USPTO Proposed 'Terminal Disclaimer' Rule Could Impact Life Science Patent Protections
By Jeffrey D. Morton, Haynes and Boone
On May 10, 2024, the United States Patent and Trademark Office (USPTO) issued a notice of proposed rulemaking that focused on terminal disclaimer practice. Under the proposal, a terminal disclaimer would need to include an agreement that the patent in which the disclaimer is filed — or any patent granted on an application in which a terminal disclaimer is filed — would only be enforceable if the patent has never been tied to another patent that has been held to be unpatentable or invalid. As such, if one patent is found to be unpatentable or invalid, then all others that are tied to such patent by way of a filed terminal disclaimer would also be rendered unpatentable or invalid. This is a marked change from the traditional terminal disclaimer practice where tied patents are rendered valid or invalid independently of each other.
Traditionally, the life sciences industry has made frequent use of terminal disclaimers to overcome obviousness-type double patenting rejections. For example, it is not uncommon for life science innovators to: (a) protect a lead therapeutic compound through relatively narrow patent claims in a first patent while (b) simultaneously protect a broader class of therapeutic compounds through relatively broad patent claims in a second, related patent. In such instances, a rejection for obviousness-type double patenting is often issued by the USPTO; under traditional practice before the USPTO, this rejection can be overcome through the filing of a terminal disclaimer. Accordingly, the proposed move by the USPTO to tie patent validity together based on the filing of terminal disclaimers is one that would have a significant impact on how life sciences patents are prosecuted. In an extreme but now plausible scenario, if a single claim in a broad patent focused on an expansive class of therapeutic compounds is held to be invalid due to the identification of relevant prior art, such a finding would render a second patent, focused narrowly on a commercially valuable lead compound, invalid if the second patent and first patent were tied together through the filing of a terminal disclaimer. This type of scenario could have a devastating effect on companies that are logically trying to cover both ends of the patent claim scope spectrum.
Implications For Life Sciences Patenting
Below is a discussion of how this rule change, if adopted, could impact life sciences patent drafting, prosecution and related due diligence practices:
1. Increase in arguing against double-patenting rejections
Under current USPTO practice, when a patent applicant encounters an obviousness-type double patenting rejection, the rejection is often side-stepped by filing a terminal disclaimer. For many companies in the life sciences industry, the issuance of a key patent can have a significant effect on the company’s viability, as increased investment can flow into a company as it expands its patent portfolio. As such, these companies are often somewhat loathe to argue against a double patenting rejection because it can effectively be cured quickly through the filing of a terminal disclaimer. The proposed changes to U.S. terminal disclaimer practice could result in a significant increase in arguing against double-patent rejections, an approach that would be both time consuming and more costly to the patent applicant.
2. Decrease in the number of continuation filings
Continuation applications are particularly susceptible to obviousness-type double patenting, and filings are often rejected. By their very nature, continuation applications reflect identical specifications that contain unique claim sets; however, practically speaking, many of these claim sets – particularly in the life sciences – are closely related. For example, a first patent might focus on a genetically engineered sequence that contains a high percentage (e.g., 97 percent or more) of sequence identity with a particular amino acid sequence. A second patent, granted through the continuation process, may result in a lower percentage (e.g., 85 percent or more) of sequence identity for the same amino acid sequence. In such a scenario, it is extremely likely that an obviousness-type double patenting rejection will be issued from the USPTO. Given the heightened concern about one patent negatively impacting the other patent, the approach of filing multiple continuations for similar claims would likely be curtailed.
3. Increase in divisional filings
Unlike continuation applications, divisional applications – by their very nature – are directed at unique inventions. Accordingly, divisional filings constitute a safe harbor against obviousness-type double patenting rejections. Many countries around the world have developed nuanced and sophisticated divisional filing strategies to extend prosecution of a patent family in a manner focused on eliminating the need for the U.S. equivalent of a terminal disclaimer. A change in U.S. terminal disclaimer practice would likely result in U.S. practice adopting an approach similar to other jurisdictions (e.g., Europe and Canada) where divisional filings are purposely used to continue prosecution while avoiding double patenting rejections.
4. Increase in the number of claims being prosecuted in a single application
Currently, many patent applicants subscribe to the 3 independent claim/20 total claim rule to avoid patent fee surcharges at the USPTO. A byproduct of this approach is that patent applicants, including those in the life sciences industry, often prosecute claims of varying scope in distinct patent applications to avoid excess claims fees. In the event that the proposed changes to U.S. terminal disclaimer practice come into force, and mindful of the comments raised above in respect of continuation and divisional practice, it is likely that applicants would prosecute more claims in a single patent application. Taking this approach, which would likely result in more restriction requirements being issues from the USPTO, would, in turn, insulate claims that are divided out from an obviousness-type double patenting rejection.
5. Increase in freedom-to-operate activity
Sophisticated clients, particularly those in the life sciences, are constantly focused on determining whether they have freedom to operate ("FTO") as they develop their new technologies. In a typical scenario, a company that endeavors to enter a particular niche of the life sciences space will, through its counsel, conduct a thorough FTO analysis to identify those companies and their patents that already play in the same niche space. Oftentimes, the earlier companies have spent years and millions of dollars developing a thicket of patents to protect their valuable innovations; again, oftentimes these patents are tied together through the filing of terminal disclaimers. In the event that U.S. terminal disclaimer practice changes as is being proposed, it could be much easier for a single patent claim to knock out an entire family of related patents. In turn, this singular event could result in an increase in FTO activity as companies try to determine how much "white space" is present within a particular technological niche.
Watch This Space
The proposed changes to U.S. terminal disclaimer practice underwent a comment period that ended on July 9, 2024. Patent practitioners, including those in the life sciences industry, should watch the developments on this issue carefully so that they are prepared to protect their client’s valuable life sciences inventions regardless of whether or when this rule is implemented or rejected.
About The Author:
Jeffrey D. Morton is a partner in the Orange County, Palo Alto and San Francisco offices of Haynes and Boone, LLP.