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USPTO Rescinds Controversial Patent Rule Changes Proposed by Prior Administration

NEW YORK (GenomeWeb Daily News) – The US Patent and Trademark Office said yesterday that Under Secretary of Commerce for Intellectual Property and Director David Kappos has signed a final rule rescinding highly controversial regulations that were enacted by the USPTO under the Bush administration and were viewed by many in the biotech industry as hindering their ability to protect IP.

In addition, the USPTO said that it will file a motion to dismiss and vacate a federal district court decision in a lawsuit filed by GlaxoSmithKline and an independent inventor that sought to prevent the rules from taking effect.

GSK will also join the USPTO's motion for dismissal and vacatur, the USPTO said.

The litigious regulations, published in the Federal Register in August 2007, would have limited the number of continuing patent applications and number of claims that could be included within each application.

Specifically, under the rules, patent applicants would have been able to file two new continuing applications and one request for continued examination per application family as a matter of right. In addition, each patent application would have been allowed to contain no more than 25 separate claims, with no more than five of them independent, without any additional effort on the part of the applicant.

Traditional rules allowed applicants to file an unlimited number of continuing applications, requests for continued examination, and claims.

The USPTO said at the time that it designed the new rules to help the office deal with the tremendous backlog of patent applications at the office, thereby reducing patent pendency.

But many patent-holding organizations – particularly those in the biotech and pharmaceutical industries – felt that the rules would have been detrimental to innovation and patenting at their companies.

"While the new rules were criticized by many stakeholders across many patent holding industries, they were of particular concern to those in the biotech industry," Hans Sauer, associate general counsel for intellectual property for the Biotechnology Industry Organization, told GenomeWeb Daily News yesterday.

"By the PTO's own numbers, biotech relies to a greater extent than other industries on so-called continuing patent applications and a variety of patent claims, all of which would have been constrained by the proposed rules," Sauer said. "Accordingly, biotech always felt particularly impacted by these rules."

However, the published regulations never came into effect, as an inventor named Triantafyllos Tafas, who founded medical imaging firm Ikonisys, sued the USPTO almost immediately following the proposal, claiming that the USPTO had overstepped its rule-making authority.

In October 2007, GSK filed a complaint against the USPTO with the US Federal Court for the Eastern District of Virginia to challenge the published rules, claiming that the changes would irreparably harm the firm because of the large number of patents it has in continuation or pending.

In addition, many organizations including BIO, the Pharmaceutical and Research Manufacturers of America, and the American Intellectual Property Law Association filed amicus briefs in support of the GSK complaint.

The court consolidated the GSK and Tafas complaints, and in October 2007 it ruled in favor of the plaintiffs by issuing a preliminary injunction against the rules, followed by a permanent injunction in April 2008.

However, the USPTO appealed to the US Court of Appeals, and in March of this year a panel of the Federal Circuit concluded that the new rules were all "procedural" in nature, within the agency's rulemaking authority, and consistent with patent law. Finally, in July, the Federal Circuit vacated the divided-panel decision and agreed to hear the matter en banc, meaning the new regulations might still have been enacted.

That was until yesterday, when recently appointed USPTO Director Kappos signed a final rule rescinding the proposed regulations. The USPTO also worked with GSK to jointly dismiss the case and vacate the federal court decision.

"We applaud the [PTO] for its leadership in deciding to withdraw these rules, which we believe would have harmed innovation across all industries, and specifically would have deprived GSK and other manufacturers of the patent protection necessary to promote medical research and innovation," Sherry Knowles, GSK's senior vice president and chief intellectual patent counsel, said yesterday in a statement.

BIO's Sauer echoed Knowles' comments, telling GWDN that to some BIO members the rules were "even more of a concern" to the biotech industry than patent reform legislation currently being considered in Congress, and that the biotech community was "very happy now" to see that Kappos has withdrawn the rules.

However, the USPTO may not be contented to let the matter drop entirely. Earlier this week, the administration, represented by Kappos and Secretary of Commerce Gary Locke, reiterated its general support of the patent reform bill and provided several recommendations for improvement – one of which was granting the USPTO "substantive rulemaking authority" to provide Kappos with "flexibility in the administration of patent rules and procedures."

BIO's Sauer said that the addition of this recommendation stood out as a sticking point to the biotech industry even though the rest of the administration's views on how it can help speed passage of the legislation was "warmly received" by the industry.

However, Sauer also said that the inclusion of this recommendation – in light of yesterday's actions – may also be seen as an effort on the part of the USPTO to reach out to the patent-holding community and foster an open discussion on how to improve efficiency at the agency.

"I think they do want substantive rule-making authority, but not at the price … of [winning] that authority with bare-knuckles litigation," Sauer said.

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