USPTO Steps in for Congress in Attempt to Legislate on Terminal Disclaimers

“It is without doubt that a requirement that a patent cannot be enforced is the removal of a substantive patent right, which exceeds the statutory authority of the USPTO. Only Congress can do this, and it has not.”

terminal disclaimersBy now, you are aware that the U.S. Patent and Trademark Office (USPTO) released a Notice of Proposed Rulemaking (NPRM) on May 10, 2024 (89 Fed. Reg. 40439), that would dramatically alter patent applicant and patentee statutory rights in their patent filings by proposing a draconian change to the requirements for submission of a terminal disclaimer (TD). Several blogs, including IPWatchdog, have reported on it. Comments are due by July 9, 2024.

I will leave for another day the topic of the shock, ire and disdain of many in the community engendered by this NPRM, the likes of which has not been seen since the debacle of the publication of the Final Rules on Claims and Continuations in 2007. I want to instead focus on the substance of the NPRM and provide some historic context and rebuttal that may be useful.

In summary, the proposed rule would require that every TD include a provision agreeing that the patent with the TD is enforceable only as long as it is not tied by the TD “directly or indirectly” to a commonly owned patent or application that issues as a patent that: (i) has at least one claim (and can be only one claim and only marginally related) that has been finally held unpatentable or invalid under Sections 102 or 103 and all rights of appeal exhausted or (ii) a statutory disclaimer of a claim is filed after the claim has been challenged under §102 or §103. A patent is “indirectly” tied by two TDs to another patent when: (1) a TD filed in the patent or application identifies an intermediate patent/application as the reference patent or application; and (2) a TD filed in the intermediate patent/application identifies the other patent, or the application that issued as the other patent, as the reference patent or application.

USPTO Picks a Side

The USPTO suggested that this regulation would be voluntary, in part because TDs can be withdrawn before issuance. This must have been mentioned as a joke because if the TD is withdrawn, the rejection that caused the TD is reactivated.

The USPTO indicates that the reason for this draconian change is to protect infringers from multiple lawsuits that could deter competition. But isn’t the sole purpose of a patent to prevent competition for a set time period? I think that is the definition of a patent. The Office now firmly prioritizes the protection of infringers over the rights of inventors, to the glee of the tech community and the generic pharmaceutical industry. The USPTO has selected a side among its stakeholders.

The USPTO in the NPRM states that the proposed rule furthers the objectives of Executive Order 14036 on “Promoting Competition in the American Economy” 86 FR 36987 (July 14, 2021). This Order unfortunately comes from the wrong branch of government, which has no constitutional authority over patents. The U.S. Constitution grants SOLE authority to the legislative branch over how to promote the progress of science and the useful arts by securing for limited times the exclusive right to their discoveries. Art. I, Sec. 8, Cl 8.

How We Got Here

What the NPRM strangely doesn’t refer to is the letter from six senators, dated June 8, 2022, that requested the USPTO to issue a notice of proposed rulemaking or a public request for comments based on a list of questions. This subset of senators asked that the Office consider the responses, send them the reactions, and take regulatory steps to improve patent quality and eliminate large collections of patents on a single invention (sounds more like a directive than a request?). One of the questions was:

“Currently, patents tied together with a terminal disclaimer after an obviousness-type double patent rejection must be separately challenged on validity grounds. However, if these patent are obvious variations of each other, should the filing of a terminal disclaimer be an admission of obviousness? And if so, would these patents, when their validity is challenged after issuance, stand and fall together?”

The June 8 letter was prominently discussed in the USPTO’s Request for Comments (87 FR 60134) but completely dropped from the NPRM. Curious. I, along with Anthony Prosser, wrote an article on this for IPWatchdog on Sept. 9, 2022: “Let’s Do Something About the Unauthorized Doctrine of Non-Statutory Judicially Created Obviousness-Type Double Patenting”.

It was apparent that these six senators did not have the full support of their colleagues, or else this could have been addressed by legislation from the sole branch of government empowered to do so. Instead, the subset of senators simply sent the letter (Leahy, Blumenthal, Klobachar, Cornyn, Collins and Braun; glaringly, they were not joined by the prominent IP-focused Senators, Tillis and Coons). The September 8, 2022, letter appeared to be an attempt by this subset of senators to pressure the USPTO to do what it advocated for but did not have the political consensus to pass as a statute.

The NPRM quotes to SimpleAir, Inc. v. Google (884 F.3d 1160 (Fed. Cir. 2018), in which the court said ““[O]ur cases foreclose the inference that filing a TD functions as an admission regarding the patentability of the resulting claims.” The NPRM thus “opts” not to include a rule that filing a TD is an admission of obviousness, probably because the USPTO knows it cannot overrule Federal Circuit case law, and this isn’t actually an option. Congress could well have done that, and it was suggested in the June 8, 2022, letter, but apparently without Congressional consensus.

Where the NPRM is Wrong

The USPTO cites In re Van Ornum, 686 F. 2d 937 (CCPA 1982) as general support for inclusion of a requirement in a TD that places conditions on the enforcement of a patent. This reliance goes too far. Van Ornum solely addressed whether a “non-alienation” provision in a TD (i.e., a common ownership requirement) promulgated by the USPTO goes beyond the rulemaking authority of the USPTO. It held that it does not. Van Ornum did not address the next step that the USPTO proposes to make now, which is the prohibition on the enforceability of a patent which is the subject of a TD if only one claim of a patent or application directly or indirectly tied to it is found to be invalid. Van Ornum cannot be extended as cover for the proposed new regulation.

The NPRM asserts that the new language would not affect the validity of claims because it is a “voluntary agreement” by the patentee that the tied patents will only be enforceable under certain conditions. Of course, a TD is not voluntary if it is required to obtain a patent to which an inventor is otherwise entitled under 35 USC §101. It is coercion. The NPRM tries to distinguish between enforcement and validity in an effort to squeeze unsuccessfully into Van Ornum, however, this is just a word salad because if a patent can’t be enforced, it is useless and equivalent to being invalid. In the same vein, a bullet can cure cancer.

The Create Act

Current patent claims tied by a TD under either §1.321(c) or §1.321(d) can be separately litigated on validity grounds (although the §1.321(d) patents must be litigated in the same proceeding). I also leave to the side in this post the serious question of the constitutionality of these terminal disclaimer provisions, which I (with Tony Prosser) have written and spoken about.

The legislative history of the Create Act is informative. Remember that 37 CFR §1.321(c) is the current normally requested TD regulation and 37 CFR §1.321(d) is the TD regulation that pertains solely to patents that arise as a result of joint research between two entities with a joint research agreement in place that takes advantage of the Create Act. The Create Act was a negotiated compromise with universities and research organizations that work with companies to do joint research after the case OddzOn Products v. Just Toys (122 F. 3d 1396 (Fed. Cir. 1997)) ruled that a patent application filed early in a collaboration could become disqualifying prior art to a later filed application from the same collaboration naming different inventors or assignees. Universities were up in arms about this. The decision created a situation in which an otherwise patentable invention from a collaboration could be rendered invalid due to the sharing of confidential information during the collaboration. The Create Act of 2004 amended §103(c) to provide a safe harbor for the joint research efforts.

The legislative history of the Create Act informs the views of Congress on this matter. The Create Act as passed is very short (§103(c)).  The Senate legislative history is informative of the guardrails requested on §1.321(d) (Congressional Record June 25, 2004 (Vol 150, No. 90)):

“One modification of existing disclaimer practice, however, is needed for double patenting to achieve its policy objectives where the CREATE Act applies. The CREATE Act will now permit patents with patentably indistinct claims to be separately owned, but remain valid. Heretofore, this separate ownership would have rendered the indistinct patent invalid. To protect the public interest, these separately owned patents must be subject to a new form of disclaimer that will protect the public against separate actions for enforcement of both the first-issued patent and any patents with claims that are not patentably distinct over the claims of the first-issued patent.”

(Emphasis added).

Leaving aside the legal effect of legislative history generally (or why Congress left this to legislative history instead of amending the bill to include it while still pending), the Senate in passing the Create Act thus recommended tying ONLY the benefit of the §103(c) Create Act to a TD with an extra provision that required that the patents be enforced in the same litigation. The legislative history was clear that this limitation was intended to address issues that could be raised ONLY by the new Create Act legislation, that different entities could own patents related by TDs and enforce them. Of course, at the same time, the senators were aware of and referenced §1.321(c) in the legislative history and provided no intent whatsoever to recommend a change to require the same restriction for ALL TDs. Therefore, a strong argument can be made that the Create Act legislative history indicates that Congress was in favor of §1.321(c) as it stood and not in favor of the changes to it which the Senate, at least by legislative history, advocated for under the Create Act for 1.321(d).

Even when the Create Act §103(c) was passed, there was no legislative intent from the Senate to prohibit the enforceability of patents, but only the recommendation that the litigation be tied due to the separate assignees or inventors. This is black and white. Congress as a whole has never legislated or even as a group advocated for the tying of enforceability to TDs outside of the Create Act, and even in that case, it was a litigation restriction, not an unenforceability mandate. The present NPRM is inconsistent with what Congress in the legislative history proposed for the Create Act.

Substantive Rights vs. Procedural Rights

It is without doubt that a requirement that a patent cannot be enforced  is the removal of a substantive patent right, which exceeds the statutory authority of the USPTO. Only Congress can do this, and it has not. And given the legislative history from the Senate in passing the Create Act, as a Congressional body, it had no intent to do so.

Under 35 U.S.C. §2, the USPTO can only promulgate regulations that are not inconsistent with law. The NPRM is inconsistent with law, at least because there is no Congressional statute authorizing the unenforceability of a patent that has a TD that is tied directly or indirectly to a patent that has only one claim that has been held invalid, nor has that authority been unambiguously delegated to the USPTO. It is also inconsistent with law because it exceeds the ruling of Van Ornum, the only case that the USPTO cites for support.

Further, Chevron deference (Chevron v. NRDC, 467 U.S. 837 (1984)) does not save this proposed regulation. Even under its current state, a precondition to deference under Chevron is a congressional delegation of authority, which certainly has not been given to this proposed regulation. Further, the future of the Chevron deference is in doubt in any event, given that the U.S. Supreme Court is poised to rule on its future in this term (Loper Bright v. Raimondo, 45 F. 4th 359 (D.C. Cir. 2022; S. Ct. docket 22-451). The argument is that the delegation of regulatory authority of federal agencies undermines legislative powers and also exposes the public to policies that can change every four years. Policies should not be made by government officials who are not elected and not accountable to the public in the same way that Congress is.

Adding to this, Congress did not explicitly grant the USPTO retroactive rulemaking powers under 35 USC § 2(b)(2), and thus, the USPTO lacks such power. Bowen v. Georgetown Univ. Hosp. 488 U.S. 204 (1988). The proposed regulation would be retroactive because if promulgated, it would apply to already pending applications that issue as patents. The already pending applications would have been filed based on the rules that applied when they were filed, which entail a quid pro quo to disclose trade secrets. If a regulation results in the involuntary taking of property already in existence, it is a substantive regulation. It is thus inconsistent with the Administrative Procedures Act (5 U.S.C. §706) and constitutes a taking of property.

Get Your Comments In

In summary, the NPRM fails on multiple grounds. Make sure to have your say and get your comments to the Office by July 9, 2024. Let’s get to work.


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Join the Discussion

9 comments so far. Add my comment.

  • [Avatar for Anon]
    May 17, 2024 07:59 am

    Indeed, this ultra vires “legislate by dollar change” runs afoul of the (limited) authority of the Patent Office for setting fees and is clearly aimed for the type of legal change that was expressly defeated in the still-binding Tafas decision.

  • [Avatar for Pro Say]
    Pro Say
    May 15, 2024 12:04 pm

    With a hat-tip to my bud Night Writer, see also this superb tear-apart, take-down analysis by Foley’s Courtenay Brinckerhoff:

    Truth over PTO leadership b.s.

    Note to all you overworked, under-appreciated Examiners and ex-Examiners: No reason that you, too, can’t let your concerns be heard. Just post anonymously. This burden should not — indeed must not — be placed on your backs.

  • [Avatar for IP Nerd (Parody)]
    IP Nerd (Parody)
    May 15, 2024 10:48 am

    Allowing creators room to operate should be the mission of USTPO. If a new innovator teams up with a new patent attorney through innovative exuberance they might “over create claims”. The pair down method fosters new concepts and improves capitalist flows. The perfect application approach benefits entrenched entities suffocating creativity and supports monopolistic tendencies.

    The USPTO is a fully fee-funded agency and must periodically assess and adjust fee rates to ensure aggregate fee collections finance the aggregate costs necessary to issue robust and reliable patents and to register and maintain accurate and reliable trademarks. Being one of the few government agencies that pay for itself we can afford to let the people create and innovate.

  • [Avatar for Kirk Hartung]
    Kirk Hartung
    May 15, 2024 10:23 am

    Why would the TD patent be completely invalid if only 1 claim of the parent patent is invalid, but the parent patent has other claims that remain valid and enforceable? This makes no sense, particularly if the invalid claim in the parent patent is not the claim that caused the obvious type double patenting TD.

  • [Avatar for Lab Jedor]
    Lab Jedor
    May 15, 2024 10:15 am

    Absolutely Sherry. And we all get sooooo tired and fatigued by the machinations of the USPTO leadership. There is no stability and predictability in our patent system. Hello Congress. Congress, hello. Are you there Congress?

  • [Avatar for OneVision]
    May 15, 2024 09:37 am

    Absolutely brilliant piece, Ms. Knowles. You dismantled the USPTO’s reliance on the Van Ornum decision. Thus, the USPTO has no grounds left to oppose the statutory mandate that “[e]ach claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims . . . .” 35 U.S.C. 282(a). You’ve provided a roadmap for many others to voice their concerns and possibly to pursue legal action.

  • [Avatar for Paul]
    May 14, 2024 07:19 pm

    Sherry, thanks for breaking down the NPRM so clearly. Your support for innovators’ rights is awesome. Keep up the great work!

  • [Avatar for Tom]
    May 14, 2024 07:16 pm

    Thank you Sherry for your clear analysis of the NPRM. I appreciate your advocacy for the rights of innovators. Please keep it up.

  • [Avatar for Pro Say]
    Pro Say
    May 14, 2024 06:38 pm

    With this illegal, unconstitutional attempt to upend settled patent process by circumventing Congress, the math is now irrefutable:

    Michelle Lee + John Dudas = Kathi Vidal

    Kathi — is this really how you want to be remembered? Because if you don’t stop this insane quest, that’s exactly how your history will be written.


    p.s. My fellow independent inventors and non-Big Tech companies, please join me in tearing this piece of you-know-what to shreds with your comments. Silence is not an option if you care about your patents, your children’s patents, and your grand children’s patents.

    For despite their exhortations to the contrary, Kathi and her PTO leadership cabal don’t actually give a d.a.m.n. about us; or about American innovation.

    China and Big Tech uber alles!

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