IN THE UNITED
STATES DISTRICT COURT
FOR THE EASTERN
DISTRICT OF VIRGINIA
TRIANTAFYLLOS
TAFAS )
)
Plaintiff, )
)
v. ) 1:07cv846
(JCC)
)
JON W. DUDAS,
et al., )
)
Defendants. )
)
CONSOLIDATED
WITH
)
SMITHKLINE
BEECHAM )
CORPORATION, et
al. )
)
Plaintiffs )
)
v. ) 1:07cv1008
(JCC)
)
JON W. DUDAS,
et al., )
)
Defendants. )
M E M O R A N D U M O P I N I O N
This matter is
before the Court on: (1) Plaintiffs
Smithkline
Beecham Corporation and Glaxo Group Limited’s (“GSK”)
Motion for a
Temporary Restraining Order (“TRO”) and Preliminary
Injunction; (2)
Defendants Jon W. Dudas and
and Trademark
Office’s (“PTO”) Motion to Strike Exhibit E of the
Memorandum in
Support of GSK’s Motion; (3) the Motion of Amicus
Curiae American
Intellectual Property Law Association (“AIPLA”)
2
for Leave fo
File its Brief in Support of GSK’s Motion; (4)
HEXAS, LLC (“Hexas”),
The Roskamp Institute, and Tikvah
Therapeutics,
Inc.’s (“Tikvah”) Joint Motion in Support of Motion
for Leave to
File Amici
Curiae Brief in Support of GSK’s Motion;
and (5) the
Motion of Amicus
Curiae Elan Pharmaceutical Corp. for
Leave to File
its Brief in Support of GSK’s Motion. For the
reasons stated
below, the Court will grant GSK’s motion, deny the
PTO’s motion,
and grant the motions for leave to file as amici.
I. Background
GSK is the
second largest pharmaceutical company in the
world and is
responsible for developing and marketing drugs that
treat numerous
ailments, including cancer, cardiovascular
disease,
respiratory diseases, HIV, and depression. The patent
system
encourages companies like GSK to engage in the research
and development
of new drugs by providing them with the legal
protection that
enables them to recover the significant costs
that accompany
development and regulatory approval of new drugs.
This case deals
with potential changes to this system brought on
by the PTO’s
modification of several long-established rules.
Under both the
old and new rules, to obtain patent
protection an
inventor first files a patent application with the
PTO. The first
application filed for a given invention is a
“parent” or
“initial” application. A parent application contains
two primary
parts: a “specification,” which describes the
3
invention and
how to make and use it, and one or more “claims,”
which identify
the scope of the legal protection that the
invention
should receive, and come in either “independent” or
“dependent”
forms. Once the application is filed, a patent
examiner
determines whether the claimed invention meets the
statutory
requirements found in Title 35 of the
Code. If it is
rejected, the examiner will issue an “Office
Action” that
contains the grounds for rejection. An applicant
may then amend
the claims, argue against the rejection, or
present
evidence to show why the invention is patentable. The
patent examiner
must respond by either allowing or rejecting the
claim.
Upon receiving
a final rejection, an applicant has four
choices: (1)
appeal to the Board of Patent Appeals and
Interferences
and from there to the Federal Circuit; (2) file a
“request for
continued examination” (“RCE”) of the application;
(3) file a
“continuation” or “continuation-in-part” application;
or (4) file an
after final “amendment.” A continuation
application
uses the same specification as the pending parent
application and
enjoys the benefit of the filing date of the
parent
application (the “priority date”).
In situations
where an applicant claims more than one
independent
invention in the initial application, the examiner
may impose a
“restriction requirement” that forces an applicant
4
to separate
their multiple independent inventions into
“divisional”
applications that claim a single invention. The
applicant must
then choose one of the inventions to prosecute in
their initial
application, and can prosecute the remaining
inventions in
their divisional applications, which claim the
priority date
of the parent application.
On
rules that
would limit the number of continuing applications,
RCEs, and
claims that an applicant could make. The PTO justified
the proposed
changes on the ground that the growing number of
continuing
applications and increasing number and complexity of
claims in
applications had crippled the PTO’s ability to examine
newly-filed
applications. After a four month public comment
period where
the PTO received more than 500 written comments,
many of which
expressed disapproval with the proposed rules, on
“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 (
The Final Rules
are set to take effect on
Under the old
system, an applicant could file an
unlimited
number of continuing applications, RCEs, and claims.
The Final Rules
modify that system in the several ways. First,
5
Final Rules 78
and 114 allow an applicant to file two
continuation or
continuation-in-part applications, plus a single
RCE, after an
initial application as a matter of right. If the
applicant wants
to engage in further prosecution, a third
continuation or
continuation-in-part application or a second RCE
can be filed
with a “petition and showing” that explains why the
amendment,
argument, or evidence could not have been presented in
one of the
previously-filed applications. These Final Rules
apply to all
initial and continuing applications filed on or
after November
1, 2007. In addition, under Final Rule 142, if
the applicant
submits an application with multiple independent
inventions,
with the examiner’s permission a divisional
application may
be filed for each invention, and each divisional
application
will be treated as an initial application.
Second, Final
Rule 75 permits an applicant to present a
total of five
independent claims and twenty-five total claims
without
providing any further information about those claims. An
applicant who
wants to exceed either of these limitations must
provide an
“examination support document” (“ESD”) containing
information
about the claims that may assist the examiner in
determining the
patentability of the claimed invention. The
requirements of
an ESD are set out in Final Rule 265. These
Final Rules
apply to all applications filed on or after November
1, 2007, and
all pending applications for which a first Office
“Continuation,”
“continuation-in-part,” and “divisional” 1
applications
are all commonly referred to as “continuing
applications.”
6
Action on the
merits was not mailed before November 1, 2007.
Under the old
system, GSK would traditionally prosecute
patents in the
following manner. When GSK discovered a potential
class of new
drug products (a “genus”), it would typically file
an initial
application containing a broad disclosure that
includes
numerous structurally-related compounds (a “species”).
This broad
disclosure would include a number of different
inventions and
disclose more than it claims. Because GSK does
not know until
after extensive research is performed which member
of the genus
will be brought to market, it would file an initial
application
with the understanding that it will prosecute
narrower or
additional patent claims in subsequent continuing
applications.1 These continuing applications can claim the
priority date
of the parent application; consequently,
publications
and public information generated between the
priority date
and the date of the later-filed applications cannot
be used against
patentability.
GSK currently
has roughly one hundred or more pending
applications in
which two or more continuing applications have
been filed, and
approximately thirty or more pending applications
in which two or
more continuing applications and a RCE have been
filed. GSK also
has several pending applications that have not
7
yet received an
Office Action on the merits and contain enough
claims to
trigger an ESD.
On October 9,
2007, GSK filed a Complaint against the
PTO seeking a
preliminary injunction staying the implementation
of the Final
Rules until the resolution of the lawsuit, a
permanent
injunction against the implementation of the Final
Rules, a
declaratory judgment that the Final Rules are contrary
to law, and a
request that the Final Rules be vacated. Two days
later, GSK
filed an Amended Complaint against the PTO seeking the
same relief. On
October 15, 2007, GSK moved for a TRO and
preliminary
injunction enjoining the implementation of the Final
Rules. On
October 19, the PTO moved to strike the declaration of
Harry F.
Manbeck, Jr., Exhibit E of the Memorandum in Support of
GSK’s Motion.
In addition, numerous entities have filed motions
for leave to
file amicus
curiae briefs, including: (1) AIPLA on
October 25; (2)
HEXAS, The Roskamp Institute, and Tikvah,
jointly, on
October 26; and (3) Elan Pharmaceuticals on October
29. These
motions are currently before the Court.
II. Standard of Review
The Federal
Circuit has generally treated the grant or
denial of a
preliminary injunction as a procedural matter and
thus has
applied the procedural law of the regional circuit in
which the case
was brought. See Texas Instruments, Inc. v.
Tessera, Inc., 231 F.3d 1325, 1328 (Fed. Cir. 2000); Mikohn v.
8
Gaming Corp. v. Acres Gaming, Inc., 165 F.3d 891, 894 (Fed. Cir.
1998). However,
where “the issue pertains to or is unique to
patent law,”
the Federal Circuit has applied its own law to both
substantive and
procedural issues “intimately involved in the
substance of
enforcement of the patent right.” Amana
Refrigeration, Inc., v. Quadlux, Inc., 172 F.3d 852, 856 (Fed.
Cir.
1999)(citations omitted); see also Mikohn, 165 F.3d at 894
(stating that
the Federal Circuit has given “dominant effect to
Federal Circuit
precedent insofar as it reflects considerations
specific to
patent issues”). To the extent that GSK’s Motion
deals with the
propriety of the Final Rules under the patent
laws, the Court
will apply the law of the Federal Circuit with
respect to the
issuance of a preliminary injunction. See Mylan
Pharms., Inc. v. Thompson, 268 F.2d 1323, 1329 n.1 (Fed. Cir.
2001)(finding
that Federal Circuit law applied to a preliminary
injunction
motion involving the enforcement of patent rights);
Texas Instruments, 231 F.3d at 1328 (finding that Federal Circuit
law applied to
a preliminary injunction motion involving
substantive
issues in an area of law within the unique
jurisdiction of
the Federal Circuit).
The four
factors relevant to the Court’s decision to
grant or deny a
preliminary injunction are: “(1) the likelihood
of [the
plaintiff’s] success on the merits; (2) irreparable harm
if the
injunction is not granted; (3) the balance of hardships
Alternately,
under Fourth Circuit law the standard for 2
preliminary
injunctions is substantially similar. See
Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189, 193
(4th Cir.
1977).
9
between the
parties; and (4) the public interest.” Abbott Labs.
v. Andrx Pharms., Inc., 473 F.3d 1196, 1200-01 (Fed. Cir. 2007)
(citations
omitted).2 “These factors, taken individually, are not
dispositive;
rather, the district court must weigh and measure
each factor
against the other factors and against the form and
magnitude of
the relief requested.” Amazon.com, Inc. v.
Barnesandnodble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir.
2001)(citations
omitted).
The Court has
broad discretion in deciding whether to
allow a
non-party to participate as an amicus curiae. See, e.g.,
Hoptowit v. Ray, 682 F.2d 1237, 1260 (9th Cir. 1982); Waste
Mgmt., Inc. v. City of
Such non-party
participants have “been allowed at the trial level
where they
provide helpful analysis of the law, they have a
special
interest in the subject matter of the suit, or existing
counsel is in
need of assistance.” Bryant v. Better Business
Bureau,
923 F. Supp. 720, 727 (D. Md. 1996)(internal citations
omitted); see also Northern Sec. Co.
v.
555, 556 (1903). However, “[a] motion for leave to file an
amicus curiae
brief . . . should not be granted unless the court
‘deems the
proffered information timely and useful.’” Bryant,
10
923 F. Supp. at
727-28 (citing Yip v. Pagano, 606 F. Supp. 1566,
1568 (D.N.J.
1985)).
The
admissibility of expert testimony is governed by
Federal Rule of
Evidence 702, amended effective December 1, 2000
to reflect the
Supreme Court’s rulings in Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509
Carmichael, 526
If scientific,
technical, or other
specialized
knowledge will assist the trier
of fact to
understand the evidence or to
determine a
fact in issue, a witness
qualified as an
expert by knowledge, skill,
experience,
training, or education, may
testify thereto
in the form of an opinion or
otherwise, if
(1) the testimony is based upon
sufficient
facts or data, (2) the testimony
is the product
of reliable principles and
methods, and
(3) the witness has applied the
principles and
methods reliably to the facts
of the case.
Fed. R. Evid.
702. A district court’s decision with respect to
the
admissibility of expert scientific testimony “is always a
flexible one,
and the court’s conclusions necessarily amount to
an exercise of
broad discretion guided by the overarching
criteria of
relevance and reliability.” Oglesby v. General
Motors Corp., 190 F.3d 244, 250 (4th Cir. 1999); see also Cooper
v. Smith & Nephew, Inc., 259 F.3d 194, 200 (4th Cir. 2001)(noting
the Supreme
Court’s statement in Kumho Tire that trial judges
“must have
considerable leeway in deciding in a particular case
how to go about
determining whether particular expert testimony
11
is reliable”)
(quoting Kumho
Tire, 526
States v. Barnette, 211 F.3d 803, 816 (4th Cir. 2000)(noting the
Fourth
Circuit’s consistent practice of giving “great deference”
to a trial
Court’s Daubert
ruling).
III. Analysis
GSK seeks a TRO
and a preliminary injunction preventing
the PTO from
implementing the Final Rules, the PTO moves to
strike the
declaration of Harry F. Manbeck, Jr., Exhibit E of the
Memorandum in
Support of GSK’s Motion, and numerous entities have
filed three
separate motions for leave to file amicus curiae
briefs. The
Court will address the amicus issue
and the PTO’s
motion first
before turning to GSK’s motion.
A. Motions for Leave to File Amicus
Curiae Briefs
Plaintiffs
Tafas and GSK have consented to the filing
of the amicus curiae motions of Elan, Hexas, the Roskamp
Institute,
Tikvah, and AIPLA. The PTO opposes all of the filings
as untimely.
However, the cases the PTO cites in support of
their claim
that these filings are untimely involve situations in
which the
motions to file as amicus were made months after the
cases were
filed and the courts had begun holding hearings. See,
e.g., Centeno-Bernuy v. Perry, 302 F. Supp. 2d 128, 131 (W.D.N.Y.
2003) (finding
that “the motion is untimely as the hearing has
been completed
and the preliminary injunction motion has been
submitted for
decision”); O Centro Espirita Beneficente Uniao do
12
Vegetal v. Ashcroft, 282 F. Supp. 2d 1271, 1274 (D.N.M. 2002)
(denying a
motion to enter as an amicus after parties had
“prepared
numerous briefs . . . over a period of more than a
year, . . .
[and] presented evidence and arguments at a lengthy
hearing”).
Rather than frequently turning down amicus briefs on
timeliness
grounds, courts have accepted them as timely even when
filed “on the
eve of summary judgment motions.” Community Ass'n
for Restoration of the Env't v. Deruyter Bros. Dairy, 54 F. Supp.
2d 974, 975-976
(E.D. Wash. 1999). This case was filed on
October 9,
2007, and the parties seeking to be heard as amici
curiae filed
their motions before the first hearing. Because
these amicus
briefs were filed a relatively short time after the
case began, the
Court will find that they are sufficiently
timely.
The PTO also
objects to AIPLA’s proposed amicus brief
on the grounds
that it improperly contains new arguments not
contained
within GSK’s brief. The Court agrees that it may not
consider legal
issues or arguments not raised by the parties.
See, e.g. Cellnet Communs. v. FCC, 149 F.3d 429, 443 (6th Cir.
1998)(holding
that “[t]o the extent that the amicus raises issues
or make
arguments that exceed those properly raised by the
parties, [the
Court] may not consider such issues”). However,
the mere fact
that a non-party seeks to put forth an opinion in
the case does
not disqualify it as an amicus. Although “[a]n
13
amicus . . . is
not a party to the litigation and participates
only to assist
the court[, n]evertheless, ‘by the nature of
things an
amicus is not normally impartial’ . . . and ‘there is
no rule . . .
that amici must be totally disinterested.’” Waste
Mgmt., Inc. v. City of
(quoting United States v. Gotti, 755 F. Supp. 1157, 1158
(E.D.N.Y. 1991)
and Concerned
Area Residents for the Environment
v. Southview Farm, 834 F. Supp. 1410, 1413 (W.D.N.Y. 1993)).
Therefore, the
Court will grant each of the three motions for
leave to file
an amicus
curiae brief, but will not consider any
legal issues or
arguments therein that were not raised by the
parties
themselves.
B. Admissibility of the Manbeck Declaration
Defendants move
to strike the declaration of Harry F.
Manbeck, Jr.,
Exhibit E of the Memorandum in Support of GSK’s
Motion, on
grounds that it is not allowable under the Federal
Rules of
Evidence, it impermissibly augments the administrative
record, and it
is in violation of the local rules. The Court
will take each
concern in turn.
1) Expert
Testimony
The PTO argues
that the Manbeck Declaration is
inappropriate
in that it is primarily a rendering of legal
conclusions and
is therefore not relevant, helpful, or needed by
the Court in
its determination of whether a preliminary
14
injunction is
appropriate in this case. The Federal Circuit,
which regularly
hears questions of patent law, “has on numerous
occasions noted
the impropriety of patent lawyers testifying as
expert
witnesses and giving their opinion regarding the proper
interpretation
of a claim as a matter of law, the ultimate issue
for the court
to decide.” Endress + Hauser, Inc. v. Hawk
Measurement Sys. Pty. Ltd., 122 F.3d 1040, 1042 (Fed. Cir. 1997).
However, patent
lawyers frequently testify as expert witnesses as
to matters of
PTO practice and procedure and to explain the
complexities of
patent prosecution, and a “judge can even advert
to the
testimony of patent law experts -- that is, patent lawyers
-- for advice
on the interpretation of claims.” Markman v.
Westview Instruments, Inc., 52 F.3d 967, 991 (Fed. Cir.
1995)(emphasizing
the importance of expert witnesses in the field
of patents to
“reveal how others use and understand technical
terms that may
appear ambiguous or opaque to the judge, who
rarely has the
knowledge of those skilled in the field of the
patent”).
Insofar as the Manbeck Declaration renders legal
conclusions,
the Court agrees that it is inappropriate. However,
the Court also
recognizes its own limited knowledge of the
intricacies of
patent regulations and appreciates the need for
experts in this
matter.
In a situation
similar to this one, a trial court
declined to
strike a patent lawyer’s expert report upon
15
allegations
that it “consist[ed] solely of legal conclusions
disguised as
expert testimony.” Chamberlain Group, Inc. v.
Interlogix, Inc., 2002 WL 653893, *1 (N.D.Ill.,2002). The Court
reasoned that
excluding the entire report would be “an
extraordinary
measure” and chastised the moving party for
“fail[ing] to
identify specific portions of [the expert’s] report
that it
contends should be stricken.”
“provide[d]
an explanation of the prosecution history of the
patents at
issue, and the operation of the Patent and Trademark
Office,” thus
helping the Court to understand the patent issues
in the case.
Similarly, the
PTO does not delineate particular
portions of
Manbeck’s expert testimony that they wish to strike,
claiming that
the entire report is tainted. The Court recognizes
that the
Manbeck Declaration contains some impermissible legal
arguments, but
agrees with the
the entire
report would be extraordinary, particularly given
Manbeck’s
obvious qualifications in the field and clear ability
to explain the
complexities of patent regulation and the
background of
this matter. Therefore, the Court will accept the
Declaration as
the statement of an expert witness, but will not
take into
account any impermissible legal argument contained
therein.
16
2) Augmentation
of administrative record
The PTO alleges
that the Manbeck Declaration
“impermissibly
introduces into the administrative record . . .
material that
was not before the USPTO when it enacted the Final
Rules.” Mem.
in Supp. of Defs.’ Mot. to Strike Ex. E at 6.
Generally,
“judicial review of agency action pursuant to the APA
is confined to
the agency's administrative record.” American
Canoe Ass'n v. United States EPA, 46 F. Supp. 2d 473, 475 (E.D.
Manbeck
Declaration does contain analysis that goes beyond mere
explanation of
the administrative record. However, “[e]ven in
APA record
review cases, circumstances may justify expanding the
record or
permitting discovery,” including “such a failure in the
record to
explain administrative action as to frustrate judicial
review, the
agency's reliance on materials or documents not
included in the
administrative record, or the need to supplement
the record to
explain or clarify technical terms or other
difficult
subject matter included in the record.”
(internal
citations omitted); see also Public Power Council v.
Johnson,
674 F.2d 791, 793-94 (9th Cir. 1982) (holding that
“there may be
circumstances to justify expanding the record or
permitting
discovery,” including “ascertaining whether the agency
considered all
the relevant factors or fully explicated its
course of
conduct or grounds for decision,” situations “when it
17
appears the
agency has relied on documents or materials not
included in the
record,” and other circumstances as “necessary to
permit
explanation or clarification of technical terms or subject
matter involved
in the agency action under review” as “background
information”).
Not only are there situations in which external
information can
be helpful to the Court, but the D.C. Circuit has
pointed out
that it can be reversible error for a district court
to avoid going
outside the administrative record in some
situations. Esch v. Yeutter, 876 F.2d 976, 992 (D.C. Cir. 1989).
It recognized
that extra-record evidence can be important in
scenarios
“when a case is so complex that a court needs more
evidence to
enable it to understand the issues clearly” and “in
cases where
relief is at issue, especially at the preliminary
injunction
stage,” among others.
In this
consideration of a preliminary injunction,
given that the
subject matter is difficult and there are a number
of terms used
uniquely in the patent context, the Court finds
that some
explanatory material is appropriate. The Manbeck
Declaration
relies on statutes, court cases, Congressional
documents, and
the PTO's own publications, not on rare sources or
information
that the PTO was unaware of. In fact, the Court
would find it
extremely unusual if the PTO had not taken into
consideration
statutes, patent case law, and declarations of
Congress in its
promulgation of the Final Rules, even if they are
18
explicitly
referenced in the administrative record. Therefore,
the Court will
find that the external material relied upon in the
Declaration is
appropriate for the purpose of providing
explanatory and
background information for the Court.
3) Compliance
with the Local Rules
The PTO’s
third argument is that the Manbeck
Declaration is
an extension of GSK’s brief and an attempt to
circumvent the
Local Rules page requirement, rather than a truly
separate
exhibit. Local Rule 7(F)(3). It is not inappropriate
for a party to
include exhibits or declarations in addition to
its briefs, and
the PTO itself included exhibits that explain the
implications of
the Final Rules. See, e.g., Decl. of Andrew
Faile, Ex. 4 to Defs.’ Opp. to Pls.’ Mot. for a TRO and
Prelim.
Inj. As
discussed above, GSK includes the Manbeck Declaration in
order to assist
the Court in resolving a case that involves
complex patent
issues. Although the Declaration includes some
legal
conclusions, there are no significant arguments contained
in the
Declaration that are not also found in the brief itself.
The Manbeck
Declaration is an exhibit, not a continuation of
GSK’s brief,
and in no way violates the Local Rules of the Court.
For the
foregoing reasons, the Court will deny the
PTO’s Motion
to Strike the Manbeck Declaration, but will not
consider those
parts of the Exhibit which contain impermissible
legal
arguments.
19
C. GSK’s Motion for a TRO and Preliminary Injunction
In carefully
weighing the factors of the Federal
Circuit’s
balancing test, for the reasons stated below, the Court
will grant
GSK’s Motion for a Preliminary Injunction.
1) Likelihood
of Success on the Merits
GSK first
argues that they will succeed on the merits
because the PTO
lacks the authority to promulgate substantive
rules and
therefore the PTO’s interpretation of the Patent Act is
not owed Chevron deference. See Adams Fruit Co. v. Barrett, 494
(1984). More
specifically, GSK argues that, because Congress did
not grant the
PTO the authority to construe provisions of the
Patent Act
except in certain, limited instances, Chevron
deference to
the PTO’s interpretations of law in this area is
inappropriate.
Instead, under Adams Fruit, the PTO is
entitled
no deference. Adams Fruit, 494
Section 2(b)(2)
of Title 35 empowers the PTO to
“establish
regulations, not inconsistent with law,” for several
enumerated
purposes, the most relevant of which include
regulations to
“govern the conduct of proceedings in the Office,”
35 U.S.C. §§
2(b)(2)(A), and to “facilitate and expedite the
processing of
patent applications.” 35 U.S.C. § 2(b)(2)(C). The
PTO thus has
the power to “set reasonable deadlines and
requirements
for the prosecution of applications.” In re
20
Borgese,
303 F.3d 1362, 1368 (Fed. Cir. 2002). Section 2(b)(2)
does not,
however, vest the PTO with any general substantive
rulemaking
power. Merck
& Co. v. Kessler, 80 F.3d 1543, 1550
(Fed. Cir.
1996). This conclusion is further evidenced by the
fact that,
since 2005, Congress has debated and considered
whether it
should grant the PTO substantive rulemaking authority.
See Manbeck
Decl., Ex. E to Mem. in Support of Pls.’ Mot. for a
TRO and Prelim.
Inj. at ¶ 11; H.R. 1908, 110th Cong., §
14(a)(2007).
The PTO
contends that the Final Rules fall within the
scope of their
Section 2(b)(2) authority because they “govern the
conduct of
proceedings in the Office” and “do not affect the
truly
substantive rights of the patent applicant.” Defs.’ Opp’n
to Pls.’ Mot.
at 22. Specifically, the PTO asserts that the
Final Rules do
not affect the substantive eligibility
requirements
for obtaining a patent.
101, 102, and
103. They further assert that even if the
procedures
created by the Final Rules sometimes affect
substantive
outcomes, that does not place the Final Rules outside
of the PTO’s
rulemaking authority. Defs.’ Opp’n to Pls.’ Mot. at
22.
In In re Van Ornum, cited by the PTO, the Federal
Circuit’s
predecessor court upheld a PTO rule that required a
particular
disclaimer from applicants seeking more than one
21
patent on an
invention. 686 F.2d 937, 945 (CCPA 1982). The
Court found
that the rule was “substantive in that it relates to
a condition
under which a patent will be granted,” but noted that
“[m]uch of
the content of the PTO rules is ‘substantive’ in this
respect.” In re Van Ornum, 686 F.2d 937, 945 (CCPA 1982). As
GSK rightly
notes, however, the Court in In re Van Ornum also
held that the
regulation at issue comported with statutory and
case law.
this Court
disagrees with GSK’s additional contention that the
Final Rules are
inconsistent with the Patent Act. As the Court
will explain,
GSK raises serious concerns as to whether the Final
Rules comport
with the Patent Act. In addition, the Court also
believes that
GSK has created a colorable question as to whether
the Final Rules
are truly substantive. Thus, the Court will find
that there is a
genuine possibility that GSK will succeed on this
issue.
GSK’s second
claim, alluded to by the Court above, is
that Final
Rules 78, 114, 75, and 265 exceed the plain language
of Title 35. As
to Final Rule 78, which limits the number of
continuing
applications, GSK contends that Section 120 of Title
35 prohibits
the PTO from limiting the number of continuing
applications
that may be filed. Section 120 states that laterfiled
applications
“shall have the same effect” as pending
previously-filed
applications, thus allowing the former to take
22
the priority
date of the latter. 35 U.S.C. § 120. In In re
Henriksen, the Federal Circuit’s predecessor court found that
under Section
120 “there is no statutory basis for fixing an
arbitrary limit
to the number of prior applications through which
a chain of
copendency may be traced to obtain the benefit of the
filing date of
the earliest of a chain of copending
applications.”
399 F.2d 253, 254 (CCPA 1968). While Final Rule
78 does not
present an absolute bar on more than two continuing
applications,
GSK asserts that the “could not have” evidentiary
burden of the
petition and showing is a “de facto limit” on
further
continuing applications because the PTO will deny a
petition in
“almost all circumstances.” Mem. in Support of Pls.’
Mot. for a TRO
and Prelim. Inj. at 19; Ex. A to Pls.’ Mem. at
46769-77.
Moreover, while
In re
Bogese found that Henriksen did
not suggest
that “the PTO must allow dilatory tactics in the
prosecution of
applications or that the PTO lacks inherent power
to prohibit
unreasonable delay in prosecution,” 303 F.3d at 1368
n.6, In re Borgese rested on the doctrine of prosecution laches,
which permits
the denial of an application where the applicant
delays too long
in filing a continuing application.
69; see also Symbol Techs.,
Inc. v. Lemelson Med., Educ. &
Research Found., 277 F.3d 1361, 1365-66 (Fed. Cir. 2002)(“Symbol
II”)(finding
that Section 120 did not abrogate the doctrine of
A bill
considered, but not passed, by Congress in 2005 3
suggests a
similar conclusion. See H.R.
2795, 109th Cong., § 123
(June 8,
2005)(“The Director may by regulation limit the
circumstances
under which an application for patent, other than a
divisional
application that meets the requirements for filing
under section
121, may be entitled to the benefit under section
120 of the
filing date of a prior-filed application . . . .”).
23
prosecution
laches). GSK argues that, while the doctrine of
prosecution
laches still applies, Section 120 as interpreted in
Henriksen prevents the PTO from crafting its own limitations to
the number of
continuation applications that may be filed. This
sentiment is
supported by Symbol Techs., Inc. v. Lemelson Med.,
Educ. & Research Found., 422 F.3d 1378 (Fed. Cir. 2005)(“Symbol
IV”),
where the Federal Circuit held that the doctrine of
prosecution
laches “should be used sparingly lest statutory
provisions be
unjustifiabaly vitiated.”
holding
suggests that a decision by the PTO to limit the number
of continuing
applications would run contrary to the mandate of
Section 120.3
The PTO
responds that Final Rule 78 is within its
authority under
Section 2(b)(2), is not an absolute bar to filing
a third
continuing application, and that the PTO will review
petitions for a
third application “on a case-by-case basis.”
Defs.’
Opp’n to Pls.’ Mot. at 26 n.20; Ex. 2 to Defs.’ Opp’n at
46770-76.
Nevertheless, the Court believes that, on balance, the
law on this
question tips in favor of GSK, and thus the Court
24
will find that
GSK has demonstrated a likelihood of success on
this issue.
GSK further
argues that 35 U.S.C. § 132 prohibits the
promulgation of
Final Rule 114, which governs RCEs. Section
132(b) requires
that the PTO “prescribe regulations to provide
for the
continued examination of applications for patent at the
request of the
applicant.” 35 U.S.C. § 132(b). While GSK reads
this language
and finds that Congress did not grant the PTO the
authority to
restrict the number of RCEs that may be filed, the
PTO argues that
Final Rule 114 complies with Section 132 even
though it
requires that a petition and showing accompany the
filing of a
second RCE. Given the limited briefing of this issue
by both
parties, the Court will find that, for the purposes of
this motion,
neither party can claim a strong likelihood of
success on this
issue.
GSK makes a
similar claim with respect to Final Rules
75 and 265,
which limit the number of claims an applicant may
file. Section
111 and 112, the relevant statutory provisions,
are similar to
Sections 120 and 132 in that they do not specify
whether the PTO
has the authority to place a limit on the number
of claims an
applicant may file. 35 U.S.C. §§ 111 and 112. The
PTO argues that
it is entitled to Chevron deference on this issue
because of the
ambiguity of Section 2(b)(2). GSK, however, has
raised serious
questions as to whether the PTO is entitled to
25
Chevron deference in this case. Nevertheles, given the limited
briefing of
this issue by both parties, the Court will find that,
for the
purposes of this motion, neither party can claim a strong
likelihood of
success on this issue.
The PTO
justifies each of these rule changes on the
grounds of
administrative efficiency. GSK challenges this
rationale as
arbitrary and capricious because “it has not been
adequately
explained, ignores less-drastic and less-damaging
alternatives to
restricting abusive continuation applications,
and is not
supported by the PTO’s statistics on the number of
third or
subsequent continuation applications.” Mem. in Support
of Pls.’ Mot.
for a TRO and Prelim. Inj. at 23. Judicial review
of agency
rulemaking under 5 U.S.C. § 706(2)(A) is guided by
Motor Vehicle Mfrs. Ass’n of the
Auto. Ins. Co., 463
court “is not
to substitute its judgment for that of the agency,”
it must still
“consider whether the decision was based on a
consideration
of the relevant factors and whether there has been
a clear error
of judgment.”
The PTO states
that 2.7% of applications filed in 2006
would have
required a petition and showing under Final Rules 78
and 114,
amounting to approximately 11,000 continuation
applications
and RCEs. See Ex. 1 to Defs.’ Mem. in Opp’n to
Pls.’ Mot. at
A05022, A05646. The PTO explained in the final
26
Federal
Register notice that, under the old system of unlimited
continuation
applications, applicants were engaging in unfocused
practices that
impeded the PTO’s ability to effectively examine
applications.
Ex. 2 to Defs.’ Opp’n to Pls.’ Mot. at 46720. The
PTO expected
that limiting continuation applications and RCEs
would lead to
more focused prosecution and enable the PTO to
apply its
resources to new applications. See id. at 46716-20.
Similarly,
limiting the number of claims in each application
under Final
Rules 75 and 265 would accomplish the same goal. See
id. at
46721. Furthermore, the Federal Register reflects that
the PTO
considered weaker alternatives but concluded that those
measures would
be inadequate to achieve the PTO’s goals. See id.
at 46816-23,
46824-26, 46833-34. Though the Final Rules would
reduce the
PTO’s backlog by only 2.7% and, by their own
admission, are
insufficient to reduce the backlog to a reasonable
level, PTO
models show that they will have an impact on the
backlog. See Ex. 1 to Defs.’ Opp’n to Pls.’ Mot. at A05645.
Thus, the
PTO’s rationale appears to be sufficient to satisfy
arbitrary and
capricious review, and the Court will find that GSK
has not shown a
real likelihood of success on this issue.
GSK also takes
issue with the alleged retroactive
application of
the Final Rules. According to GSK, the Final
Rules apply
retroactively because they “apply legal consequences
to past events
completed before the effective date [of November
27
1, 2007] where
none attached before.” Mem. in Support of Pls.’
Mot. for a TRO
and Prelim. Inj. at 24. Because retroactivity is
not favored in
the law, “a statutory grant of legislative
rulemaking
authority will not, as a general matter, be understood
to encompass
the power to promulgate retroactive rules unless
that power is
conveyed by Congress in express terms.” Bowen v.
Congress did
not expressly grant the PTO those powers. See 35
U.S.C. §
2(b)(2).
However, the
United States Supreme Court has found that
a regulation is
retroactive only if it “would impair rights a
party possessed
when he acted, increase a party’s liability for
past conduct,
or impose new duties with respect to transactions
already
completed.” Landgraf v. USI Film Prods., 511
280 (1994). The
PTO, citing Landgraf, argues that
the Final
Rules are not
retroactive because the filing of an initial
application
does not create any “rights” or amount to
“transactions
already completed.” Defs.’ Opp’n to Pls.’ Mot. at
33 (citations
omitted). The PTO cites a number of cases
dictating that
patent applications do not give rise to property
rights that
create retroactivity concerns under Landgraf. See
Marsh v. Nicols, Shepher & Co, 128
the patent is
issued, there is no property right in it; that is,
no such right
as the inventor can enforce.”); Brenner v. Ebert,
28
398 F.2d 762,
764 (D.C. Cir. 1968)(“We have considerable doubt
whether
appellees’ allowed but unissued patent is ‘property’ as
that term is
used in the fifth amendment.”); Mullins Mfg. Co. v.
Booth,
125 F.2d 660, 664 (6th Cir. 1942)(“The right of [the
Defendant] to
his invention while his application is pending is
an inchoate
right, which matures as property when the patent
issues.”); De Ferranti v. Lyndmark, 30 App. D.C. 417, at *5
(1908)(“[I]n
a patent no vested right of which the applicant
cannot be
deprived is acquired under the preliminary proceedings
leading up to
its issuance.”).
Landgraf, however, does not limit “the presumption
against
statutory retroactivity to cases involving ‘vested
rights.’” Landgraf, 511
argue that it
has rights in pending patents. Instead, GSK
contends that
the Final Rules “impose new duties” that did not
exist under the
old rules. Pls.’ Reply Mem. at 17. The
requirement of
filing a petition and showing to justify more than
two continuing
applications or a second RCE and the requirement
of filing an
ESD under Final Rules 75 and 265 qualify as
impositions of
new duties with respect to already-completed
transactions
– here, the initial applications.
In addition, as
GSK noted at oral argument, by seeking
patent
protection inventors like GSK sacrifice their trade
secrets, and
the United State Supreme Court has found that trade
29
secrets are
property rights. See Rucklehaus v. Monsanto Co., 467
voluntarily
surrendered its property rights in exchange for a
guarantee from
the PTO that it will have a “full and fair
opportunity to
seek a spectrum of patent protection adequate to
protect [its]
investments.” Brief for Amicus Curiae AIPLA at 3.
While “an
individual [that] discloses his trade secret to others
who are under
no obligation to protect the confidentiality of the
information, or
otherwise publicly discloses the secret,” loses
that property
right, Rucklehaus, 467
Rules
retroactively alter the bargain on which inventors like GSK
rely in making
their decision to surrender their rights. The
Final Rules
thus impair GSK’s right to this bargain.
Furthermore,
while procedural rules often do not raise
retroactivity
concerns when applied to pending applications, see
Landsgraf, 511
to whether the
Final Rules even qualify as procedural. Given all
of these
factors, the Court will find that GSK has demonstrated a
real likelihood
of success on the issue.
Finally, GSK
claims that Final Rule 265, which
delineates the
requirements of an ESD, is unconstitutionally
vague because
it fails to provide “any boundaries on the scope of
the search.”
Mem. in Support of Pls.’ Mot. for a TRO and Prelim.
Inj. at 26.
Specifically, GSK complains that the “rule does not
30
indicate
whether the applicant must conduct electronic searches,
manual
searches, or both; in which countries’ databases the
applicant must
search; or which libraries it must search.”
at 27.
According to GSK, the ESD requirement forces applicants
to “search
the patent literature of the entire world, as well as
unspecified yet
relevant ‘non patent literature.’” Pls.’ Reply
Mem. at 18-19.
The PTO
responds that, under Marsh,
GSK does not have a
vested property
right in its patent application and therefore
cannot bring a
constitutional vagueness challenge. Defs.’ Opp’n
to Pls.’ Mot.
at 35. Regardless, the PTO also contends that the
ESD
requirements are sufficiently clear for applicants to be able
to comply. The
D.C. Circuit has found that to satisfy due
process
requirements, regulations “must be sufficiently specific
. . . that a
reasonably prudent person, familiar with the
conditions the
regulations are meant to address and the
objectives the
regulations are meant to achieve, would have fair
warning of what
the regulations require.” Freeman United Coal
Mining Co. v. Fed. Mine Safety & Health Rev. Comm’n, 108 F.3d
358, 362 (D.C.
Cir. 1997).
In the final
Federal Register notice, the PTO explained
that “[t]he
standard for the preexamination search . . . is the
same standard
that the [PTO] uses to examine patent applications,
which is set
forth in MPEP §§ 904-904.03,” and that following the
31
MPEP §§
904-904.03 standard “should be sufficient” to meet the
ESD
requirements. Ex. 2 to Defs.’ Opp’n to Pls.’ Mot. at 46800.
The PTO has
also published further guidance documents to assist
applicants in
meeting these requirements. See Ex.
4 to Defs.’
Opp’n to
Pls.’ Mot. at Ex. A “Guidelines for Examination Support
Document (“ESD”)
under 37 CFR 1.265." In response, GSK notes
that the need
for official guidance suggests an admission of
vagueness.
Moreover, any guidance documents generated by the PTO
outside of the
notice and comment rulemaking process violate the
Administrative
Procedure Act. See Appalachian Power Co. v.
E.P.A.,
208 F.3d 1015, 1028 (D.C. Cir. 2000). Thus, because the
Court believes
that GSK has raised serious concerns as to whether
a reasonably
prudent person would be able to comply with the ESD
requirements,
the Court will find that GSK has demonstrated a
real likelihood
of success on this issue.
Based 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 to GSK if injunction is not granted
If the Final
Rules go into effect on November 1, GSK
claims that
they will experience significant irreparable harm.
GSK has about
two thousand pending applications, the rights of
which would be
changed under the new rules. In particular, GSK’s
ability to file
continuing applications for those patent
32
applications is
truncated, and they will be unable to file the
further claims
they expected regarding applications for
inventions that
were developed based on the current rules.
Because of the
new limitations on continuing applications, the
inventions
included in pending applications will receive less
protection
under the law if the new rules are enacted than under
the rules in
place at the times the applications were filed. The
harm will begin
to accrue as soon as the Final Rules go into
effect because
GSK will have to begin making strategic decisions
regarding their
pending applications and the choices they make
will
permanently affect their rights under patent law, whether or
not the Final
Rules are eventually invalidated. In addition, GSK
claims it will
suffer from great uncertainty about how to comply
with the Final
Rules, and incur significant cost in creating the
required
examination support documentation.
GSK further
argues that, if the Final Rules are not
preliminarily
enjoined and the Court later deems them invalid,
GSK will lose a
substantial amount of investment capital because
it will be too
late to save patent rights covering medical
inventions that
cannot proceed to market without strong
protection. As
such, potentially helpful drugs will be lost to
both GSK and
the public. Pharmaceutical companies like GSK give
up trade secret
rights regarding an invention when they choose to
submit a patent
application. Under the current rules, the
33
expectation is
that the government will afford them strong,
reliable patent
protection in return for loss of trade secret
rights. When
the Final Rules go into effect, inventors lose some
of the patent
protection on pending applications they had come to
rely upon under
the current system. GSK would be unable to sue
to reinstate
lost patent protection or obtain monetary
compensation if
the Final Rules are vacated. The Fourth Circuit
has found
irreparable harm sufficient to warrant an injunction in
cases where
monetary damages are inadequate, particularly in the
case of
government action later found to be unlawful. See, e.g.,
Rum Creek Coal Sales, Inc. v. Caperton, 926 F.2d 353, 361 (4th
Cir. 1991); see also Bowe Bell &
Howell Co. v. Harris, 145 Fed.
Appx. 401, 404
(4th Cir. 2005) (upholding the finding of
irreparable
harm when “violations . . . could not be compensated
by money
damages alone”).
The PTO cites
several cases holding that the costs of
complying with
government regulation are not usually the kinds of
irreparable
harm contemplated by the legal test for a preliminary
injunction.
However, courts have not entirely excluded these
costs from the
calculation; instead, they have found that such
costs are not alone sufficient to constitute irreparable harm
under ordinary
circumstances. See, e.g., A. O. Smith Corp. v.
FTC,
530 F.2d 515, 527 (3d Cir. 1976)(“[a]ny time a corporation
complies with a
government regulation that requires corporation
34
action, it
spends money and loses profits; yet it could hardly be
contended that
proof of such an injury, alone,
would satisfy the
requisite for a
preliminary injunction”)(emphasis added);
1980)(“injury
resulting from attempted compliance with government
regulation ordinarily is not irreparable harm”)(emphasis added).
The mere cost
of implementing otherwise reasonable regulations is
not in itself
irreparable harm. However, a “[plaintiff] should
not be forced
into the position of choosing to either violate an
allegedly
invalid ordinance and suffer the inherent consequences
of doing so or
comply with the same and suffer a loss with little
hope of
recovery.” Synagro-Wwt,
Inc. v.
Dist. LEXIS
10987 (W.D. Va. 2001).
The PTO argues
that GSK does not identify a specific
patent
application they intend to file immediately upon the
implementation
of the Final Rules, which the PTO offers as
evidence that
GSK will not experience certain harm. The PTO also
explains the
steps GSK might be able to take under the Final
Rules which
could prevent the loss of patent protection for at
least one
patent family. The mere necessity to make decisions or
adjust patent
prosecution strategy is not specific harm requiring
a preliminary
injunction. The PTO characterize the harms
outlined by GSK
as speculative and not immediate, emphasizing
that GSK cannot
definitely delineate certain, concrete financial
35
harm beyond the
costs of implementing the regulations.
Although GSK
cannot pinpoint an exact amount of
monetary loss,
the uncertainty caused by the regulations will
cause harm to
their investments and provide a disincentive to
their filing of
new patent applications for researching new
pharmaceutical
products. In addition, there is still some
question as to
whether following the complicated steps outlined
by the PTO will
indeed guard against lost patent protection.
Finally, GSK
will be unable to recover their losses if the Final
Rules are
ultimately determined to be invalid. Therefore, the
Court finds
that GSK is likely to suffer irreparable harm if the
preliminary
injunction is not granted.
3) The balance
of hardships between the parties
The PTO claims
that the balance of hardships tilts in
their favor
because they will have to endure the hardship caused
by forcing a
large organization in the midst of instituting a
massive change
to stop and reverse course. The PTO has spent
millions of
dollars training their staff and retooling their
computer
systems to prepare for the implementation of the Final
Rules, changes
that cannot be easily undone or simply placed on
hold. If
subjected to a preliminary injunction, they will be
forced to use
sub-standard systems, exposing themselves to the
possibility of
costly computer problems. In addition, they will
continue to
encounter the problems of inefficiencies and the
36
increased
likelihood of error that the Final Rules were
promulgated to
fix, exacerbated by the confusion among patent
filers and the
likely increase in erroneous filings. They will
also have to
pay the costs of retraining their employees to
institute the
Final Rules if they go into effect on a future
date.
GSK
characterizes the PTO’s harm as primarily sunk
costs already
incurred by training personnel and changing the
computer
systems to implement rules the organization knew might
not go into
effect. Any costs incurred by a delay in
implementing
the Final Rules would thus be merely the cost of
maintaining the
status quo. Additionally, GSK downplays the
PTO’s
expectation that the Final Rules would provide a
significant
gain in efficiency or a reduction in backlog. GSK
argues that
they, by contrast, will begin to experience the
irreparable
harms discussed above as soon as the rules go into
effect, and do
not have any avenues at all for maintaining any
version of the
status quo when it comes to certainty about their
patent
protection. They will instantly suffer from uncertainty
regarding the
protection afforded their patents and their
corresponding
investment risk, in addition to the costs of
attempting to
comply with the Final Rules. Thus, the Court finds
that, although
the hardship to the PTO is not nonexistent, the
uncertainty and
loss of investment suffered immediately by GSK
37
tilts the
balance of the hardships in their favor.
4) The public
interest
The PTO argues
that the public interest is most
benefitted by
the Final Rules going into effect immediately. The
PTO claims that
the rules promote efficiency and timeliness and
are needed
immediately to alleviate the harm entrepreneurs suffer
because of the
current system’s uncertainty. In addition, patent
applicants who
are preparing to comply with the Final Rules will
face
uncertainty as to how to proceed with patent prosecution and
as to which
rules will govern their application during the period
of an
injunction.
GSK asserts
that preserving the status quo while the
litigation
proceeds is important for maintaining stability for
patent holders.
Innovation is encouraged when patent holders and
applicants have
certainty about how their patents will be
treated. The
fact that three amicus briefs were filed by
organizations
representing a wide array of industries, all urging
the Court to
grant the preliminary injunction because their
interests will
otherwise be harmed, further demonstrates the
possibility of
potential immediate harm to the public if the
rules are
allowed to go into effect on November 1. Many
companies rely
upon the stable, reliable protection afforded by
the current
patent system in determining whether it is costeffective
to abandon
their trade secret protection by pursuing a
38
patent.
Implementation of the Final Rules changes those
companies’
calculus and immediately decreases their ability to
pursue costly
new innovations.
Allowing the
implementation of rules that may or may
not remain in
effect is likely to cause much greater uncertainty
and squelching
of innovation than a preliminary injunction giving
the Court time
to consider the validity of the Final Rules before
they go into
affect. Accordingly, the Court will find that the
public interest
is most served by continuing the status quo and
granting the
TRO.
Therefore,
after considering the likelihood of GSK’s
success on the
merits, the possibility of irreparable harm to GSK
if the
injunction is not granted, the balance of hardships
between the
parties, and the public interest, the Court finds
that GSK’s
Motion should be granted.
IV. Conclusion
For the reasons
stated above, the Court will: (1) grant
GSK’s Motion
for a Preliminary Injunction; (2) deny the PTO’s
Motion to
Strike Exhibit E of the Memorandum in Support of GSK’s
Motion; (3)
grant the Motion of Amicus Curiae AIPLA for Leave fo
File its Brief
in Support of GSK’s Motion; (4) grant HEXAS, The
Roskamp
Institute, and Tikvah’s Joint Motion in Support of Motion
for Leave to
File Amici
Curiae Brief in Support of GSK’s Motion;
and (5) grant
the Motion of Amicus Curiae Elan
Pharmaceutical
39
Corp. for Leave
to File its Brief in Support of GSK’s Motion.
An appropriate
Order will issue.
October 31,
2007 _______________/s/________________
UNITED STATES
DISTRICT COURT JUDGE