The U.S. District Court for the Eastern District of Virginia has issued an order enjoining the implementation and enforcement of the new U.S. Patent and Trademark Office (“PTO”) rules related to claims and continuation practice, one day before the new rules were set to take effect on November 1, 2007.

Proposed Rules

Back on August 21, 2007, the PTO published its final rules titled “Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims and Examination of Claims in Patent Applications.”  72 Fed. Reg. 46716-46843 (Aug. 21, 2007) (“Final Rules”). Previously, patent applicants could file an unlimited number of continuing applications, requests for continued examination (“RCEs”) and claims.  The Final Rules added new limitations:

(1) Final Rules 78 and 114 would allow applicants to file two continuation or continuation-in-part applications plus a single RCE after an initial application as a matter of right.  A third continuation or continuation-in-part application or a second RCE could only be filed with a “petition and showing” explaining why the amendment, argument or evidence could have been presented in one of the previously-filed applications.  Final Rules 78 and 114 applied to all initial and continuing applications filed on or after November 1, 2007.

(2) Final Rule 75 would allow applicants to present a total of five independent claims and 25 total claims without providing any further information about those claims.  Additional claims could presented if applicants provided an “examination support document” containing information about the claims to assist the examiner in determining patentability of the claims.  Final Rule 75 applied to all applications filed on or after November 1, 2007 and all pending applications for which a first Office Action on the merits was not mailed before November 1, 2007.

Lawsuits Filed

In August 2007, inventor Dr. Triantafyllos Tafas filed a declaratory judgment action against the PTO and its director, Jon Dudas, in the U.S. District Court for the Eastern District of Virginia, asserting, inter alia, that the Final Rules violated the Constitution and the Patent Act.  In October 2007, SmithKline Beecham Corporation d/b/a GlaxoSmithKline (“GSK”) also filed suit in the same court, asking for a preliminary and permanent injunction on the grounds, inter alia, that the PTO exceeded its rule making authority.  The court consolidated the two actions, with GSK becoming dominant plaintiff, and scheduled a hearing for October 31, 2007.

Court Grants Motion for Preliminary Injunction

After hearing oral arguments at the hearing, the court issued an order preliminarily enjoining the Final Rules from taking effect.

The court first noted the four factors relevant to a preliminary injunction determination:  (1) the likelihood of the plaintiff’s success on the merits; (2) the irreparable harm if the injunction is not granted; (3) the balance of the hardships between the parties; and (4) the public interest.

(1)  Likelihood of Success on the Merits

GSK had challenged the Final Rules on the ground that the PTO lacked the authority to promulgate substantive rules and that the Final Rules exceeded the plain language of the Patent Act.  Moreover, GSK argued that it had relied on current patent rules in deciding to give up trade secret rights in exchange for patent protection, and applying the Final Rules retroactively to currently pending applications made the bargain unfair.  GSK also argued that the Final Rules related to the examination support document requirements were unconstitutionally vague because they failed to provide any boundaries on the scope of the search that applicants were required to undertake.  The court found that GSK had raised “colorable questions” on these issues and found that “[b]ased on the difficult legal questions presented by this case, the Court will find that, in sum, the likelihood of success on the merits factor weighs in favor of GSK.”

(2)  Irreparable Harm

GSK cited specific instances of irreparable harm, including approximately two thousand pending applications, the rights of which would be changed under the Final Rules, a substantial loss of investment capital, lost patent protection and a disincentive to file new patent applications.  The court noted that even if GSK could not pinpoint an exact amount of monetary loss, the uncertainty and possible lost patent protection demonstrated irreparable harm.

(3)  Balance of Hardships

The PTO argued that it had spent millions of dollars training staff and retooling computer systems to prepare for implementation of the Final Rules, and while the court acknowledged this as a hardship, the court considered the “uncertainty and loss of investment suffered immediately by GSK” to tilt the balance of hardships in GSK’s favor.

(4)  Public Interest

The court found that the public interest was served in maintaining the status quo, because it gave the court time to consider the validity of the Final Rules before going into effect.

Accordingly, the court granted the motion for a preliminary injunction.