How Are The USPTO’s Proposed Rule Changes For Terminal Disclaimers Problematic?: Let Me Count The Ways | Womble Bond Dickinson
On May 10, 2024, the United States Patent and Trademark Office (USPTO) issued a Notice of Proposed Rulemaking (Notice) proposing changes to terminal disclaimer (TD) practice. Specifically, it proposed amending the rules “to require that a terminal disclaimer filed to obviate nonstatutory double patenting 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 the 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: (1) any claim has been finally held unpatentable or invalid under 35 U.S.C. 102 or 103 in a Federal court in a civil action or at the USPTO, and all appeal rights have been exhausted; or (2) a statutory disclaimer of a claim is filed after any challenge based on 35 U.S.C. 102 or 103 to that claim has been made.” (Emphasis added).
According to the Notice, the USPTO “opted not to propose a rule requiring a stipulation that the claims are not patentably distinct or an agreement by the disclaimant that filing a terminal disclaimer is an admission of obviousness. The proposed rule does not concern the validity of claims. Instead, the proposed rule would require an agreement by the disclaimant that the patent with the terminal disclaimer will be enforced only under certain conditions.”
What might the practical effect of these proposed rule changes be? Let’s assume that three patents exist and that appropriate TDs satisfying the proposed rule changes have been filed. In our hypothetical, one of the three patents is challenged in an inter partes review (IPR) and, ultimately, one claim in that patent is found unpatentable over prior art, with all appeals being exhausted.
According to the proposed rules, the two patents not involved in the IPR are now unenforceable because TDs exist and one claim was held to be unpatentable in the IPR. And after the IPR was filed, the patentee could not file a statutory disclaimer [35 U.S.C. §253(a)] for any claim in the challenged patent without rendering the other two patents unenforceable.
Thus, one effect of the proposed rules is that a challenger could file an IPR against a single, “weak” claim in one patent, having the ultimate goal of knocking out the entirety of the other two patents through unenforceability. Such a backdoor manner of eliminating claims without full consideration of their merits would be unfair to the patentee.
Other potential issues with the proposed rule changes and the USPTO’s attempted justification for them could include:
The Proposed Rule Changes Run Afoul of 35 U.S.C. §§ 253 and 282
35 U.S.C. §253 governs disclaimers, with subsection (a) relating to disclaimers of claims and subsection (b) relating to TDs. 35 U.S.C. §282 relates to claim validity.
Sections 253 and 282 indicate that validity shall be determined for each claim individually, stating that “[w]henever a claim of a patent is invalid the remaining claims shall not thereby be rendered invalid” [Section 253(a)] and that “[a] patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” [Section 282].
Claim validity is thus determined on a claim-by-claim basis, not on a patent-by-patent basis. The Notice’s attempt to change the issue from one of validity on a claim-by-claim basis to an equitable issue of unenforceability on a patent-by-patent basis is contrary to plain statutory language.
The Notice’s attempt to change the issue from one of validity on a claim-by-claim basis to an equitable issue of unenforceability on a patent-by-patent basis is contrary to plain statutory language.
The USPTO Typically Avoids Enforceability Issues
Regarding unenforceability resulting from inequitable conduct, MPEP 2010 states: “[i]t is the courts and not the [USPTO] that are in the best position to fashion an equitable remedy to fit the precise facts in those cases where inequitable conduct is established. Furthermore, inequitable conduct is not set by statute as a criteria for patentability but rather is a judicial application of the doctrine of unclean hands which is appropriate to be handled by the courts rather than by an administrative body. Because of the lack of tools in the Office to deal with this issue and because of its sensitive nature and potential impact on a patent, examiner determinations generally will not deter subsequent litigation of the same issue in the courts on appeal or in separate litigation…”
Thus, the USPTO has avoided equitable issues in the past. Although it is not clear that this issue is truly one of enforceability, if it is, why would the USPTO delve into it?
The Proposed Rule Changes Run Afoul Of The Reasoning Behind The SAS Decision
In SAS v. Iancu, 138 S.Ct. 1348 (2018), the Supreme Court rejected the USPTO’s practice of instituting only a portion of a petitioner’s requested IPR (partial institution) instead of the entire requested review, reasoning that USPTO cannot abandon statutory requirements under the guise of USPTO “discretion.” Similarly, the USPTO should not be able to abandon statutory requirements of determining validity on a claim-by-claim basis simply by recharacterizing its examination as relating to “enforceability” as opposed to “validity.” No statutory language provides the USPTO with the discretion or ability to alter the claim-by-claim validity analysis associated with obviousness-type double patenting by reclassifying it as an enforceability analysis determined on a patent-by-patent basis.
The USPTO should not be able to abandon statutory requirements of determining validity on a claim-by-claim basis simply by recharacterizing its examination as relating to “enforceability” as opposed to “validity.”
The Proposed Rule Changes Run Afoul Of Federal Circuit Case Law Related To TDs
The Federal Circuit has made clear that filing a TD is not an admission related to patentability. See, SimpleAir, Inc. v. Google LLC, 884 F.3d 1160, 1167-68 (Fed. Cir. 2018) (“[O]ur cases foreclose the inference that filing a terminal disclaimer functions as an admission regarding the patentability of the resulting claims.”); Motionless Keyboard Co. v. Microsoft Cop.., 486 F.3d 1376, 1385 (Fed. Cir. 2007) (“A terminal disclaimer simply is not an admission that a later-filed invention is obvious.”); Ortho Pharm. Corp. v. Smith, 959 F.2d 936, 941 (Fed. Cir. 1992) (rejecting the argument that the patent applicant admitted to obviousness-type double patenting by filing a terminal disclaimer)). However, the proposed rule changes would effectively make filing a TD a negative admission regarding the involved patents. For example, in the hypothetical discussed above, the TDs would effectively create an “admission” that the two patents not challenged in the IPR were no longer viable because one claim in the challenged patent did not survive the IPR.
All of the above is perhaps exacerbated by the USPTO’s proposed fee increases for TDs (4/23/2024), which escalate over time and encourage early filing of TDs even before relevant claim language has been determined. Filing TDs early and often would only compound the problems and issues discussed above for patentees.
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