"Suffice it to say here that the courts have the final say on unpatentability of claims, not the PTO. "

Belkin v Kappos concerned prior art in a re-examination.

The issue

Belkin argues that the Board has jurisdiction to consider on reconsideration prior art found not to raise a substantial new question of patentability on inter partes reexamination when reexamination is subsequently granted for the same claim on another reference. Belkin views reexamination as a two-step procedure: (1) determining whether a substantial new question of patentabil- ity exists; and (2) if so, determining whether the claims are patentable over all prior art. Belkin concedes that the first step is not appealable under § 312(c). But Belkin contends that once a substantial new question of pat- entability affecting a claim is found, all prior art must be considered, including prior art found previously not to raise a substantial new question of patentability.

The CAFC in part noted:

Belkin argues that 37 C.F.R. § 1.104 supports its interpretation because that regulation requires the examiner to make a “thorough investigation of the available prior art” during reexamination. Regulation 1.104 does not benefit Belkin, as the “available prior art” cited by the regulation is only that which the Director has indicated constitutes a substantial new question of patentability. Thus, the fact that § 1.104 states that the examiner shall make a thorough investigation of available prior art does not affect the analysis. In any event, in order to reconcile what may otherwise appear to be conflicting provisions, we hold that, under the statute, available prior art may only be considered to answer the specific questions of patentability found by the Director.2

The CAFC set up a hierarchy:

Statutes rank higher than regulations, which rank higher than the MPEP.

AND

Suffice it to say here that the courts have the final say on unpatentability of claims, not the PTO.