Recent Developments in Japan and Europe Regarding Continuation Practice and Late Claiming

Although the PTO asserts that its controversial new continuation rules are motivated primarily by a need for improved Office efficiency, it has also acknowledged on multiple occasions that one of the “goals” of the new rules is to substantially restrict the ability of applicants to file continuations for the purpose of “late claiming.” By “late claiming,” I refer to the practice of filing new claims directed to previously unclaimed subject matter, particularly in an application claiming the priority benefit of an earlier filed application. Late claiming is particularly prevalent in the biotechnology and pharmaceutical industries, and has been facilitated in the past by the U.S.’s relatively liberal continuation rules. But critics argue that the practice has been subject to abuse. For example, it is alleged that some patent applicants wait for third parties to introduce new products on the market, and then file late claims specifically targeting those products. Late claiming that occurs years after the initial filing is also thought to provide inadequate notice to third parties, who might assume that previously disclosed but unclaimed subject matter has been dedicated to the public. The PTO appears to have sided with these critics, and characterizes the use of continuation practice to facilitate late claiming as improper and abusive of the system.

On the other hand, the patent bar and many users of the patent system argue that late claiming is legitimate and can promote innovation. As an example, they point to the substantial time lag between the initial discovery of a family of drug candidates and the eventual development of a demonstrably safe and effective therapeutic product, along with the huge cost and uncertainty inherent to the endeavor. Absent the ability to plant an early “stake in the sand,” and then file new claims over the ensuing years as the ultimate commercial product evolves, they argue that it would be difficult to justify the huge capital investment required to support drug development. Far from being a reason to limit continuation practice, opponents of the PTO’s new rules point to late claiming as a compelling justification for maintaining the traditional continuation practice.

It is interesting to note that Japan and Europe have both recently addressed essentially the same issue, and in both cases decided on the side of liberal continuation rules and late claiming. In Japan, a 2005 report sponsored by the Intellectual Property Policy Committee of the Industrial Structure Council tackled the question of whether Japan might benefit from loosening its rules on divisional filings in order to allow applicants a greater opportunity to late claim (See http://www.iip.or.jp/e/summary/pdf/detail2004/e16_01.pdf). The report acknowledged the potential for inadequate notice to third parties, but decided that this concern was outweighed by the incentive to innovation that would occur if Japan were to follow the lead of the U.S. and Europe and liberalize divisional practice to permit an expanded opportunity for late claiming. Shortly after the report came out, Japan amended its law to permit the filing of divisional applications within 30 days from notice of allowance or decision of refusal. Prior to the change, applicants were only allowed to file divisional applications at certain times prior to notice of allowance, or within 30 days after filing a notice of appeal against a final rejection. The new law went into effect April 1, 2007, and applies to applications having an effective filing date on or after that date (See http://www.soei.com/english/wnew07_03_01.html and http://www.soei.com/english/wnew06_07_20.html).

The European Patent Office (EPO) has traditionally allowed applicants to file a chain of divisional patent applications for the purpose of late claiming, but the legality of this practice was recently called into question by certain decisions of EPO Technical Boards of Appeal. The issue was ultimately brought to the EPO’s Enlarged Board of Appeals (EBA), essentially the European equivalent of the en banc Federal Circuit. On June 28, 2007, the EBA issued a decision (G 0001/05) holding that under the European Patent Convention applicants are permitted to late claim, and to file of a series of divisional applications to maintain the pendency of a priority application for the purpose of late claiming, thus effectively maintaining the status quo in Europe.

In reaching its decision, the EBA considered amicus briefs filed in support of both sides that essentially echoed the current debate in the U.S., i.e., notice to third parties vs. incentives to innovation. The European patent bar, not surprisingly, weighed in on the side of late claiming and more liberal divisional rules. Interestingly, the President of the EPO also submitted comments in support of the traditional practice, in contrast with the situation in the U.S., where the PTO and patent bar have taken opposing sides in the debate. The EBA’s decision acknowledges substantial public policy concerns with allowing an applicant to maintain the pendency of a sequence of divisional applications for up to 20 years and to file new claims at anytime during that period, but concluded that if any reform is deemed necessary it must come from the legislature.

Perhaps the U.S. could learn from the experiences of Japan and Europe. While late claiming does raise public policy concerns, particularly with respect to notice to third parties, it also plays a critical role in incentivizing innovation in important industries such as biotechnology and pharma. These competing effects need to be balanced. The rule changes would have a substantial impact on the rights of patent applicants, and the PTO should acknowledge this rather than seeking to make substantive policy under the guise of procedural rulemaking. Perhaps it would be beneficial to impose some sort of restriction on late claiming, but if so we should be up front about it and consider reforms that address the issue directly, rather than through arbitrary restrictions on continuation filings. Moreover, substantive changes to patent law of this nature should emanate from Congress rather than the PTO, at least until Congress decides to confer substantive rulemaking authority on the Office.