On May 9, 2024, the USPTO issued a notice of proposed rulemaking adding a new requirement for filing terminal disclaimers, which are generally used to allow inventors to receive multiple patents stemming from the same patent application. This allows inventors to obtain an initial patent quickly if there is agreement with the examiner that some patent claims are allowable while continuing to seek patent protection for the full scope of the invention through prosecution of continuation applications. Timely issuance of an initial patent, which this approach to prosecution facilitates, has been shown to be critical to startup success.
The examiner may issue rejections in these follow-on patent applications if some of the proposed patent claims seem too close to the claims in the original patent; applicants can overcome these rejections by filing terminal disclaimers. By law, terminal disclaimers cannot be used to extend the term of protections that these new claims receive beyond that of the original patent; they simply allow an inventor to obtain additional patent claims to ensure that the entirety of their invention is adequately protected. However, under the USPTO’s proposed rule, invalidating any claim in the original patent will also render unenforceable all of the claims in any other patents tied to it with a terminal disclaimer (no matter how unrelated the later claims are to the invalidated claim) drastically weakening patent rights and making it significantly more difficult for inventors to ensure protection for the entirety of their invention.
The Federal Trade Commission was among the organizations that submitted comments on the USPTO’s proposal, and did so in strong defense of the proposed rule. However, the arguments made by the FTC in support of the proposed rule miss the crux of the issue.
| Claim: “Terminal disclaimers enable anticompetitive practices by “facilitat[ing] the growth of patent thickets,” and therefore must be reformed.” |
| In reality: Both pieces of this claim are false. First, it is crucial to recognize the fallacies behind the bogeyman of the patent thicket myth. There is nothing unusual or malicious about filing multiple patents to protect different components of a single product — and in fact, being able to do so is vital to the development of high-tech products across all industries, from smartphones to medicines. Obtaining multiple patents offers no unfair advantage to the patent owner, as all granted patents must comply with statutory requirements for patentability. Terminal disclaimer practice creates no independent thicketing problems — existing limitations on the practice already treat these related patents as if they are one by requiring that they all be owned by the same entity and have the same expiration date.
The USPTO and FTC both fail to provide evidence that the current terminal disclaimer practice is actually causing harm to companies seeking to compete with patent holders. Both the FTC and the USPTO therefore appear to advocate for this change based not on a need for reform, but simply a desire to advantage non-patent competitors over patent-holding inventors — a motivation which ignores the fundamental idea that patents must be strong and valuable in order to properly incentivize inventorship. |
| Claim: “The USPTO’s proposed policy would “promote[] competition and market entry,” thereby “promot[ing] innovation.” |
| In reality: By making it easier to render patents unenforceable, the proposed policy might increase the ability of non-patent-holding companies to compete with patent-holding competitors, but it would do so by creating a large loophole that unfairly targets patent owners trying to use a well-established method of obtaining patent protection over time. The resultant negative effect on the reliability of IP rights would ultimately serve to undermine innovation, not promote it.
Under the proposed rule, accused infringers would be able to challenge a particularly weak single patent claim in one patent and thereby automatically invalidate all the patent claims in any patent related to the first patent by a terminal disclaimer, no matter how different the claims in the related patents are. As a result, inventors will likely avoid filing terminal disclaimers at all costs. This will upend current patent prosecution practice, incentivizing inventors (who can afford it) to draft patent claims in the initial application to cover every iteration of what they have invented, instead of proceeding in a step-wise fashion if the invention proves worthy of needing more refined patent protection. This will cost significantly more upfront, both in terms of money and time. It will also increase the USPTO’s workload at a time when it is already falling behind in its application backlog. And together, the high costs and insecurity related to terminal disclaimers will make it more difficult for inventors to obtain patents, and especially, to obtain protection for the full scope of their inventions. This, in turn, will make it harder for inventors to obtain investor funding. The foreseeable consequence of the policy will be to keep innovative companies out of the marketplace while encouraging parasitic behavior from their less productive competitors. It will also steer inventors away from patents and toward trade secrets, which, while important, do less to promote competition and innovation because they keep knowledge out of the public sphere. Overall, the proposed rule is likely to have a negative impact on innovation. |