Patent Lodge

Earlier this year, the U.S. Patent and Trademark Office (PTO) proposed a rule that would affect terminal disclaimers (TD) filed to obviate Non-Statutory Double Patenting (NSDP) rejections. The PTO did not believe the proposed rule would be “significant.” Well, the definition of “significant” is like the definition of “beauty” -- it’s in the eye of the beholder. Particularly, and contrary to what the PTO contends, most patent holders would likely find the proposed rule significant because it would affect a substantive right of a patent, namely its enforceability.

So, what does the proposed rule require? Under the proposed rule, an applicant must agree that the patent in which the TD is filed (i.e., target patent) would no longer be enforceable if a claim in another patent (i.e., reference patent, tied directly or indirectly to the target patent through the TD) has been finally held unpatentable or invalid based on anticipation or obviousness. Specifically, the proposed rule would require terminal disclaimers filed to obviate nonstatutory double patenting to include an agreement by the disclaimant that the patent in which the terminal disclaimer is filed, or any patent granted on an application in which a terminal disclaimer is filed, will be enforceable only if the patent is not tied and has never been tied directly or indirectly to a patent by one or more terminal disclaimers filed to obviate nonstatutory double patenting in which: any claim has been finally held unpatentable or invalid as anticipated or obvious by a Federal court in a civil action or by the USPTO, and all appeal rights have been exhausted; or a statutory disclaimer of a claim is filed after any challenge based on anticipation or obviousness to that claim has been made. Put another way, patents within a patent family that are tied directly or indirectly by a series of TDs would run the risk of being found unenforceable if a claim in any one of the patents is invalidated over prior art. Essentially, this could wipe out a whole family of patents with one challenge.

For background purposes, an NSDP rejection is based on a judicially created doctrine primarily intended to first prevent the extension of a patent term for patentably obvious claims and second prevent the possibility of multiple suits against an accused infringer by different assignees of patents claiming patentably indistinct inventions. Conventionally, a NSDP rejection could be overcome by the filing of a TD.

To that end, not much thought is often given to filing a TD to overcome a NSDP rejection. In fact, it can be common to file a TD rather than argue the merits of the rejection in order to reduce costs and expedite prosecution. In turn, the patents affected will expire at the same time regardless of the effects of the TD unless one is subject to patent term adjustment.

Under current rules, when a TD is filed, the patentee agrees that both the target and reference patents will expire at the same time and also that common ownership will be maintained between the target and reference patents in order to keep the patents enforceable. From an enforcement perspective, even if patents are tied together by a TD, a patent owner can choose which patent to assert against an infringer. From a validity perspective, an infringer or third party who wishes to challenge the validity of claims subject to a TD must challenge each patent individually.

Shifting back to the proposed rule, from a validity perspective, instead of having to challenge each patent individually, an entire patent family tied directly or indirectly by one or more TDs could be wiped out by only challenging one claim in a reference patent. Thus, the effect of this proposed rule has the potential to cause significant change.

The PTO claims the proposed rule is designed to promote competition and innovation and reduce costs to patent challengers. The PTO finds that the current rule creates a bar to competition because the cost to separately challenge the validity of each patent with obvious variants is high. It also believes that the proposed rule will decrease the number of patents issued with obvious variants. Many argue that the PTO does not have the authority to pass this proposed rule because it removes a substantive patent right.

Stay tuned. We will monitor the progress of this proposed rule change and report back with our guidance if the rule change is adopted.