David Kappos, recently appointed Under Secretary of Commerce for Intellectual Property, signed a final rule yesterday to rescind contentious regulations enacted by the USPTO under the Bush administration.

At the time the regulations were published, the USPTO justified them as a measure to address the bottleneck of patent applications languishing at their office. However, these regulations, in fact, limited the number of continuing patent applications and claims that could be included in a patent application.

Under these regulations, patent applicants would be limited to only two new continuing applications and one request for continued examination. Additionally, each patent application would be limited to 25 claims, with no more than 5 of them independent, which constrains innovation by forcing parameters onto discovery.

Prior to passage of the litigious rules, applicants had unlimited continuing applications, claims and requests for continued examinations. The USPTO's aim may have been to improve efficiency, but it completely superseded the historical precedents that are the foundation for the protection of intellectual property. Consequently, there has been a tremendous backlash to the new rules, particularly by the biotech and pharmaceutical industries. These industries rely heavily on the ability to protect their intellectual property and felt that the new rules would hinder innovation and the ability to patent their technologies.

"By the PTO's own numbers, biotech relies to a greater extent than other industries on so-called continuing patent applications and a variety of patent claims, all of which would have been constrained by the proposed rules," Hans Sauer, associate general counsel for intellectual property for the Biotechnology Industry Organization (Bio), told GenomeWeb Daily News yesterday. Sauer continued, "Accordingly, biotech always felt particularly impacted by these rules."

Although the controversial regulations were published in the Federal Register in August 2007, they never came into effect. Independent inventor Triantafyllos Tafas, founder of the medical imaging firm Ikonisys, filed suit against the USPTO shortly after the publication, asserting that the USPTO was overstepping its authority.

Then in October 2007, Glaxo SmithKline (GSK) also filed a complaint against the USPTO contesting the published rules, alleging that this would damage their interests because they had scores of patents either in continuation or pending. What's more, amicus briefs in support of GSK's complaint poured in from organizations such as BIO, the Pharmaceutical and Research Manufacturers of America and the American Intellectual Property Law Association.

The Federal Court consolidated the GSK and Tafas suits and then ruled in their favor. A preliminary injunction was issued in October 2007 and a permanent injunction in April of the following year.

The USPTO struck back with an appeal to the Federal Circuit where a panel reversed the lower court. The finding was that the new rules were procedural in nature, consistent with patent law and within the USPTO's rulemaking authority, however the panel was divided on their verdict.

The controversy over the appeal was so great that the Federal Circuit Court vacated the panel's ruling and agreed to hear the matter en banc. This would have resulted in a hearing before the entire body of judges of the Federal Circuit Court of Appeals, but yesterday, Obama appointee Kappos exercised his discretion as Director of the USPTO and signed off on a rescindment of the controversial rules. Under his direction, the USPTO worked with GSK to discharge the case and vacate the federal court ruling.

GSK's senior vice president and chief intellectual patent counsel Sherry Knowles said yesterday, "We applaud the [PTO] for its leadership in deciding to withdraw these rules, which we believe would have harmed innovation across all industries, and specifically would have deprived GSK and other manufacturers of the patent protection necessary to promote medical research and innovation."

Although this move seems conciliatory, the issue may yet resurface. This week, the Obama administration, represented by Kappos and Secretary of Commerce Gary Locke, reaffirmed its support of the patent "reform" bill currently before Congress. As part of this message, several recommendations for improvement of the patent system were made. One of the suggestions was to grant the USPTO "substantive rulemaking authority" that would provide Kappos the "flexibility in the administration of patent rules and procedures."

On behalf of the Biotechnology Industry Organization, Sauer stated that the inclusion of the recommendations may be seen as an olive branch to the patent-holding community to encourage open discussion on how to improve efficiency at the USPTO. Sauer said, "I think they do want substantive rule-making authority, but not at the price ... of [winning] that authority with bare-knuckles litigation."

While the USPTO is no doubt riddled with inefficiencies and unnecessary barriers to patent issuance, current patent "reform" proposals seem to be directed at the symptoms and not the disease. The federal government continues to invest in university research, but the flawed system of intellectual property ownership, management and protection hinders meaningful translation from breakthrough to bedside. With so many stakeholders in the arena of intellectual property, President Obama's peer-to-policy agenda could induce dialogue among these diverse interests to develop meaningful solutions to these crucial concerns.

As the conflict over patent "reform" continues in the court room, the board room and the back rooms of Congress, IP Advocate will stay abreast of the critical issues and controversies that impact our community.

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