On Wednesday, on October 31, 2007, the United States District Court for the Eastern District of Virginia (Judge James Cacheris), following a last minute hearing that day, issued a decision temporarily enjoining the United States Patent and Trademark Office (USPTO or PTO) from implementing new rules that were to become effective just a few short hours later (Not only would the rule changes have been applied the next day, they would have been retroactively applied to many already-filed applications). For the time being the former rules will remain in effect.

The new rules, among other things, would effectively limit both the number of claims filed in each patent application and the number of ‘continuation' applications that may stem from any original patent application (click here to view the pdf, or visit the following website: http://www.uspto.gov/web/offices/com/sol/notices/72fr46716.pdf).

In his Order (see Memorandum Opinion, 10/31/2007) granting GlaxoSmithKline's (GSK) Motion for TRO and Preliminary Injunction,[1] Judge Cacheris temporarily barred enforcement of the new USPTO rules "giving the Court time to consider the validity of the Final Rules before they go into [e]ffect."

The Court considered four factors when determining whether to bar implementation of the new rules: (1) likelihood of success on the merits, (2) irreparable harm if the rules go into effect as scheduled, (3) the balance of hardships between the parties, and (4) the public interest. The Court found that each of the four factors weighed in GSK's favor.

Specifically, the Court found that GSK had shown a likelihood of success on four of the seven[2] issues raised by GSK, finding that:

1. Because the PTO only has authority to make procedural rule changes, not substantive changes to the patent law (which Congress must make), "GSK raises serious concerns as to whether the Final Rules comport with the Patent Act" and "there remains a serious question as to whether the Final Rules even qualify as procedural."
2. Federal Circuit law "suggests that a decision by the PTO to limit the number of continuing applications would run contrary" to the current patent statute permitting any number of continuing applications so long as the continuing application "is filed by an inventor ... named in the previously filed application [and] filed before the patenting or abandonment of or termination of proceedings on the first application." Because there "is no statutory basis for fixing an arbitrary limit" of continuing applications, the Court found that "GSK has demonstrated a likelihood of success on this issue."
3. "the Final Rules retroactively alter the bargain on which inventors like GSK rely in making their decision to surrender their rights." The Court specifically noted that although patent applications themselves do not constitute vested rights, inventors voluntarily sacrifice their trade secret rights in exchange for seeking a patent. "The Final Rules thus impair GSK's right to this bargain" and "GSK has demonstrated a real likelihood of success on the issue."
4. "GSK has raised serious concerns as to whether a reasonably prudent person would be able to comply with the ESD (examination support document) requirements," indicating that the new ESD is impermissibly vague and potentially in violation of the Administrative Procedure Act, and finding "that GSK has demonstrated a real likelihood of success on this issue."

The Court also found that "GSK is likely to suffer irreparable harm if the preliminary injunction is not granted" for several reasons, including:

1. "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."
2. "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.'"
3. "the uncertainty caused by the regulations will cause harm to [GSK's] investments and provide a disincentive to their filing of new patent applications for researching new pharmaceutical products."
4. "there is still some question as to whether following the complicated steps outlined by the PTO will indeed guard against lost patent protection [and] GSK will be unable to recover their losses if the Final Rules are ultimately determined to be invalid."

Further, the Court determined that "although the hardship to the PTO is not nonexistent, the uncertainty and loss of investment suffered immediately by GSK tilts the balance of the hardships in their favor." And finally, that "that the public interest is most served by continuing the status quo and granting the TRO," specifically finding that:

Allowing 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 in [e]ffect.

In this case, the preliminary injunction order is immediately appealable to the Federal Circuit, which could only review the injunction for abuse of discretion (a standard of review that favors GSK in upholding the preliminary injunction). The USPTO could also proceed in filing a motion for summary judgment, forcing the Court to finally decide the issue, and appeal that judgment if the Court ultimately ruled in GSK's favor. However, it is unlikely the Court would reach a decision on the summary judgment motion before sometime in February.

[1] In the case of Tafas v. Dudas before Judge Cacheris, several plaintiffs joined GlaxoSmithKline in attempting to block the new rules. Other parties included the American Intellectual Property Law Association (AIPLA); IBM; Élan; Hexas, LLC; the Roskamp Institute; Tikvah Therapeutics; SanDisk; and Senator Charles Schumer (D, NY), each filing briefs or declarations supporting blocking the new rules.

[2] Glaxo challenges to the new rules included: (1) the USPTO did not have authority to enact the new rules because they are substantive rule changes; (2) the new rules on continuations are inconsistent with § 120, (3) the new rules on Requests for Continuing Examination are inconsistent with § 132, (4) the restrictions on number of claims are inconsistent with §§ 111-112, (5) the rules are arbitrary and capricious, (6) retroactively applying the rules to previously-filed patent application is not permissible, and (7) the examination support document (ESD) requirement is impermissibly vague.