USPTO’s proposed new rule for terminal disclaimer practice

The Unites States Patent and Trademark Office (USPTO) published a Notice of Proposed Rulemaking on May 10, 2024 that could have a significant impact on the enforceability of future patents in which terminal disclaimers are filed. USPTO, Terminal Disclaimer Practice To Obviate Nonstatutory Double Patenting, 89 Fed. Reg. 40439. The proposed rule would require that any terminal disclaimer filed to overcome nonstatutory double patenting must include an agreement that the subject patent would be enforceable only if the reference patent is not tied – and has never been tied directly or indirectly – to a patent by one or more terminal disclaimers in which any claim has been finally held unpatentable or invalid over the prior art.

The proposed rule is a significant departure from current USPTO practice and would substantially increase the burden on patent applicants as well as introduce significant uncertainty into the value of patent portfolios.

Current USPTO practice

Under current USPTO practice, patent applications claiming an obvious variant of the subject matter claimed in a reference patent or patent application may be rejected under the doctrine of obviousness-type double patenting (nonstatutory double patenting). The rationale for the doctrine of nonstatutory double patenting is to prevent the unfair extension of patent exclusivity beyond the term of a first patent through issuance of further patents directed to obvious variants of the invention(s) claimed in the first patent.

Obviousness-type double patenting rejections are proper only where (i) the subject application shares with the reference patent or patent application the same inventive entity, at least one common inventor, or a common applicant or assignee or (ii) the subject application and reference patent or patent application are owned by two parties who are subject to a joint research agreement. MPEP § 804.

Terminal disclaimers are regularly used in the course of prosecution to overcome obviousness-type double patenting rejections by providing that the subject application will expire no later than the reference patent, thereby disclaiming any patent term that would otherwise have been available for the subject application thereafter. MPEP § 1490; 37 CFR § 1.321. The filing of a terminal disclaimer does not currently constitute an admission of unpatentability between the claims of a subject patent and the claims in a reference patent over which the terminal disclaimer was filed. See 35 U.S.C. § 282(a); see also 89 Fed. Reg. at 40411 (listing cases).

USPTO’s proposed rule change

The USPTO’s proposed rule is intended to promote competition by lowering the cost of challenging groups of patents tied by terminal disclaimers, resulting in reduced barriers to market entry and lower costs for consumers.

Under the USPTO’s proposed rule, terminal disclaimers would include a specific agreement that the subject patent for which the terminal disclaimer was filed would not be enforceable if it is tied, or had ever been tied, directly or indirectly to another patent that has any claim invalidated or canceled based on prior art. According to the proposed rule, terminal disclaimers would be unidirectional, thus encumbering only the subject patent for which the terminal disclaimer was filed and not the reference patent(s) over which the terminal disclaimer was filed.

The proposed rule has significant implications for enforceability of terminally disclaimed patents. Notably, the fate and unenforceability of a subject patent would be tied to any reference patent over which a terminal disclaimer was filed – regardless of any relationship or commonality between their claims. Further, a finding of invalidity over prior art of even a single claim in a reference patent over which a terminal disclaimer was filed would result in unenforceability of the entire subject patent. Additionally, the proposed rule extends to subject patents that, although no longer tied to a reference patent by terminal disclaimer, were at some point tied to a reference patent by terminal disclaimer that was invalidated over prior art – as well as those to which it is indirectly tied.

Takeaways

If adopted, the proposed rule is likely to significantly alter the strategies many patent applicants will pursue to avoid and respond to obviousness-type double patenting rejections, and in particular, to limit the use of terminal disclaimers wherever possible.

The proposed rule will be a value add to parties facing alleged infringement of multiple patents tied by terminal disclaimers. In those instances, the defendant would only need to focus on addressing the validity of the claims of a single patent to challenge the enforceability of all the tied patents.

The proposed rule potentially contravenes a number of long-standing legal conventions. For example, it is generally accepted that the validity of each claim must be considered separately. 35 U.S.C. § 282(a). Although the USPTO has rulemaking authority, such authority does not extend to substantive changes to the law. See 35 U.S.C. § 2(b)(2); see also, e.g. Animal Legal Def. Fund v. Quigg, 932 F.2d 920, 930 (Fed. Cir. 1991). Whether or not the proposed rule is considered procedural or substantive could be debated, however, the far-reaching implications of the change is unlikely to be disputed.

Several practice changes are likely to result from the proposed rule change. For example, patent applicants may more actively seek restriction requirements to trigger the safe harbor available to divisional applications. In the course of prosecution, Applicants may argue more vigorously to overcome nonstatutory double patenting rejections, pursue claim amendments as alternatives to filing terminal disclaimers, appeal nonstatutory double patenting rejections, and generally avoid filing terminal disclaimers unless absolutely necessary. As a result of these added burdens and precautions needed during prosecution, the proposed rule would seem unlikely to “reduce[] barriers to market entry and lower costs for consumers.”

The proposed rule is open for comments until July 9, 2024. Those interested in submitting or reviewing comments can do so here at this link.

Learn more about the implications of the proposed rule by contacting any of the authors or your usual DLA Piper relationship attorney.