By Kevin E. Noonan --
Like the most popular kid at a high school dance being the first to take the floor, GlaxoSmithKline's (GSK) lawsuit against John Dudas and the U.S. Patent and Trademark Office's new continuation and claims rules entitled "Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably-indistinct Claims and Examination of Claims in Patent Applications; Final Rule" (New Rules), seems to have broken the ice. The American Intellectual Property Lawyers Association (AIPLA) has filed an amicus curiae brief with the Court hearing GSK's temporary restraining order and preliminary injunction motion, and it has been joined by some expected and unexpected bedfellows.
The AIPLA brief focuses on two of the requirements for a preliminary injunction: irreparable harm and the public interest (the other two are the balance of the hardships between the parties and the likelihood of success on the merits). In doing so, the brief concentrates on the retroactive application of the rules to applications filed prior to the time the rules were promulgated (and, if the Patent Office's backlog statistics can be believed, before the rules were even proposed for the majority of pending applications). AIPLA states the case for the injunction succinctly: imposition of the rules would affect great hardship on applicants, while the Court's granting a stay on implementing the new rules "should not adversely impact" the Office.
The brief sets up the argument with regard to contrasting patent protection and trade secret protection. Patent applicants, rather than disclosing their inventions to the public attendant on applying for patent protection, had the option of holding their inventions as trade secrets. The decision-making involved in choosing patent protection over keeping the technology as a trade secret was made in reliance on the rules as they existed when the applications were filed, and applying the new rules retroactively frustrates the legitimate expectations patent applications had in reliance thereupon, according to the brief. The brief argues that the public interest is served by encouraging invention disclosure through patenting, since patent protection is given for only limited times and the technology falls into the public domain upon patent expiry (and earlier should the patent maintenance fees not be paid).
The hardships on patent applicants, according to the brief, will be "immediate, widespread and irreparable" should the new rules be permitted to come into effect on November 1st. This is an important point made in the brief, since the aim is to convince the Judge that the rules should be stayed pending judicial resolution of the allegations of unlawfulness in GSK's complaint. The brief asserts that permitting the new rules to come into effect will make it "impossible to return to the status quo . . . important intellectual property rights will be permanently lost." The brief references case law, treatises, and other reference works to demonstrate that filing patentably-distinct claims for what may be more than a single invention has been both routine and useful for applicants, particularly new business concerns, that are formed to commercialize "emerging technology," a type of technology cited by the Office as intended to benefit from the new rules. The brief asserts that it is just the applications in these technologies that "almost inevitably" contain more than the 5 independent claims and 25 total claims that are the maxima permitted under the new rules. Having filed and prosecuted applications under the former rules of practice, implementation of the new rules will, according to the brief, require companies to file a Suggested Restriction Requirement (SRR) document or an Examination Support Document (ESD). The deficiency of the first option is that the Office is not obliged to grant such requests, and such a failure would cause an applicant to abandon claims to previously-disclosed inventions and lose intellectual property rights as a result. This is "profoundly unfair" and constitutes a "forfeiture" of rights for inventions disclosed publicly (by publication of an application) and then preclusion from pursuing claims to such invention(s). ESDs fare no better in the brief's analysis, citing the risks attendant to filing such a document (including "inadvertent misstatements") and the costs, which even the Office now admits can cost over $13,000 in some instances and not the $2,500 it originally estimated the average cost to be. The brief makes the interesting point that, by shifting the burden from the Examiner to the applicant, the new rules are "at variance with counsel's role as 'an advocate' for her client." And the alternatives to filing an ESD or cancelling claims and losing valuable intellectual property rights in the process is rightly termed a Hobson's Choice in the brief.
The same can be said, in another portion of the brief, for requiring applicants to make the types of representations regarding patentable-distinctiveness between claims of related, co-pending applications in order to avoid having to cancel claims or entire applications filed under a different regulatory regime.
A portion of the brief is spent exposing the Office's proffer of petitioning for additional claims, RCEs, or continuation applications for what it is -- a red herring, a sham, and a ruse, because according to the Office's own words there are so few situations that would constitute an adequate showing to have a petition granted. Also noted are the costs attendant upon the filing and rearranging of claims in existing applications, as well as the reporting requirements discussed above. All these efforts are expected to take "extraordinary amounts of time" and "incur unjustifiably excessive costs" in order to comply.
The AIPLA brief is supported by a declaration from Burt Magen (at right), a partner at the Vierra Magen Marcus & DeNiro firm who represents SanDisk; Mr. Magen testifies on behalf of their interests and the effects he expects the new rules to have on his client's interests. Not surprisingly, these effects will be bad. Mr. Magen focuses his testimony on the retroactive application of the rules to pending applications. He testifies that SanDisk has 235 applications pending for which his firm provides representation in patent prosecution matters and that have not yet received a "first action on the merits" (FAOM). According to Mr. Magen, there are 142 patent families represented by these 235 applications. By his calculations, the claims of 174 of the 235 pending applications will need to be combined into 81 patent applications to comply with the rules, requiring SanDisk to abandon 93 of these applications, and another 8 applications where other members of the family have received a FAOM. Mr. Magen testifies that the cost of abandoning these applications alone amounts to almost $200,000 in wasted filing fees (which, unlike claims fees, are not going to be refunded by the Office). In addition, adding the claims from these 101 applications will incur an additional cost in excess of $130,000, according to Mr. Magen's calculations. Mr. Magen then adds the expected costs of the divisional applications that SanDisk will file as a consequence of restriction of the claims (by the Office, or more likely, consistent with a Suggested Restriction Requirement (SRR) submission), which he estimates to be about $150,000. The grand total is almost half a million dollars. Mr. Magen then goes on to testify as to the consequences of the Office not granting SanDisk's SRR, which will be irrevocable loss of intellectual property rights.
Anticipating the Office's counterargument regarding the filing of a petition and showing, or an Examination Support Document (ESD), Mr. Magen testifies that this option is "not only expensive, but also provides statements on the record that can potentially be used by an accused infringer" for both invalidity and inequitable conduct defenses. With regard to Requests for Continued Examination (RCEs), Mr. Magen testifies that the limitation of only one per patent family disrupts the "normal back-and-forth" with an Examiner that occurs during patent prosecution, and also prevents an applicant from complying with the duty of disclosure under Rule 56 in instances where an applicant files international applications, as Mr. Magen testifies SanDisk does routinely, and receives a search report containing relevant prior art that is not known to the applicant nor received in time to be filed in the ordinary course. RCE practice permits an applicant to submit such art under the current rules, and this procedural avenue is foreclosed under the new rules. "This situation will create irreparable harm to SanDisk," according to Mr. Magen.
Perhaps most surprising is the declaration of David J. Kappos (at left), Vice President and Assistant General Counsel, Intellectual Property Law, of IBM. IBM, like many information technology (IT) companies, has been a strong supporter of "patent reform," including the new rules. Despite previous statements in support of the rules, Mr. Kappos' declaration is filed in support of the AIPLA's amicus brief.
Mr. Kappos' declaration focuses on the retroactive application of the rules to pending applications, and specifically references the "related application" disclosure requirements imposed by new rules 37 C.F.R. §§ 1.78(f)(1) and 1.78(f)(2). Mr. Kappos testifies that IBM has 25,000 pending applications and, after preliminary review, would need to identify more than 30,000 related patents and patent applications in order to comply with the rules. Mr. Kappos further testifies that, should the Patent Office refuse to accept IBM's bases for its assertions of patentable distinctiveness, the only remedy would be to cancel claims and thus lose rights to patentable inventions. (No doubt the Patent Office rejoinder to this assertion will be the Examination Support Document (ESD) option; the lunacy of this course of action is not addressed in Mr. Kappos' declaration.)
The bottom line, according to Mr. Kappos, is a cost of "over 10 million dollars" in legal fees and internal costs, not counting the loss of intellectual property rights that may be occasioned by the rules. These costs, according to Mr. Kappos, will be incurred to the detriment of IBM's abilities to protect its new intellectual property; this allegation strikes directly at one of the (largely spurious) Patent Office grounds for the new rules, that examination of "old" technology (represented by continuation applications) detracts from the Office's ability to examine "new" technology.
It remains to be seen whether all this activity will be "too little, too late" or whether GSK and its amici will be able to convince the Judge that they satisfy the preliminary injunction standard. It would be sweet irony if the Judge recognizes the Patent Office's postponement of the hearing to the day before implementation is slated to occur for what it is - an attempt to tie his hands and make it more likely that he will deny the motion. The brief and declarations submitted today bolster GSK's argument that it has fulfilled the requirements for an injunction. Let's hope the Judge is listening.
For additional information on this topic, please see:
- "GSK Brings Out the Big Guns Opposing the New Continuation and Claims Rules," October 24, 2007
- "Hooray! - (Finally) the Big Dogs Have Joined the Hunt," October 11, 2007
- Patently-O's coverage