Guest Post by Simon J. Elliott and Courtenay C. Brinckerhoff —
On August 21, 2007, the U.S. Patent and Trademark Office (PTO) released final rules limiting a patent applicant’s opportunities to pursue patent protection for a given invention. The PTO rules do this by restricting the number of patent applications that can be filed to the same basic invention to one original application and two continuations or continuations-in-part (CIPs), and by restricting a patent applicant to only a single request for continued examination (RCE) in a patent family. The PTO will permit additional continuations or RCEs only if the applicant can establish to the PTO’s satisfaction that the new amendment, argument or evidence "could not have been submitted earlier." See 37 C.F.R. 1.78(d).
When the PTO published the proposed rules in January of 2006, they were met with unprecedented resistance and public outcry at the restrictions they would place on patent applicants. In an attempt to quell such concerns, the final rules were extensively modified, and the PTO asserts that the new rules will affect less than 3% of patent applications. This would still affect nearly 4,000 applications, based on numbers presented by the PTO. Patent scholar Mark Lemley, scoffing at the idea that the rules would have any significant impact, believes the numbers will be even lower, affecting "10 applications a year, maybe 50, out of 450,000." Stuart Weinberg, "Inventor Sues U.S. Patent Office to Block New Continuation Rules," Dow Jones Newswires, Aug. 23, 2007. The bases for these low numbers have not been verified, however, and serious errors have been identified in the PTO’s continuation application metrics in other contexts. See, e.g., Stuart J.H. Graham, Behind the Patent’s Veil: Innovators’ Uses of Patent Continuation Practice, 1975-2002, GaTech TI:GER Working Paper Series (conducting a statistical analysis of continuation filings at the PTO and the economic and legal reasons for filing continuations). Indeed, many biotechnology industry representatives probably could identify at least 10 patent applications per client that will be negatively impacted by the new rules.
Biotechnology industry representatives are loudly protesting the new rules, arguing that they overlook the legitimate need for a liberal continuation practice in the biotech industry. Is biotech over-reacting? Or did the PTO fail to consider the disparate impact the new rules would have on this burgeoning industry?
Continuations Are Common in Biotech and Are Associated with Patent Value
Since at least 1975, continuations (including CIPs and RCEs) have been more popular in biotech, pharmaceutical and chemical fields than in other technologies. For example, in 1995-1999, continued patents amounted to 41% of drug and health-related patents and 39.4% of chemical patents, but only 25.1% of electronic and 21.6% of mechanical patents. Graham, supra. Continuations are commonly used by key players in the biotech industry. From 1995-1999, continuations accounted for 70-80% of patents to the top biotechnology firms, i.e., Amgen, Chiron, Genentech and Immunex. See Graham, supra.
Using litigation as a proxy for patent value reveals that continuations may be among a patent owner’s most valuable assets. While the average non-litigated patent resulted from an average of only 1.54 applications (e.g., an average of fewer than one continuation), the average litigated patent resulted from an average of 2.57 applications (e.g., an average of between one and two continuations). Graham, supra. While biotech-specific data are not available, it is reasonable to assume that litigated biotech patents often are first, second or even third generation continuations, based on the high proportion of continuations that are filed by the biotech industry. With the new rules effectively limiting patent applicants to only two continuations, the biotech industry is likely to find their most valuable patents impacted by the new restrictions.
Patent Practice Differs Across Technologies
When explaining the need for the new rules and their predicted impact, the PTO speaks of patents as a class, ignoring fundamental differences across technical fields. For example, in the fields of electronics and software, rapidly moving technology, unimpeded by regulatory barriers, means that new inventions are rapidly commercialized and patents often are most valuable at the beginning of their terms. An electronics product may be protected by hundreds of patents, but their commercially effective life may be only a few years, after which they are displaced by next-generation technology. In contrast, it takes many years to bring a biotechnology invention to market, particularly where the product requires FDA approval. Moreover, biotech and pharmaceutical products are typically protected by a small number of patents, often stemming from the same family. In these fields, a patent is valuable initially to gain the investor support required to navigate the regulatory review process, but maximum commercial value often is not realized until the end of a patent’s term, when the patent owner finally is able to commercialize its product.
As for patent prosecution, in the "predictable arts" of electronics and mechanical inventions, patentability usually depends on distinguishing the prior art. On the other hand, in "unpredictable arts" such as biotechnology and pharmaceuticals, questions of enablement, utility, written description and definiteness also arise. Even prior art issues may be more difficult in biotech applications, because when the technology is very new, the nomenclature is still evolving, and the same product may be called by different names, depending on the means used to discover it. For example, a receptor protein for the AIDS virus might be identified by its DNA sequence, protein sequence, structural motifs, recognition by an antibody, molecular weight, binding characteristics, or function. As a result, it may be more difficult to identify relevant prior art and to compare disclosures using different terminology.
Continuations Have Legitimate Uses, Which Will Be Curtailed under the New Rules
The commentary published with the new rules reveals a mindset at the PTO that patent applicants use continuations for a host of nefarious purposes that work hardship on the PTO and the public. Two recognized cases of continuation abuse, Symbol Technologies v. Lemelson, 277 F.3d 1361 (Fed. Cir. 2002); In re Bogese, 303 F.3d 1362 (Fed. Cir. 2002), did not occur in biotech applications, however. To the contrary, the large number of biotech continuations stems mostly from legitimate purposes, many of which will be unjustly limited by the new rules.
Providing Post-Filing Evidence of Enablement and Utility
A patent application must satisfy the statutory enablement and utility requirements at the time of filing, but additional evidence supporting enablement and utility can be submitted after the application is filed. Although such new evidence "does not render an insufficient disclosure enabling, . . . [it] goes to prove that the disclosure was in fact enabling when filed." In re Brana, 51 F.3d 1560, 1567 (Fed. Cir. 1995). The time and expense of obtaining additional experimental data may be extensive, especially in technologies involving human treatment, where supporting animal model or even human data may be required. Continuation practice addresses this problem by permitting applicants filing an original application to pursue product claims (which usually require less supporting evidence), and subsequent continuation applications to pursue therapeutic method claims. Similarly, an applicant may pursue claims to the first embodiment of its invention to undergo experimental testing, and then file a continuation application to pursue other aspects, once relevant supporting data is obtained.
Without a liberal continuation practice, applicants may not be able to obtain the evidence necessary to prove enablement of all supported claims. Thus, the applicant’s rights to a patent that satisfied the statutory requirements may be denied if the applicant cannot satisfy the PTO’s evidentiary standards within the restricted time period permitted by the new rules. See, e.g., The Comments of the Biotechnology Industry Organization on the United States Patent & Trademark Office Proposed Rules Changes Concerning Continuation Practice and Claim Limitations, May 2, 2006, Biotechnology Industry Association, at pages 4-5 (last accessed May 4, 2006).
The PTO’s commentary to the new rules explains that the PTO may permit applicants in "unpredictable arts" to file additional continuations to submit new evidence of enablement as long as the "evidence or data resulted from research or testing that was commenced with reasonable diligence," and as long as the applicant had taken "reasonable steps to resolve the issue during [prior applications]." 72 Fed. Reg. 46,775-76 (August 21, 2007). An applicant’s understanding of "reasonable diligence" may differ from the PTO’s, however. For example, the PTO suggests that reasonable diligence during prosecution of prior applications includes filing an appeal or requesting deferral of examination. Reasonable diligence towards obtaining evidence requires that the applicant not wait for a "decision" from the PTO before commencing research, testing, or FDA submission. 72 Fed. Reg. 46,776.
The PTO advises that the mere fact that an applicant is in the process of obtaining data to support an FDA filing is not likely to justify an additional continuation application. Moreover, the PTO predicts that the need to submit information developed for the FDA in order to prove enablement or utility will be rare, as the standard for patentability is lower than that for regulatory approval. 72 Fed. Reg. 46,775. Nevertheless, applicants often find that data included in an FDA submission is useful to support enablement.
Strict enforcement of the new continuation restrictions may be particularly felt by small biotech companies, who will be squeezed between investors who want patent rights before funding expensive clinical trials, and the PTO, who may treat the time spent to raise capital as a "delay" demonstrating a lack of "diligence."
Negotiating With The PTO Examiner
The process of obtaining a patent involves negotiations between the PTO Examiner and the applicant as to the patentable scope of the claims and appropriate claim language. Such negotiations are especially important in biotech applications, where many issues need to be resolved. Often the Examiner’s opening position (first Office Action) will be to reject the claims as being unclear ("indefinite"), being overly broad as compared to the disclosure (e.g., lacking enablement and/or written description), and being obvious in view of the prior art. The applicant may address these rejections in the first instance by submitting claim amendments, explanations, and legal arguments. Usually such a response resolves many of the issues, leaving the Examiner’s remaining concerns (set forth in a "final" Office Action) for further negotiation. At that point, the applicant may obtain and present experimental data or other evidence to support patentability. Often, the applicant will need to file a continuation or RCE to have the new evidence entered into the record, because an Examiner is not required to consider new evidence "after final."
The PTO commentary published with the new rules suggests that this negotiation process may amount to undue delay, although many biotech representatives have adopted this approach as a reasonable way to manage patent prosecution costs. By responding to a first Office Action primarily with good faith claim amendments and arguments, applicants are able to resolve many issues at minimal cost. By forcing applicants to respond to each initial rejection with experimental data or other evidence, the new rules will drive up prosecution costs, and applicants may have to spend more resources than otherwise would be necessary to address improper rejections.
The elimination of liberal continuation practice transforms the patent prosecution process from a negotiation-like process to a more litigation-like proceeding, in which the Examiner is both opposing party and judge. While the PTO suggests that increased use of appeals will mitigate the negative impact of the new rules on an applicant’s ability to obtain valid patents, the PTO’s analysis ignores the high costs and delay of an appeal, and the markedly increased costs of prosecution under the new rules.
Protecting Unclaimed Embodiments
Continuations often are filed to pursue patents to aspects of the invention that are described, but not claimed, in the original patent. Business considerations may drive the filing of a continuation application, such as when a previously unclaimed product becomes commercially viable, when a competing product is discovered, when new properties of a described product are discovered, or when additional financial resources become available to support additional patent filings. Additionally, applicants often are counseled to review their allowed patent applications for unclaimed embodiments of interest, and may realize that an important aspect of the invention is not covered by the claims, and thus should be pursued in a continuation application.
In the commentary published with the new rules, the PTO indicates that it is not likely to permit additional continuations under these conditions. According to the PTO, "[a]pplicants should . . . know what the applicant regards as his or her invention during the prosecution of the application." 72 Fed. Reg. 46,775. Indeed, the PTO appears to regard the use of continuations to pursue unclaimed embodiments (especially those of competitor products) to constitute abuse of the patent system. 72 Fed. Reg. 46,718-20. Others argue that this practice places an unfair burden on those who would improve patented inventions, and undermines the incentive to improve. Mark A. Lemley & Kimberly A. Moore, Ending Abuse of Patent Continuations, 84 B.U.L. Rev. 63 (2004). On the other hand, proponents of liberal continuation practice insist that it is necessary to permit inventors to fully capture the benefits of their original disclosure. Graham, supra.
Setting aside the question of whether the PTO, rather than Congress, should decide the proper balance between innovators, competitors, and incentivizing improvements, this practice has been upheld by the Federal Circuit in Kingsdown Medical Consultants v. Hollister, 863 F.2d 867 (Fed. Cir. 1988), where the court found "nothing improper, illegal or inequitable" in the practice of filing a continuation application to protect previously unclaimed embodiments. Moreover, concerns about applicants delaying patent prosecution to obtain "late" patents are balanced by the 20-year patent term, which is measured from the filing date of the original application. Thus, the longer an applicant waits to pursue claims to a specific aspect of the invention, the shorter the effective patent term will be for that embodiment.
Adding New Information
Continuation-in-part (CIP) practice permits an applicant to file a new application to supplement the original disclosure with new information as it is discovered, such as from on-going research. The new rules treat a CIP as any other continuation application. Thus, an applicant may file only two continuations, one continuation and one CIP, or two CIPs without having to justify the need for an additional CIP. If a new invention has several different aspects, and each aspect is subject to the development of improvements warranting a CIP, an applicant may quickly be restricted by the new rules from filing all desired CIPs. Moreover, if any application encounters a difficult prosecution requiring a continuation to obtain a patent, the ability to file a CIP will be further restricted.
The PTO’s commentary to the new rules explains that "the mere fact that the subject matter was not present at the time of filing the prior filed application would not be a sufficient showing" to justify a further CIP. 72 Fed. Reg. 46,772. In other words, the fact that an applicant made a new discovery would not justify a CIP directed to the new discovery. Instead, the PTO advises applicants to file new patent applications to new discoveries, a practice that also will maximize patent term for the new aspects of the invention.
Biotech Beware
The biotech industry is justifiably concerned about the impact the new rules will have on the ability to obtain patents that cover all aspects of an invention. Applicants should begin working with their patent counsel as soon as possible to devise strategies for protecting their inventions in view of the new rules.
Ed: Ms. Brinckerhoff is a Partner and Dr. Elliott is a law clerk with Foley & Lardner LLP.
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