The rules had been set to go into effect on November 1 2007, but were put on hold on October 31, when Judge James Cacheris granted GSK’s and Tafas’ requests for a temporary restraining order and preliminary injunction staying their implementation until the Court had time to consider the full merits of the case.

Under the proposed rules package, applicants would have been limited to filing two continuation or continuation-in-part (CIP) applications and one request for continued examination (RCE) and only five independent and 25 total claims, before having to submit an examination support document (ESD). Previously, there was no limit on the number of claims or continuations applicants could file.

In his memorandum opinion released yesterday, Judge Cacheris of the US District Court for the Eastern District of Virginia said that the proposed rules were substantive, rather than procedural, as the USPTO had argued, and that the Office therefore did not have the authority to promulgate them:

“Despite the USPTO’s arguments, the Court finds that the Final Rules are neither procedural rules nor rules relating to application processing that have substantive collateral consequences, but substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act. The 2+1 Rule and the 5/25 Rule, which limit continuing applications, RCEs, and claims, and the ESD requirement, which shifts the examination burden onto applicants, constitute a drastic departure from the terms of the Patent Act as they are presently understood. By so departing, the Final Rules effect changes in GSK’s and Tafas’s existing rights and obligations.”

In a statement sent to Managing IP, Sherry Knowles of GSK said: “We are pleased that the Court has considered our arguments and decided that the PTO lacks the necessary authority to implement the proposed rule changes. In this action, GlaxoSmithKline has demonstrated its willingness to support innovation across all industries, and in particular, to aggressively defend its right to seek the full scope of rights on its discoveries.”

John Desmarais, who represented GSK in the case, said that the opinion will have far-reaching consequences for the PTO, and that the Office will likely appeal the decision to the Court of Appeals for the Federal Circuit (CAFC):

“They almost have to appeal to the CAFC,” Desmarais told Managing IP. “This rules package was the first in a series of proposed rule changes that the PTO is promulgating. There are other draconian changes pending, and this decision puts the brakes on them too.”

The PTO introduced new rules relating to Information Disclosure Statements (IDSs) in 2006, which are set to go into effect at any time. The Office also published proposed changes to the rules on so-called Markush – or alternative – claim language, which would impact the chemical, biotechnology and pharmaceutical industries in particular, in August 2007.

In a statement, the USPTO said it was disappointed, but did not say whether it planned to appeal:

“We are disappointed with this court's decision, which rejects our view that the USPTO has the authority to implement the proposed rules about claims and continuations. The USPTO believes that these rules are consistent with existing statutes and will strengthen the US patent system for all stakeholders. While considering next steps, our goal remains the same as it has always been: to improve the quality of the intellectual property system for the benefit of all."

Steven Moore and Jim Nealon of Kelley Drye & Warren, who represented Triantafyllos Tafas, said that any appeal would likely have to be filed within the next 30 days. Moore said that the PTO could also file a motion for reconsideration of the decision, but that it was “very unlikely”.

“We absolutely expect an appeal,” said Moore. “I can’t imagine that the PTO would leave it as is, although in my own opinion they have no shot,” he said.

Moore added that, even if the PTO were to win on appeal, the case would most likely be remanded on the remaining issues before reaching the Supreme Court, which would prolong the process considerably: “We made a lot of other arguments, but the judge only ruled on one ground,” said Moore. “That gives me a lot of security that nothing will happen in the foreseeable future.”

Both Desmarais and Moore said that the PTO would now likely increase its efforts to lobby Congress for substantive rulemaking authority under the pending patent reform legislation, which may reach the Senate floor sometime in April. HR1908, which passed the House of Representatives in September 2007, contains language which could grant the PTO such authority.

Moore described Tafas as “pleased but cautious in terms of what’s going to happen in the Senate”. He said that Tafas has met with Senators to convince them of the potentially detrimental impact of the proposed rules on emerging companies and small inventors, but that the opposition’s considerable political power was “of course” worrying:

“We’ve done everything we can,” said Moore. “It’s all politics now.”