Busy Board bounces appeal of statutory rejections when provisional rejection matures during appeal

[Today's guest post is from Robert K S, who is a patent attorney from Cleveland, Ohio.]

Takeaway: At the time applicants filed their notice of appeal, fewer than all the pending claims had nonprovisional obviousness rejections associated with them, but all the pending claims were provisionally rejected under non-statutory obviousness-type double patenting over applications that had not yet matured into patents.  Applicants appealed only the nonprovisional § 103 rejections  A provisional rejection was made nonprovisional in the Examiner's Answer, an application underlying the rejection having matured into a patent after the filing of the notice of appeal.  Citing the need to timely consider other appeals on it's docket, the Board disposed of the appeal by affirming the non-appealed, nonstatutory rejections, without considering the § 103 rejections that had been appealed.  (Ex parte Palmer, No. 2014-002277 (P.T.A.B. Mar. 10, 2016).)

Details:

Ex parte Palmer
Appeal 2014-002277; Appl. No. 11/429,850; Tech. Center 1700
Decided: March 10, 2016

In a final Office action issued December 18, 2012, the application was provisionally rejected on grounds of nonstatutory obviousness-type double patenting, based on then-unissued co-pending applications. Some of the pending claims were also rejected on statutory obviousness grounds under § 103. In an after-final response filed February 18, 2013, the applicants averred that they would "address the need to file one or more terminal disclaimers to overcome the aforementioned obviousness-type double patenting rejections" "[u]pon indication of allowable subject matter". The applicants appealed on March 12, 2013, and their appeal brief, filed May 8, 2013, addressed only the § 103 rejections.

Unfortunately for the applicants, one of the co-pending applications that was basis for a provisional nonstatutory obviousness-type double-patenting rejection matured to patent on April 13, 2013, while the applicants were busy writing their appeal brief.  The applicants failed or declined to address the provisional rejection-made nonprovisional in the October 11, 2013 Examiner's Answer-in either the appeal brief or a reply brief. Deeming the applicants' February 2013 vow to "address" the then-provisional rejections upon maturation insufficient as a promise to file a terminal disclaimer, the Board opined that "the time to present arguments on the merits-and therefore resolve the question of whether a terminal disclaimer is needed-was in the Appeal Brief in this appeal". The Board therefore affirmed the application's rejection without reaching the § 103 rejections that had been the only basis of the appeal.

The Board made its decision with the understanding that, post-appeal, it will not suffice for the applicants to file a terminal disclaimer to be granted allowance.  Prosecution closed with the appealed § 103 rejections left unreviewed, and these standing rejections will impede the application's advance toward issuance. The decision also cost the applicants their appeals fees, which they will have to pay a second time if they want to have the § 103 rejections reviewed. The Board noted that the applicants could still keep their patent rights alive with an RCE or continuation, but that may be cold comfort. The applicants will suffer years of delay on their path to issuance, and the decision potentially robs the applicants of valuable PTA days (depending on whether a terminal disclaimer is ultimately filed).

The panel in this case was not shy about disclosing the reason for its declining to consider the appealed issues: the Board is too busy to be bothered.[1] "In managing the ex parte appeal docket, we are not only concerned with this appeal, but other appeals on the Board's ex parte appeal docket.  Affirmance of the double patenting rejection disposes of the appeal.  Under the circumstances, and in deference to a need to timely consider other appeals, we exercise discretion to not reach the remaining rejections." Apparently acknowledging that the decision could be perceived as mean-spirited, the opinion deflects blame by stating that any hardship suffered as a result was "self- imposed" by the applicants.

My take:

This decision might serve as a lesson to applicants and their counsel not to ignore provisional rejections, and to read carefully the Examiner's Answer on appeal to check for changed conditions affecting rejections. It also raises questions as to what obligations applicants have to address rejections that are, at least at first, only provisional in nature, and at what points in the proceedings such obligations arise.

The reasons to side against the applicants are many. First, they attempted to "hold in abeyance" the provisional rejections, rather than addressing them immediately. See 37 C.F.R. § 1.111(b). Then, the applicants missed or ignored the issuance of the double-patenting reference application in the month leading up to the filing of their appeal brief, and missed or ignored the examiner's notification of the rejection having become nonprovisional in the answer brief. Finally, the applicants failed to file a reply brief addressing the nonprovisional rejections and showing good cause for doing so (per 37 C.F.R. § 41.41).

On the other hand, applicants generally have neither the obligation nor the incentive to file a terminal disclaimer-and pay the accompanying fee-to overcome rejections that are only provisional in nature. If a co-pending reference application ultimately fails to issue, or issues only with claims upon which an obviousness-type double patenting rejection would not be well founded, any terminal disclaimer fee paid will have been wasted, and the value of the patent portfolio may be needlessly diminished by the term-limiting and enforcement-coupling effects of the disclaimer. How could it be just for the USPTO to require applicants to submit traversal arguments or a signed terminal disclaimer, each expensive in its own way, before the ripening of the issue? [2]
 
From this perspective, Applicants' counsel can scarcely be faulted for (in effect) asking the PTO to hold the provisional rejections in abeyance, especially when, at the time it was made in February 2013, the request was in accordance with PTO policy, policy that did not change until October 2015, when MPEP § 804(I)(B)(1) was amended to instruct that a filing of either a terminal disclaimer or a showing of patentable distinction over the reference application's claims "should not be held in abeyance" once a provisional double patenting rejection has been issued (for the dubious reason that one or the other filing "is necessary for further consideration of the rejection of the claims").[3]

If an applicant has no obligation to counter a provisional rejection until the applicant receives notice that it has been made nonprovisional, then the applicants in this case were not obligated to traverse or otherwise overcome the nonstatutory rejections here until the Examiner's Answer-by which point it was likely too late to do anything about it.[4] From this perspective, it is not clear that the applicants in this case did anything blameworthy. The decision twice intimates that merely committing to filing a terminal disclaimer would have been as good as actually filing a terminal disclaimer to obviate the double patenting rejection and have the § 103 rejections reviewed. But, despite this decision, is not clear why mere committal would have been effective to obviate the rejections, or how it could have prevented the Board from taking the same action it did in this case.

The decision raises the issue of whether the Board has the prerogative to affirm on uncontested grounds, or even if it does not, whether it ever should, even in the interest of expedient disposal. The decision cites to 37 C.F.R. § 41.37(c)(l)(iv), but the rule does not require an appellant to show examiner error in uncontested grounds of rejection. As a matter both of equity and properly incentivized appellate administration, an appellant who pays to appeal certain grounds should generally have the benefit of review of those grounds unless the review would be unusually burdensome. Otherwise, the Board could become incentivized to dispose of appeals cheaply as a means of generating appeals fees revenue.[5]

Finally, the decision raises the issue as to whether, as a practical matter, the strategy taken by the Board is more likely to reduce the examination and appeal backlogs or increase them. Having gotten no answer on the issues they brought to the Board, the dissatisfied applicants are likely only to get right back in line for another appeal decision. What was a three-year appeal pendency in the Board's statistics effectively became a six-year pendency.

Was the Board's punt in this case efficient docket management, or obnoxious parsimony? Pipe up in the comments.

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[1]. The Board is presently dealing with an appeal backlog of about 20,000 cases.

[2]. For some creative, but losing, arguments against obviousness-type double patenting tried by applicants who couldn't or wouldn't file a terminal disclaimer, see Karen's earlier blog post on the subject.

[3]. The policy might be challenged as arbitrary or capricious, since overcoming provisional rejections can hardly be said to be "necessary" for consideration of any outstanding nonprovisional rejections, since Rule 111(b)'s reference to "rejections" is probably best interpreted to mean nonprovisional rejections, and since the courts have held that provisional rejections exist to benefit, rather than harm, the applicant with early notice, In re Wetterau, 356 F.2d 556, 558 n.2 (C.C.P.A. 1966), and, at least in some circumstances, cannot be made final, In re Mott, 539 F.2d 1291, 1295-96 (C.C.P.A. 1976) ("Once the provisional rejection has been made, there is nothing the examiner and the applicant must do until the other application issues. We see no undue burden here.").

[4]. Would notice of a nonprovisional rejection in an Examiner's Answer be a "new ground of rejection" under 37 C.F.R. § 41.39(a)(2) that would entitle an applicant to reopen prosecution under 37 C.F.R. 41.39(b) (see MPEP § 1207.03)? The case law teaches that the ultimate criterion of whether a rejection is considered "new" is whether the applicant has had a fair opportunity to react to the thrust of the rejection. In re Kronig, 539 F.2d 1300, 1302 (C.C.P.A. 1976). The particular situation where, by dint of a patent grant, a provisional rejection matures into a nonprovisional rejection is not listed among the "factual situations that do not constitute a new ground of rejection" in MPEP § 1207.03(a), but this likely means only that the courts have not considered the question.  This issue may have been waived in the present case because of the applicants' failure to petition the examiner's decision not to designate the nonprovisionality of the rejection as a "new ground" in the Examiner's Answer (see 37 C.F.R. § 41.40(a)).

[5]. Although appeals fees collected in 2015 were almost $77 million, they were still 16% below what was anticipated in the budget.See page 159 of the USPTO Fiscal Year 2017 Congressional Justification.)