Pharma Gets Sympathetic Ear From Appeals Court In Patent Rule Challenge

A three-judge panel of the Federal Circuit U.S. Court of Appeals appeared to side with the pharmaceutical industry in its battle with the Patent and Trademark Office over rules to limit certain patent filings.

During Dec. 5 oral arguments in Tafas v. Dudas, the judges posed the most-pointed questions to U.S. PTO General Counsel James Toupin. One judge, Randall Rader, went further, hypothesizing that the PTO rules could harm drug companies.

At issue are patent rules the PTO issued in August 2007 that would limit the number of "continuation applications" an inventor can submit beyond an original patent filing.

Continuation applications amend claims or provide additional evidence of an invention's patentability while retaining the benefit of the original application's earlier filing date. Right now, patent holders can file an unlimited number of continuation applications.

Under the revised rules - which were challenged in separate lawsuits by GlaxoSmithKline and inventor Triantafyllos Tafas - if an applicant files more than two continuation or continuation-in-part applications, that applicant must submit a document explaining why the information could not have been included in a previous filing.

The Dec. 5 hearing follows two lower-court rulings in favor of GSK and Tafas. Last November, a federal judge issued a preliminary injunction prohibiting the PTO from implementing the rules (¹ , p. 28). In April, the judge declared the rules null and void (² (Also see "Court Nullifies PTO Rules To Limit Patent Filings" - Pink Sheet, 1 Apr, 2008.)).

Significant Implications For Drug And Biotech

The case has implications for pharma. Most drug and biotech patent holders need to file multiple continuations to fully cover an invention. The PTO rules would make that process more onerous and, industry argues, potentially could prevent a patent holder from fully covering a product.

Indeed, the case is being followed closely by the drug industry. The Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization filed amicus briefs in support of Tafas.

On the other side, a dozen law professors, led by Mark Lemley of Stanford Law School and Arti Rai of Duke Law School, submitted a brief in support of the PTO. Rai is on President-elect Barack Obama's transition team for the Department of Commerce.

Rule Will "Cripple" Pharmaceutical Industry

The central legal question in the case is whether the new rules should be considered substantive, (and therefore a change in existing law that PTO is not authorized to make) or procedural, in which case the agency should be granted deference.

GSK's attorney John Desmarais, of Kirkland & Ellis, argued during the appeals court hearing that, if implemented, the PTO rule would have dire consequences for patent holders of drug and biotechnology patents.

"You will cripple the pharmaceutical industry with these rules," Desmarais declared. If you limit the number of continuations a company can file, "they're not going to be able to patent" new products, he said.

The court asked Toupin, the PTO general counsel, if the agency had considered the impact the rules would have on the pharmaceutical industry. Toupin responded that yes, PTO had, and as a result changed its original proposal, which would have allowed only one continuation or request for continued examination without additional documentation, instead of two continuations.

Toupin argued that PTO's rules do not impose a limit on the number of claims, but only require an applicant to provide additional information if claims exceed a certain number.

Judge Rader rejected that argument. "Wouldn't you be crazy to use that [examination support document] procedure and subject yourself to inequitable conduct if you make a slightly wrong comma in the wrong place?" he asked.

Rader then pressed the point, questioning whether Toupin would advise a pharmaceutical company to use this procedure routinely when the company is going to need continuations to cover its real inventions.

"You're going to need more claims because you're not only claiming the species but the various formulations and the administration methods," Rader said.

"And you're going to say 'well, it's okay, we can go beyond ... the continuation limit because we can clarify it all with [examination support documents].' That's the advice you're going to give your client?"

"I bet you're not going to be hired by very many pharmaceutical companies," he added, evoking laughter from the audience. "I think you just sent yourself to the electronics industry."

Congress Should Fix Filing Backlog, GSK Says

In issuing the rules, PTO said the rules would help reduce the amount of time patent examiners spend on continuation applications and allow them to focus on new applications, thus reducing the backlog of filings.

Rader noted that the agency is falling behind by at least 100,000 applications each year and asked Desmarais if something should be done to address that backlog.

Desmarais argued that PTO has no authority to change the law and that it is up to Congress to find ways to reduce the backlog. Congress, he noted, has debated whether to give the patent office substantive rulemaking authority in patent reform legislation introduced in the past several years.

"It's not for the PTO to say 'we're tired of waiting for Congress' and come in and grab the law themselves and start to change it," Desmarais said.

Judge Sharon Prost told Toupin that the PTO had "put a gloss over what the rules are" in its brief to the court by suggesting that they do not provide a hard limit on continuation applications when, in fact, they appear to do so.

Toupin replied that the agency had given a number of examples in which it would grant a continuation petition, such as when there is an unexpected rejection by the examiner in the last office action that could not have been anticipated.

Prost responded that the examples do not remove a hard limit but rather define what the exceptions are.

- Brenda Sandburg ([email protected])