Terminal Disclaimer Rule Proposed to Balance Innovation and Competition | Dickinson Wright
The United States Patent and Trademark Office (“USPTO”) periodically evaluates the delicate balance of the U.S. patent system to protect innovation without excessively stifling competition. U.S. patents give patent owners the exclusive right to exclude others from making, using, selling, or importing the claimed invention typically for 20 years; however, the risk of patent infringement can deter other companies from making innovative changes to the claimed invention and entering the market.
In some situations, patent owners are able to get multiple patents with non-obvious variants of an invention, which often leads to double patenting rejections from the USPTO. To address such rejections, a patent owner may choose to shorten the term of its patent by filing a terminal disclaimer. A terminal disclaimer is a statement by a patent owner to disclaim (i.e., forfeit) a portion of a patent’s term beyond the expiration date of another patent claiming substantially the same invention. This disclaimer prevents the patent owner from unjustifiably extending the term of its exclusive rights to the claimed invention.
However, allowing patent owners to get multiple patents claiming the same invention, even with a shorter patent term, is effective in preventing competitors from entering the market because of the high cost required to invalidate each of the multitude of patents. Thus, the USPTO is evaluating a new rule to restore the balance between innovation and competition.
On May 10, 2024, the USPTO proposed a new rule that would require an additional requirement for patent owners to file terminal disclaimers. Specifically, this rule would require patent owners filing a terminal disclaimer to agree that the patent or any patent granted on an application in which a terminal disclaimer is filed will become unenforceable if any claim in another patent, connected through a terminal disclaimer, has been: (1) finally held unpatentable or invalid over prior art; or (2) abandoned through a statutory disclaimer after a challenge for anticipation or obviousness has been made against that claim.
The USPTO proposed this rule to encourage innovation and competition by lowering the burden and expense of challenging each patent of a multitude of patents directed to indistinct variations of a single invention. Additionally, the USPTO asserted that the proposed rule would streamline and expedite patent disputes, narrow validity issues, and offer greater certainty to competitors and the public.
Moreover, the proposed rule aims to tackle the problem of preventing start-up companies from entering the market. Currently, it is relatively inexpensive for patent owners, such as large corporations, to file numerous patents, effectively blocking smaller competitors from competing. It is costly to invalidate a patent, and each invalidation proceeding includes the review of only one patent. As a result, the proposed rule would remove an unnecessary deterrence for companies, including start-up companies, to enter the marketplace.
However, this proposed rule also presents significant risks for patent owners. If adopted, a successful challenge to a single claim could invalidate the entire group of patents tied together by a terminal disclaimer. Challengers are likely to target a single patent they believe has the highest chance of at least one claim being invalidated to invalidate all of the tied patents. Due to this likelihood, the number of invalidity challenges may increase.
To address this issue, patent owners may need to adjust their strategies for filing patent applications and overcoming double patenting rejections. For example, patent owners may choose to file a robust patent application with multiple embodiments and additional claims of varying scope to reduce the need for continuation applications or to be able to claim distinct variations of the invention in subsequent continuation applications. However, if even a single claim is found invalid in a multitude of patents tied together, the entire patent group would be invalidated. A new strategy may be to file narrow claims that are more difficult to invalidate. A downside to narrow claims is that it is easier for competitors to design around the claims, and they are more difficult to enforce. Furthermore, if a double patenting rejection is issued, patent owners will be more likely to file arguments to overcome a double patenting rejection rather than filing a terminal disclaimer. Thus, patent prosecution costs will likely increase.
While the proposed rule poses risks for patent owners, it also presents a significant opportunity to create a more inclusive playing field within the technological community. Given that patent owners will be required to adhere to this rule (i.e., agree to the new requirement), their existing patents tied to terminal disclaimers should remain unaffected.
The USPTO accepted public comments on the proposed rule through July 9, 2024. These comments and an overview of the proposed rule can be found on this Federal Register page.
Special thanks to Summer Associate Gino M. Perrino for contributing to this article.
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