The United States Patent and Trademark Office (USPTO) recently proposed a significant change to the rules governing terminal disclaimers. The USPTO says that the rule change would “promote innovation and competition,” but is more likely designed to reduce the backlog of cases at the USPTO regardless of the cost to innovators, who will end up with weaker patents if they result from continuation applications with terminal disclaimers.

Competitors of patentees will sometimes utilize the teaching of a patent but, to avoid infringement, design around the claims of the patent. Patentees often file patent applications based on an original patent (called “continuation practice”) to cover products designed in this manner. Continuation applications are sometimes rejected on the basis of “double patenting,” particularly if the patent office sees the continuation application as merely an attempt to extend the term of the original patent. Terminal disclaimers, which limit the patent term to the expiration date of the original patent, are frequently employed in response to such double patenting rejections.

The USPTO's proposed rule change would introduce a new condition on continuation applications with terminal disclaimers: the applicant filing a terminal disclaimer would have to agree that the patent with the terminal disclaimer will only be enforceable if it is not, and has never been, tied through one or more terminal disclaimers to a patent in which any claim has been finally held unpatentable or invalid over prior art. This proposed new requirement is inconsistent with 35 USC 253, which states that the invalidity of one claim in a patent shall not render the remaining claims in the patent invalid. Nonetheless, the proposed rule would require patent applicants agree to a self-imposed penalty similar to that barred by statute.

The USPTO asserted that the proposed rule would “promote innovation and competition by reducing the cost of separately challenging each patent in a group of [related] patents.” There was no explanation offered as to how this reduced cost of challenging patents outweighs the loss of patent coverage to the patentee. Most egregiously, the proposed rule would render ALL claims in the patent with the terminal disclaimer unenforceable without regard to whether a claim bears any similarity to the claim in the original patent that has been determined to be invalid. This tilt of the playing field against innovators is troubling and unjustified.

The proposed rule is open for comment until July 9, 2024. If you wish to comment, you can go here.

The proposed rule would chill the filing of terminal disclaimers, and thus chill the filing continuations that might require such disclaimers, significantly hindering patent strategy and protection. While the rule would affect only patents where a terminal disclaimer was filed after the effective date of the rule, it would affect patents based on patent applications filed, and thus patent strategy determined, before the rule was even proposed. By introducing stringent conditions on terminal disclaimers, the USPTO risks undermining the valuable continuation practice.

In 2007, the USPTO proposed the "Final Rule Change for Continuations and Claims," that would have limited the number of continuation applications that could be filed for an invention. That proposed rule would have reduced the USPTO backlog, which was significant after the dot-com boom, but would have significantly limited patentee rights. The proposal sparked public outcry, leading to multiple lawsuits asserting that the rule would eliminate statutorily-granted rights. These challenges caused the eventual withdrawal of the proposed rule. The current proposed change to terminal disclaimers echoes this previous attempt and could meet a similar fate if the patent community voices its concerns.

The USPTO's proposed rule on terminal disclaimers presents a significant shift in patent policy with far-reaching consequences. While reducing litigation costs and promoting competition are commendable, the underlying desire to reduce the USPTO’s workload can undoubtedly be done without placing such a drastic consequence on continuation practice. The patent community must carefully consider the implications of this proposal and advocate for a balanced approach that supports both administrative efficiency and the needs of patentees.