Last Updated Mar 20, 2009 7:39 PM EDT
The conflict stems from a set of rules that the USPTO tried to put into effect in 2007. These would have limited patent applications to five unique claims and 25 total claims per invention, versus the historic lack of limit. Among other things, they would also have restricted the number of requests to reconsider a decision to reject a patent application as well as the number of continuations, or chances to effectively amend a patent application already in process. (Additional continuations would have been theoretically possible, but only with special permission and filing of additional paperwork that experts say could open the patents, if granted, to additional avenues of attack from competitors.)
When the rules were initially passed by the USPTO, there was strong backlash from much of the patent community and several parties sued the office to have the decision changed. Tech companies were split on their response. In favor of most or all of the new rules were a number of heavy weights, including:Texas Instruments and Eastman Kodak, opposed the rules.
The professed argument for the rules was generally that they would help improve patent quality and aid the USPTO in cutting "unnecessary work" and reducing the enormous backlog of applications it has been facing. Critics of the rules claimed that those in favor were not in the industries like biotech and pharmaceuticals that tended to need larger numbers of patent claims and an iterative process to keep protection in sync with their developing understanding of new compounds and organisms.
An additional criticism was that the rules would favor large established companies with existing patent portfolios and hamper smaller firms that are often sources of disruptive technologies and business models.
"The allowance rate [for patent applications] is at an historic low," says Robert Greene Sterne of boutique IP law firm Sterne, Kessler, Goldstein & Fox. "It's down 20 percent from its historic [average] level. Everywhere I go, both internally and with my clients, everyone is talking about how much harder it is to get claims allowed and patents issued. The question I keep asking everyone is this: Has innovation gone down in the United States in the last five years? Most people will tell you they don't think so. It used to be that the default in the Patent Office was to allow the case. Now the default is to deny the case. In fact, people jokingly say that they should change their name to the Patent Rejection Office."
The court's decision there centered on the type of authority that the USPTO has. The District Court had that that the USPTO did not have so-called substantive rule-making authority but does have procedural rule-making authority. That means the agency has broad power to implement law, but not to set fundamental policy. It went on to say that all four rules exceeded the authority of the USPTO.
However, the CAFC took a significantly different stand. Although the three-judge agreed that the USPTO only had procedural authority, it contradicted the lower court and said that all four rules were procedural and that the Office had the authority to make them. It further said that Rule 78, which limited continuations, was in conflict with U.S. patent law and was not valid. The other rules -- 75, 114, and 265 -- were not in conflict with existing law, but the court remanded the matter to the District Court to decide whether the USPTO followed the proper procedures with the three. If the court found nothing wrong iwth the process, then those three rules, including the restriction on how many times a company could ask an examiner to reconsider a patent application (a common actions for companies). In short, because organizations tended to either support or oppose all of the rules, virtually no one will be completely happy with the results.
But this is unlikely to be the end of the matter at the CAFC level. An en banc hearing with all of the 12 CAFC judges in attendance is likely, says Sterne, "given the importance of the rules, big public interest, current economic situation, and [need for] job creation."
"I think probably seven of the judges will say this is too important a case to be decided by a 2 to 1 decision," he says. "Whether they're going to reverse the present decision is another question."
Gavel image via Flickr user Thomas Roche, CC 2.0.