IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Alexandria Division

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 Limitedfs (gGSKh)

Motion for a Temporary Restraining Order (gTROh) and Preliminary

Injunction; (2) Defendants Jon W. Dudas and United States Patent

and Trademark Officefs (gPTOh) Motion to Strike Exhibit E of the

Memorandum in Support of GSKfs Motion; (3) the Motion of Amicus

Curiae American Intellectual Property Law Association (gAIPLAh)

 

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for Leave fo File its Brief in Support of GSKfs Motion; (4)

HEXAS, LLC (gHexash), The Roskamp Institute, and Tikvah

Therapeutics, Inc.fs (gTikvahh) Joint Motion in Support of Motion

for Leave to File Amici Curiae Brief in Support of GSKfs Motion;

and (5) the Motion of Amicus Curiae Elan Pharmaceutical Corp. for

Leave to File its Brief in Support of GSKfs Motion. For the

reasons stated below, the Court will grant GSKfs motion, deny the

PTOfs 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 PTOfs 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

gparenth or ginitialh application. A parent application contains

two primary parts: a gspecification,h which describes the

 

3

 

invention and how to make and use it, and one or more gclaims,h

which identify the scope of the legal protection that the

invention should receive, and come in either gindependenth or

gdependenth forms. Once the application is filed, a patent

examiner determines whether the claimed invention meets the

statutory requirements found in Title 35 of the United State

Code. If it is rejected, the examiner will issue an gOffice

Actionh 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

grequest for continued examinationh (gRCEh) of the application;

(3) file a gcontinuationh or gcontinuation-in-parth application;

or (4) file an after final gamendment.h 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 gpriority dateh).

In situations where an applicant claims more than one

independent invention in the initial application, the examiner

may impose a grestriction requirementh that forces an applicant

 

4

 

to separate their multiple independent inventions into

gdivisionalh 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 January 3, 2006 , the PTO proposed changes to its

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 PTOfs 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

August 21, 2007 , the PTO published the Final Rules, titled

gChanges to Practice for Continued Examination Filings, Patent

Applications Containing Patentably Indistinct Claims, and

Examination of Claims in Patent Applications.h 72 Fed. Reg.

46716-46843 ( Aug. 21, 2007 )(to be codified at 37 C.F.R. pt. 1).

The Final Rules are set to take effect on November 1, 2007 .

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,

 

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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 gpetition and showingh 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 examinerfs 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 gexamination support documenth (gESDh) 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

gContinuation,h gcontinuation-in-part,h and gdivisionalh 1

applications are all commonly referred to as gcontinuing

applications.h

 

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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 ggenush), it would typically file

an initial application containing a broad disclosure that

includes numerous structurally-related compounds (a gspeciesh).

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

 

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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

GSKfs 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 gthe issue pertains to or is unique to

patent law,h the Federal Circuit has applied its own law to both

substantive and procedural issues gintimately involved in the

substance of enforcement of the patent right.h 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 gdominant effect to

Federal Circuit precedent insofar as it reflects considerations

specific to patent issuesh). To the extent that GSKfs 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 Courtfs decision to

grant or deny a preliminary injunction are: g(1) the likelihood

of [the plaintifffs] 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.h Abbott Labs.

v. Andrx Pharms., Inc., 473 F.3d 1196, 1200-01 (Fed. Cir. 2007)

(citations omitted).2 gThese 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.h 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 York , 162 F.R.D. 34, 36 (M.D. Pa. 1995).

Such non-party participants have gbeen 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.h Bryant v. Better Business

Bureau, 923 F. Supp. 720, 727 (D. Md. 1996)(internal citations

omitted); see also Northern Sec. Co. v. United States , 191 U.S.

555, 556 (1903). However, g[a] motion for leave to file an

amicus curiae brief . . . should not be granted unless the court

edeems the proffered information timely and useful.fh 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 Courtfs rulings in Daubert v. Merrell Dow

Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v.

Carmichael, 526 U.S. 137 (1999). It provides as follows:

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 courtfs decision with respect to

the admissibility of expert scientific testimony gis always a

flexible one, and the courtfs conclusions necessarily amount to

an exercise of broad discretion guided by the overarching

criteria of relevance and reliability.h 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 Courtfs statement in Kumho Tire that trial judges

gmust have considerable leeway in deciding in a particular case

how to go about determining whether particular expert testimony

 

11

 

is reliableh) (quoting Kumho Tire, 526 U.S. at 152); United

States v. Barnette, 211 F.3d 803, 816 (4th Cir. 2000)(noting the

Fourth Circuitfs consistent practice of giving ggreat deferenceh

to a trial Courtfs 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 GSKfs 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 PTOfs

motion first before turning to GSKfs 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 gthe motion is untimely as the hearing has

been completed and the preliminary injunction motion has been

submitted for decisionh); O Centro Espirita Beneficente Uniao do

 

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Vegetal v. Ashcroft, 282 F. Supp. 2d 1271, 1274 (D.N.M. 2002)

(denying a motion to enter as an amicus after parties had

gprepared numerous briefs . . . over a period of more than a

year, . . . [and] presented evidence and arguments at a lengthy

hearingh). Rather than frequently turning down amicus briefs on

timeliness grounds, courts have accepted them as timely even when

filed gon the eve of summary judgment motions.h 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 AIPLAfs proposed amicus brief

on the grounds that it improperly contains new arguments not

contained within GSKfs 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 g[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 issuesh). 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 g[a]n

 

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amicus . . . is not a party to the litigation and participates

only to assist the court[, n]evertheless, eby the nature of

things an amicus is not normally impartialf . . . and ethere is

no rule . . . that amici must be totally disinterested.fh Waste

Mgmt., Inc. v. City of York , 162 F.R.D. 34, 36 (D. Pa. 1995)

(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 GSKfs

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

 

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injunction is appropriate in this case. The Federal Circuit,

which regularly hears questions of patent law, ghas 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.h 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 gjudge can even advert

to the testimony of patent law experts -- that is, patent lawyers

-- for advice on the interpretation of claims.h 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 greveal 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

patenth). 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 lawyerfs expert report upon

 

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allegations that it gconsist[ed] solely of legal conclusions

disguised as expert testimony.h Chamberlain Group, Inc. v.

Interlogix, Inc., 2002 WL 653893, *1 (N.D.Ill.,2002). The Court

reasoned that excluding the entire report would be gan

extraordinary measureh and chastised the moving party for

gfail[ing] to identify specific portions of [the expertfs] report

that it contends should be stricken.h Id. The report at issue

gprovide[d] an explanation of the prosecution history of the

patents at issue, and the operation of the Patent and Trademark

Office,h thus helping the Court to understand the patent issues

in the case. Id.

Similarly, the PTO does not delineate particular

portions of Manbeckfs 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 Chamberlain Court that striking

the entire report would be extraordinary, particularly given

Manbeckfs 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.

 

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2) Augmentation of administrative record

The PTO alleges that the Manbeck Declaration

gimpermissibly introduces into the administrative record . . .

material that was not before the USPTO when it enacted the Final

Rules.h Mem. in Supp. of Defs.f Mot. to Strike Ex. E at 6.

Generally, gjudicial review of agency action pursuant to the APA

is confined to the agency's administrative record.h American

Canoe Ass'n v. United States EPA, 46 F. Supp. 2d 473, 475 (E.D.

Va. 1999)(citing Camp v. Pitts, 411 U.S. 138, 142, (1973)). The

Manbeck Declaration does contain analysis that goes beyond mere

explanation of the administrative record. However, g[e]ven in

APA record review cases, circumstances may justify expanding the

record or permitting discovery,h including gsuch 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.h Id. at 477

(internal citations omitted); see also Public Power Council v.

Johnson, 674 F.2d 791, 793-94 (9th Cir. 1982) (holding that

gthere may be circumstances to justify expanding the record or

permitting discovery,h including gascertaining whether the agency

considered all the relevant factors or fully explicated its

course of conduct or grounds for decision,h situations gwhen it

 

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appears the agency has relied on documents or materials not

included in the record,h and other circumstances as gnecessary to

permit explanation or clarification of technical terms or subject

matter involved in the agency action under reviewh as gbackground

informationh). 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 gwhen a case is so complex that a court needs more

evidence to enable it to understand the issues clearlyh and gin

cases where relief is at issue, especially at the preliminary

injunction stage,h among others. Id. at 991.

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

 

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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 PTOfs third argument is that the Manbeck

Declaration is an extension of GSKfs 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.f Opp. to Pls.f 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

GSKfs brief, and in no way violates the Local Rules of the Court.

For the foregoing reasons, the Court will deny the

PTOfs Motion to Strike the Manbeck Declaration, but will not

consider those parts of the Exhibit which contain impermissible

legal arguments.

 

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C. GSKfs Motion for a TRO and Preliminary Injunction

In carefully weighing the factors of the Federal

Circuitfs balancing test, for the reasons stated below, the Court

will grant GSKfs 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 PTOfs interpretation of the Patent Act is

not owed Chevron deference. See Adams Fruit Co. v. Barrett, 494

U.S. 638 (1990); Chevron U.S.A. , Inc. v. NRDC, 467 U.S. 837

(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 PTOfs interpretations of law in this area is

inappropriate. Instead, under Adams Fruit, the PTO is entitled

no deference. Adams Fruit, 494 U.S. at 649-50.

Section 2(b)(2) of Title 35 empowers the PTO to

gestablish regulations, not inconsistent with law,h for several

enumerated purposes, the most relevant of which include

regulations to ggovern the conduct of proceedings in the Office,h

35 U.S.C. ˜˜ 2(b)(2)(A), and to gfacilitate and expedite the

processing of patent applications.h 35 U.S.C. ˜ 2(b)(2)(C). The

PTO thus has the power to gset reasonable deadlines and

requirements for the prosecution of applications.h In re

 

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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.f 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 ggovern the

conduct of proceedings in the Officeh and gdo not affect the

truly substantive rights of the patent applicant.h Defs.f Oppfn

to Pls.f Mot. at 22. Specifically, the PTO asserts that the

Final Rules do not affect the substantive eligibility

requirements for obtaining a patent. Id. ; see also 35 U.S.C. ˜˜

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 PTOfs rulemaking authority. Defs.f Oppfn to Pls.f Mot. at

 

22.

 

In In re Van Ornum, cited by the PTO, the Federal

Circuitfs 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 gsubstantive in that it relates to

a condition under which a patent will be granted,h but noted that

g[m]uch of the content of the PTO rules is esubstantivef in this

respect.h 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. Id. That case, then, is helpful to the PTO only if

this Court disagrees with GSKfs 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.

GSKfs 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 gshall have the same effecth as pending

previously-filed applications, thus allowing the former to take

 

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the priority date of the latter. 35 U.S.C. ˜ 120. In In re

Henriksen, the Federal Circuitfs predecessor court found that

under Section 120 gthere 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.h 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 gcould not haveh evidentiary

burden of the petition and showing is a gde facto limith on

further continuing applications because the PTO will deny a

petition in galmost all circumstances.h Mem. in Support of Pls.f

Mot. for a TRO and Prelim. Inj. at 19; Ex. A to Pls.f Mem. at

46769-77.

Moreover, while In re Bogese found that Henriksen did

not suggest that gthe PTO must allow dilatory tactics in the

prosecution of applications or that the PTO lacks inherent power

to prohibit unreasonable delay in prosecution,h 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. Id. at 1368-

69; see also Symbol Techs., Inc. v. Lemelson Med., Educ. &

Research Found., 277 F.3d 1361, 1365-66 (Fed. Cir. 2002)(gSymbol

IIh)(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)(gThe 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 . . . .h).

 

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)(gSymbol

IVh), where the Federal Circuit held that the doctrine of

prosecution laches gshould be used sparingly lest statutory

provisions be unjustifiabaly vitiated.h Id. at 1385. This

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 gon a case-by-case basis.h

Defs.f Oppfn to Pls.f Mot. at 26 n.20; Ex. 2 to Defs.f Oppfn 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 gprescribe regulations to provide

for the continued examination of applications for patent at the

request of the applicant.h 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 git has not been

adequately explained, ignores less-drastic and less-damaging

alternatives to restricting abusive continuation applications,

and is not supported by the PTOfs statistics on the number of

third or subsequent continuation applications.h Mem. in Support

of Pls.f 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. Assfn of the U.S. , Inc. v. State Farm Mutual

Auto. Ins. Co., 463 U.S. 29 (1983). Under this standard, while a

court gis not to substitute its judgment for that of the agency,h

it must still gconsider whether the decision was based on a

consideration of the relevant factors and whether there has been

a clear error of judgment.h Id. at 43.

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.f Mem. in Oppfn to

Pls.f 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 PTOfs ability to effectively examine

applications. Ex. 2 to Defs.f Oppfn to Pls.f 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 PTOfs goals. See id.

at 46816-23, 46824-26, 46833-34. Though the Final Rules would

reduce the PTOfs 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.f Oppfn to Pls.f Mot. at A05645.

Thus, the PTOfs 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 gapply legal consequences

to past events completed before the effective date [of November

 

27

 

1, 2007] where none attached before.h Mem. in Support of Pls.f

Mot. for a TRO and Prelim. Inj. at 24. Because retroactivity is

not favored in the law, ga 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.h Bowen v.

Georgetown University Hospital , 488 U.S. 204, 208 (1988).

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 gwould impair rights a

party possessed when he acted, increase a partyfs liability for

past conduct, or impose new duties with respect to transactions

already completed.h Landgraf v. USI Film Prods., 511 U.S. 244,

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 grightsh or amount to

gtransactions already completed.h Defs.f Oppfn to Pls.f 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 U.S. 605, 612 (1888)(gUntil

the patent is issued, there is no property right in it; that is,

no such right as the inventor can enforce.h); Brenner v. Ebert,

 

28

 

398 F.2d 762, 764 (D.C. Cir. 1968)(gWe have considerable doubt

whether appelleesf allowed but unissued patent is epropertyf as

that term is used in the fifth amendment.h); Mullins Mfg. Co. v.

Booth, 125 F.2d 660, 664 (6th Cir. 1942)(gThe right of [the

Defendant] to his invention while his application is pending is

an inchoate right, which matures as property when the patent

issues.h); De Ferranti v. Lyndmark, 30 App. D.C. 417, at *5

(1908)(g[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.h).

Landgraf, however, does not limit gthe presumption

against statutory retroactivity to cases involving evested

rights.fh Landgraf, 511 U.S. at 275 n.29. Moreover, GSK does not

argue that it has rights in pending patents. Instead, GSK

contends that the Final Rules gimpose new dutiesh that did not

exist under the old rules. Pls.f 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

U.S. 986, 1002 (1984); 35 U.S.C. ˜ 122(b)(1). GSK, then, has

voluntarily surrendered its property rights in exchange for a

guarantee from the PTO that it will have a gfull and fair

opportunity to seek a spectrum of patent protection adequate to

protect [its] investments.h Brief for Amicus Curiae AIPLA at 3.

While gan 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,h loses

that property right, Rucklehaus, 467 U.S. at 1002, the Final

Rules retroactively alter the bargain on which inventors like GSK

rely in making their decision to surrender their rights. The

Final Rules thus impair GSKfs right to this bargain.

Furthermore, while procedural rules often do not raise

retroactivity concerns when applied to pending applications, see

Landsgraf, 511 U.S. at 275, there remains a serious question as

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 gany boundaries on the scope of

the search.h Mem. in Support of Pls.f Mot. for a TRO and Prelim.

Inj. at 26. Specifically, GSK complains that the grule does not

 

30

 

indicate whether the applicant must conduct electronic searches,

manual searches, or both; in which countriesf databases the

applicant must search; or which libraries it must search.h Id.

at 27. According to GSK, the ESD requirement forces applicants

to gsearch the patent literature of the entire world, as well as

unspecified yet relevant enon patent literature.fh Pls.f 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.f Oppfn

to Pls.f 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 gmust 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.h Freeman United Coal

Mining Co. v. Fed. Mine Safety & Health Rev. Commfn, 108 F.3d

358, 362 (D.C. Cir. 1997).

In the final Federal Register notice, the PTO explained

that g[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,h and that following the

 

31

 

MPEP ˜˜ 904-904.03 standard gshould be sufficienth to meet the

ESD requirements. Ex. 2 to Defs.f Oppfn to Pls.f Mot. at 46800.

The PTO has also published further guidance documents to assist

applicants in meeting these requirements. See Ex. 4 to Defs.f

Oppfn to Pls.f Mot. at Ex. A gGuidelines for Examination Support

Document (gESDh) 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, GSKfs

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 gviolations . . . could not be compensated

by money damages aloneh).

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)(g[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 injunctionh)(emphasis added);

American Hospital Assoc. v. Harris, 625 F.2d 1328, 1331 (7th Cir.

1980)(ginjury resulting from attempted compliance with government

regulation ordinarily is not irreparable harmh)(emphasis added).

The mere cost of implementing otherwise reasonable regulations is

not in itself irreparable harm. However, a g[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.h Synagro-Wwt, Inc. v. Louisa County , 2001 U.S.

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 PTOfs 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

PTOfs 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 systemfs 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

companiesf 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 GSKfs

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 GSKfs Motion should be granted.

 

IV. Conclusion

For the reasons stated above, the Court will: (1) grant

GSKfs Motion for a Preliminary Injunction; (2) deny the PTOfs

Motion to Strike Exhibit E of the Memorandum in Support of GSKfs

Motion; (3) grant the Motion of Amicus Curiae AIPLA for Leave fo

File its Brief in Support of GSKfs Motion; (4) grant HEXAS, The

Roskamp Institute, and Tikvahfs Joint Motion in Support of Motion

for Leave to File Amici Curiae Brief in Support of GSKfs Motion;

and (5) grant the Motion of Amicus Curiae Elan Pharmaceutical

 

39

 

Corp. for Leave to File its Brief in Support of GSKfs Motion.

An appropriate Order will issue.

October 31, 2007 _______________/s/________________

Alexandria , Virginia James C. Cacheris

UNITED STATES DISTRICT COURT JUDGE