philadelphia, PA

October 15-16, 2008 – Advanced Courses (Patent Resources Group) – Santa Ana Pueblo, NM

October 15-17, 2008 – Maximizing Pharmaceutical Patent Lifecycles*** (American Conference Institute) – New York, NY

October 23-24, 2008 – Patent Litigation 2008 (Practising Law Institute) – Chicago, IL

October 28-29, 2008 – Pharma/Biotech IP Due Diligence*** (C5) – Amsterdam, Netherlands

November 10-11, 2008 – Patent Litigation 2008 (Practising Law Institute) – Atlanta, GA

November 11-13, 2008 – 4th Biosimilars conference (Visiongain) – Philadelphia, PA

November 12-14, 2008 – Structuring, Negotiating and Managing Pharma/Biotech Collaborative Agreements (American Conference Institute) – New York, NY

November 17-18, 2008 – Pharmaceutical and Biotech Patent Opinion Writing*** (American Conference Institute) – Boston, MA

November 17-18, 2008 – Patent Litigation 2008 (Practising Law Institute) – New York, NY

November 19-20, 2008 – Paragraph IV on Trial*** (American Conference Institute) – New York, NY

December 8-9, 2008 – Pharmaceutical and Biotech Patent Opinion Writing*** (American Conference Institute) – Atlanta, GA

January 12-13, 2009 – Pharmaceutical and Biotech Patent Opinion Writing*** (American Conference Institute) – San Diego, CA

***Patent Docs is a media partner of this conference or CLE
BIO Praises Senator Kyl’s Patent Reform Bill

September 26, 2008

By Kevin E. Noonan —

Yesterday, we reported on the introduction of a new patent reform bill (S. 3600) in the Senate (see "Senator Kyl’s Patent Reform Bill Introduced Today"). Soon after Senator Jon Kyl’s (R-AZ) patent reform bill was introduced, the Biotechnology Industry Organization (BIO) released a statement in which BIO President and CEO Jim Greenwood (below) called the legislation "a vast improvement" over S. 1145, the patent "reform" bill passed by the Senate Judiciary Committee that failed to reach a floor vote, and H.R. 1983 which was passed by the House of Representatives last fall. Mr. Greenwood thanked Senator Kyl for taking into consideration the "discrete issues and concerns raised by BIO, patient groups, universities, labor unions and many other stakeholders over the past two years." He said that the damages provisions would enhance consistent enforcement while not "manipulating the rules to favor infringers," and that the post-grant review provisions were superior to S. 1145, because while providing a second window for challenging a patent, the grounds of these challengers were "considerably more narrow" that the "broad new
administrative challenge system" contemplated in S. 1145. Mr. Greenwood also reiterated BIO’s position that the organization "remains committed to working with all Senators and Representatives, their staff, and other stakeholders to reach agreement on how best to improve our nation’s patent system in a way that promotes innovation, improves patent quality and increases public participation," calling the Kyl bill " an important step forward in enacting patent reform that will benefit the American economy."

For additional information regarding this and other related topics, please see:

• "Senator Kyl’s Patent Reform Bill Introduced Today," September 25, 2008
• "Senate Patent Reform Legislation — One Old Bill and One New Bill," August 11, 2008
• "BIO Commends Senator Specter for Patent Reform Stance," April 10, 2008
• "Judge Michel Doesn’t Think Much of Senate Bill S. 1145, Either," February 20, 2008
• "The (Un)Intended Consequences of the Law," February 18, 2008
• "BIO CEO Provides Update on Patent Reform and Follow-on Biologics Legislation – Part I," February 14, 2008
• "BIO Report Indicts "Patent Reform" Proponents," February 13, 2008
• "Patent Reform and Infringement Damages: Some Economic Reasoning," February 5, 2008
• "Department of Commerce Sends Letter on Patent Reform to Senator Leahy," February 4, 2008
• "Biotech and Pharma Opposition to Senate Patent Reform Bill," February 3, 2008
• "The Letters Keep Coming Over the Senate Transom," January 30, 2008
• "U.S. Senate Mailbox Filling with Letters against Passage of Patent ‘Reform’ Bill: An Update," January 23, 2008
• "U.S. Senate Mailbox Filling with Letters against Passage of Patent ‘Reform’ Bill," January 18, 2008
• "Patent Reform Discussed on Senate Floor," December 21, 2007
• "Enjoined New Rules and Patent Reform Finally Appearing on Biotech Industry’s Radar," December 20, 2007
• "Chinese IP Judge Discusses Implications of U.S. Patent Reform Bill and Two Congressmen Heed Warning," December 17, 2007
• "IPO President Seeks Deletion of Patent Reform Provision," December 12, 2007
• "Senate May Act on Patent ‘Reform’ Bill in the New Year," December 2, 2007
• "The Wall Street Journal Gets It Half Right," November 5, 2007
• "BIO CEO Provides Briefing on Follow-On Biologics and Patent Reform," September 18, 2007
• "Patent ‘Reform’ Bill Passes House of Representatives," September 9, 2007
• "Reversal in Microsoft Case Weakens Patent Reform Argument," August 7, 2007
• "San Francisco Chronicle Opines on Patent Reform," August 6, 2007
• "Patent Reform Bill to Be Delayed?" June 12, 2007
• "Senate Judiciary Committee Holds Hearing on Patent Reform," June 10, 2007
GSK Files Brief in Tafas v. Dudas Appeal

September 25, 2008

By Donald Zuhn —

On Wednesday, SmithKline Beecham Corp., SmithKline Beecham plc, and Glaxo Group Ltd. (GSK) filed their brief in the Tafas v. Dudas appeal (see "Brief of Plaintiffs-Appellees GlaxoSmithKline"). As we previously reported, the Plaintiffs-Appellees had until September 24th to serve and file their brief.

Most patent practitioners are no doubt quite familiar with the sequence of events that led to the Patent Office’s appeal. Briefly, GSK and Dr. Triantafyllos Tafas sought to enjoin the Patent Office from enforcing its new continuation and claims rules (Final Rules) package, which was published in August 2007. The day before the rules package was set to take effect (strangely enough, on Halloween), Judge James C. Cacheris of the Eastern District of Virginia granted GSK’s and Dr. Tafas’ motions for a temporary restraining order and preliminary injunction.

Last April (this time on April Fool’s Day), Judge Cacheris made the injunction permanent, finding that "the [continuation and claims] Rules are substantive in nature and exceed the scope of the USPTO’s rulemaking authority under 35 U.S.C. § 2(b)(2)." Judge Cacheris therefore voided the new rules. Citing Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996), and two other CAFC cases that cite Merck, Judge Cacheris determined that the relevant case law was clear: "Section 2(b)(2)’s authority is limited to rules governing the ‘conduct of proceedings’ before the Office, the USPTO does not have the authority to issue substantive rules, and it does not have the authority to make substantive declarations interpreting the Patent Act." Judge Cacheris also determined that the continuation and claims rules were "substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act," and "constitute a drastic departure from the terms of the Patent Act as they are presently understood." Judge Cacheris concluded his opinion by offering a thorough explanation as to why the cornerstones of the continuation and claims rules — the 2+1 rule and 5/25 rule — were indeed substantive rules (see "No April Fool’s Joke — Tafas and GSK Win on Summary Judgment").

In its opening brief, the Patent Office made two main assertions: first, that the Office acted within its rulemaking authority, and second, that the continuation and claims rules do not violate the relevant statutory provisions (see "USPTO Files Opening Brief in Tafas v. Dudas Appeal"). While the assertions themselves were unsurprising, the approach taken by the Patent Office represented an intriguing departure from the framework adopted by Judge Cacheris’ opinion, and revealed at least a portion of the Office’s appellate strategy. Where Judge Cacheris focused mainly on the substantive nature of the continuation and claims rules, and explicitly avoided a determination regarding whether the Patent Office was entitled to any deference, the Office relied heavily on its belief that Chevron deference places the continuation and claims rules beyond reproach (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)).

In its 60-page brief, GSK begins by attacking the Patent Office’s claim to broad Chevron deference. According to GSK, the Patent Office takes the view that "the district court should have first cloaked the agency with Chevron deference, then deferred to the PTO’s view of the scope of its own powers, and then deferred again to the PTO’s view that the Final Rules are consistent with the Patent Act." GSK argues, however, that such a view sidesteps the Supreme Court’s determination in Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990), that "[a] precondition to deference under Chevron is a congressional delegation of administrative authority" (the threshold question outlined in Adams Fruit, sometimes referred to as Chevron step zero, proceeds the two-step Chevron test). GSK notes that "[t]he PTO ignores Adams Fruit, neglecting even to mention it in its opening brief," concluding that the Office’s "silence speaks volumes."

GSK also argues that "[w]hile it is true that the PTO possesses some rulemaking authority relating to ‘procedures’ in the PTO, the critical point is that it does not possess the relevant authority to pass these substantive Final Rules." According to GSK, "the district court carefully applied the Supreme Court’s and this Court’s settled view of what it means for rules to be substantive," which specifies that any rule that "’effects a change in existing law or policy’ which ‘affect[s] individual rights and obligations’" is substantive. Moreover, because "[t]he PTO designed the Final Rules precisely to address its ‘disapproval o[f] a given type of behavior’ — the PTO’s perception that applicants file too many continuing applications, RCEs, and claims," and "admitted that it crafted the Final Rules to ‘stop’ continuing applications and limit claims," GSK argues that "[t]his admission confirms that the Final Rules are substantive."

GSK also contends that the continuation and claims rules are contrary to existing patent law. In particular, it asserts that new Rule 78 "creates a hard mechanical limit on the number of continuing applications an applicant may file and that, as a result, the rule strips applicants of valuable rights to which they are entitled under 35 U.S.C. § 120." GSK notes, however, that "for over a century, applicants have been permitted to file additional continuing applications with no arbitrary or mechanical limit." GSK also contends that new Rule 114 violates 35 U.S.C. § 132(b) by defining an "arbitrary and mechanical limit" of one RCE per application family, since § 132(b) states that the Patent Office "shall" prescribe regulations to provide for continued examination "at the request of the applicant," and the limit of one RCE per application family (rather than application) is "a clear departure from the plain language of the statute." GSK further contends that "Rule 75 is inconsistent with Section 112, ¶ 2’s grant to applicants to pursue ‘one or more claims’ in patent applications," and that "Rule 265 shifts the burden of examination to applicants by requiring applicants to establish the patentability of each independent claim before the PTO demonstrates a prima facie case of unpatentability." With regard to the "hopelessly vague and boundless prior art search[es]" mandated under new Rule 265, GSK observes that:

Only Congress can change the law so that the PTO may require that patent applicants conduct prior art searches and patentability examinations. Notably, Congress has considered granting the PTO authority to require prior art searches and patentability examinations, but has not done so to date.

Moreover, GSK argues that "[n]either the Rule, nor the PTO’s responses to comments in the Final Rules, provides any boundaries on the scope of the ESD’s search requirements." As a result, patent applicants would not be able to determine whether their searches complied with the requirements of Rule 265. GSK concludes the brief by arguing that new Rules 75, 78, 114, and 265 are unlawfully retroactive. In particular, these rules "impose ‘new duties’ on completed transactions (previously filed patent applications) and ‘impair rights a party possessed when he acted’ (the right to fully protect an invention in exchange for relinquishing a trade secret)."

The U.S. Patent and Trademark Office and USPTO Director Jon Dudas now have until October 15th to file their reply brief.

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