Commenting on the USPTO’s Proposed Rule on Terminal Disclaimers

by Dennis Crouch
As I have previously discussed on Patently-O, the USPTO recently issued a notice of proposed rulemaking that could significantly impact patent practice, particularly in the realm of terminal disclaimers filed to overcome non-statutory double patenting rejections. Dennis Crouch, Major Proposed Changes to Terminal Disclaimer Practice (and You are Not Going to Like it) , Patently-O (May 9, 2024).  Under the proposed rule, a terminal disclaimer will only be accepted by the USPTO if it includes an agreement that the patent will be unenforceable if tied (directly or indirectly) to another patent that has any claim invalidated or canceled based on prior art (anticipation or obviousness under 35 U.S.C. 102 or 103). This proposal has generated significant debate among patent practitioners, with many expressing concerns about its potential impact on innovation and patent rights.  It is a dramatic change in practice because the typical rule required by statute is that the validity of each patent claim must be separately adjudged. See 35 U.S.C. § 282(a).
The comment period is open until early July, but a number of comments have already been submitted. And I looked through them in order to get some early feedback.  You can read the comments here : https://www.regulations.gov/document/PTO-P-2024-0003-0001/comment .
Concerns About the Proposed Rule’s Impact on Bedrock Patent Law Principles
Several commenters argue that the proposed rule is contrary to fundamental principles of patent law that have been established for over 150 years. For example, dealmakers at IPValue points out that “one of the fundamental principles of U.S. patent law is that each claim of a patent is its own independent invention, and the fact that one claim is found invalid does not necessarily reflect on the validity of any other claim in the patent.” They cite Supreme Court cases dating back to 1877 and 1935 that have upheld this principle. IPValue argues that the proposed rule would ignore this bedrock principle and hold that all claims of a patent that is terminally disclaimed against another patent would be unenforceable if a single claim of that other patent were disclaimed or found invalid.
Longtime patent attorney and commentator Rick Neifeld expresses similar concerns, stating that the proposed rule “is draconian because the penalty of unenforceability of all claims in a patent in which a TD is filed is not commensurate with a finding of obviousness of a claim in the application or patent identified in the TD.” He provides a particularly draconian example where only some claims in a pending application are rejected for obviousness-type double patenting, yet under the proposed rule, the entire patent could become unenforceable based on the invalidation of a single claim in the referenced patent.
Inconsistency with Federal Circuit Precedent
Many commenters argue that the proposed rule is inconsistent with well-established Federal Circuit precedent. The USPTO itself acknowledges in the notice that “the Federal Circuit has repeatedly rejected the notion that the fact that a claim of one patent is found to be invalid means that any claims of a patent terminally disclaimed against that first patent is necessarily invalid.” Cases like SimpleAir, Inc. v. Google LLC, Motionless Keyboard Co. v. Microsoft Corp., and Ortho Pharm. Corp. v. Smith are cited as examples where the Federal Circuit has held that filing a terminal disclaimer is not an admission that the disclaimed claims are obvious or invalid.
Neifeld points out that in Ortho Pharm. Corp. v. Smith, the Federal Circuit specifically considered terminal disclaimers in the context of 35 U.S.C. 282 and 35 U.S.C. § 253 and concluded that “the invalidity of … claim 1 because of double patenting, even if true, does not necessarily require the invalidation of claims 5, 19, 40, and 43.” He argues that the proposed rule would directly contradict this unambiguous judicial interpretation of the relevant statutes and thus exceeds the USPTO’s procedural rulemaking authority in this area.
Increased Costs and Complexity of Patent Prosecution
Several commenters express concern that the proposed rule would unnecessarily increase the cost and complexity of patent prosecution. Neifeld provides a detailed example of how examiners and applicants often take a somewhat informal approach to obviousness-type double patenting rejections under the current rules. He argues that if the proposed rule is adopted, applicants will be forced to scrutinize and challenge every such rejection much more vigorously to avoid the risk of their entire patent being rendered unenforceable by the invalidation of a single claim in a referenced patent.
IPValue echoes this concern, noting that under the proposed rule, “an applicant would have no recourse but to include in the application every invention disclosed by the specification to avoid risking any continuation application being unenforceable because the continuation application may be terminally disclaimed.” They argue that this would make patent prosecution more complicated and expensive for both applicants and the USPTO.
Negative Impact on Small Businesses and Under-Resourced Inventors
Some commenters argue that the proposed rule would disproportionately harm small businesses and under-resourced inventors. Rob Honeycutt, an individual inventor, states that “ongoing continuations with terminal disclaimers are one of the few remaining advantages available to defend intellectual property rights against infinitely larger corporate entities.” He argues that the proposed rule would further disadvantage small individual inventors and micro entities.
Questions About the USPTO’s Rulemaking Authority
Several commenters question whether the USPTO has the legal authority to promulgate the proposed rule. Adam Prucka, a law student at Columbia, provides a detailed analysis of why he believes the proposed rule exceeds the USPTO’s rulemaking authority under 35 U.S.C. 2(b)(2)(A). He distinguishes the current proposal from the situation in In re Van Ornum , where the court upheld the USPTO’s authority to require non-alienation terminal disclaimers, arguing that in that case the regulation merely implemented a suggestion made by a judge in a prior case, whereas here there is no such affirmative suggestion by a court.
Prucka also invokes the Major Questions Doctrine and the Supreme Court’s “elephant in a mousehole” metaphor, arguing that a vague phrase like “the conduct of proceedings” in the USPTO’s enabling statute cannot be interpreted to endow the agency with the broad powers claimed in the proposed rule. He urges the USPTO to advise the President to transmit the proposed rule to Congress for their consideration rather than trying to implement it through agency rulemaking. Neifeld similarly argues that the proposed rule is “contrary to the Patent Act as interpreted by [judicial] precedent and thus beyond the USPTO’s rule making authority.”
While most of the public comments express opposition to the proposed rule, there are a few that voice support. One comment patent agent Scott Keeley’s firm states that “as patent practitioners, we support this proposed rule, which should prevent patent owners from improperly extending a patent term through what they call ‘evergreening.'” Keeley argues that pharmaceutical companies in particular have been “playing this game with impunity, with American consumers always losing.”
Another comment from Sam Korte at Garmin expresses support for reforming the USPTO’s terminal disclaimer practice, arguing that it is “a major and easy, step towards improving patent quality.” Garmin states that the company is “often victimized by those who abuse continuation practice before the USPTO” and that the “harm to Garmin from the USPTO’s existing continuation practice is not theoretical,” citing a recent example where the Federal Circuit affirmed the invalidation of a patent that was the fifth continuation application in its family. Garmin argues that the proposed rule will help combat the problem of “unscrupulous patent owners [using] endless chains of continuation applications [to] repeatedly assert ‘invalid’ patents that were issued only because of terminal disclaimer practice.”
While a few commenters have voiced support for the proposed changes, the overwhelming majority of public comments thus far express opposition and urge the USPTO to reconsider or withdraw the proposal. It remains to be seen how the USPTO will respond to this feedback and whether it will move forward with the proposed rule in its current form.