Terminal Disclaimers came into wide-spread use with utility patent applications filed on or after June 8, 1995 as a result of the Uruguay Round Agreements Act of 1994, which changed the previous patent term under 35 USC 154 from 17 years from the date of
issue to 20 years from the
first non-provisional filing date to which priority was claimed.
The need for Terminal Disclaimers was driven not only because, pre-June 8, 1995 the United States was the only major country having a patent term that could be longer than 20 years by virtue of continuation practice, but also because of abuse, especially in the drug field, where continuation applications were often filed just before a patent issued, to pursue a new patent with additional patent for what was viewed as only minor changes in claim scope.
[1] This could result in more than 17 years patent protection.
The change in law implemented June 8, 1995, caused a major loss in patent term for many patents, especially in the drug and biotechnology fields, where it is not uncommon for patents to take many years more than the apparent three year difference in the pre-1995 and post-1995 patent terms.
Patent term is a major economic driver in profitability of a product. For example, branded pharmaceuticals with an estimated $117.2 billion in US sales went off patent between 2012 and 2016, resulting in a loss of up to 80% of revenue.
This change in law should have also obviated the need for Terminal Disclaimers, which not only were not abolished but were used with much greater frequency, often with inappropriate analysis of claims by examiners, who make obviousness double patenting rejections routinely, based solely on common priority claims or common inventorship. Arguments to rebut these rejections are very rarely effective. These rejections are not even considered appealable in most cases.
Why would one need a Terminal Disclaimer IF there is a common priority claim? This by law means that the patent term is limited to 20 years from the earliest claimed non-provisional filing date. If an application has a later filed priority date, then the application with the earlier priority date is prior art to the claims under both 35 USC 102 and 103.
What is a Terminal Disclaimer?
A Terminal Disclaimer is a document signed by the owner of two patent applications or a patent and a patent application, when there is identical ownership and the claims are drawn to “obvious variants” of the claimed subject matter. The effect of the Terminal Disclaimer is to limit the terms of the two patents to the same, shorteWhile many can debate this issue, one major factor was that it was common with pre-June 8, 1995 patent applications claiming pharmaceutical compositions to have an effective patent term of much longer than 17 years due to the practice of filing continuation or continuation-in-part applications just before the original patent issued, to obtain a further 17 years patent term for the patented drug, where the difference in claim scope was minimal - i.e., where the claims in the later filed application was obvious over the original patent. This meant that in some cases the effective patent term could run for much longer than 17 years.
Even with the twenty year term from the earliest non-provisional filing date, allegations of patent misuse to extend monopolies have been made.
[2]
How Do Terminal Disclaimers Cause Further Loss of Patent Term?
The patent term adjustment (PTA) statute, 35 U.S.C. § 154(b), provides a means for a patent owner to recover patent term due to patent office delay. This became a significant issue when the patent term changed from 17 years from the date of issue to 20 years from the earliest claimed non-provisional filing date.
The amount of additional term is determined using a complex formula, which subtracts time due to applicant delays. This statute was in response to the significant delays in patent prosecution, especially in the medical and biotechnology fields, where a patent might not issue for many years after it was filed, due to rejections for lack of enablement or lack of data to prove efficacy.
The Federal Circuit’s August 2023 decision in
In re Cellect, LLC, 81 F.4th 1216 (Fed. Cir. 2023) raises a significant question regarding the interplay between the patent term adjustment (PTA) statute, 35 U.S.C. § 154(b), and the judicially-created doctrine of obviousness-type double patenting (ODP).
Cellect appealed the rejection of the claims of the challenged patents to the Board. Cellect noted that under Novartis AG V Enzo Ventures LLC, 909 F.3d 1367 (Fed. Cir. 2018), ODP does not invalidate a validly obtained Patent Term Exension (“PTE”) under 35 U.S.C. 156, and argued that the Board should similarly hold that ODP cannot negate a statutory grant of PTA. Cellect argued that determining unpatentability for ODP should be based on the expiration dates of the patents before any PTA is added to the term.
A fundamental issue in
Cellect is whether a patentee must forfeit their PTA term extensions to avoid an OTDP invalidity finding. This comes up in situations where a patentee has two patents that are alleged to cover common but different inventions. Under the doctrine of ODP, it is generally improper for a patentee to obtain two separate patents that are obvious variants of one another. This assumes, of course, that the rejection was not just made as a Patent Office requirement, rather than due to careful analysis. If the patentee files a terminal disclaimer that limits the patent terms so that they will expire on the same date and promises that the two patents will always be commonly owned, the latter filed application will be granted as a patent. Cellect’s challenge focused on the statutory PTA of § 154(b).
In the Order issued on January 19, 2024, the Federal Circuit denied Cellect's petition for rehearing
en banc of the Federal Circuit decision regarding PTA and ODP, stating that, "ODP for a patent that has received PTA … must be based on the expiration date of the patent after PTA has been added."
Id. at 1229. Thus, claims in a patent with PTA may be unpatentable for ODP over other claims in patents in the same family without PTA or with less PTA. The Federal Circuit in
In re Cellect distinguished the statute for PTE, which extends patent term for regulatory delay, from the statute for PTA, which extends patent term for Patent Office delay during prosecution. The Court noted that in contrast to PTA, "the expiration date used for an ODP analysis where a patent has received PTE is the expiration date before the PTE has been added.
Id. at 1226.
Summary
The effective patent term has been shortened through the use of Terminal Disclaimers. While this was a valid purpose when patent term ran from date of issue, it is now used only to limit valid patent term on claims which are either already limited by virtue of a common priority claim or by improper application by patent examiners who should be basing patentability solely under 35 USC 102 and 103 over the prior art - including applicant’s earlier filed patents, not common ownership or inventorship or priority claim. The goal of patents has always been an exchange: for disclosing how to make and use someone new and non-obvious, the inventor is entitled to a period of exclusivity to capture the economic benefit thereof. Terminal Disclaimer are no longer necessary to insure this balance but are punitive in nature.
[1] Congressional Research Service Report for Congress (March 2, 2012)
[2] According to the Association for Accessible Medicines, “the top 12 brand drugs on the market last year are protected by a total of 848 patents (71 per drug) providing an average of 38 years without generic competition. A few examples from the report:
The world’s top-selling brand drug, Humira, treats arthritis and other chronic conditions. On the market since 2002, 132 patents block competition for up to 39 years.
One of the most prescribed cancer treatments, Revlimid, was approved by the FDA in 2005. The patent thicket consists of 96 patents providing potentially 40 years without competition.
Diabetes patients who rely on the insulin treatment, Lantus, may not see a generic alternative for 37 years due to the 49 patents issued.
There is no question that several of these patents represent true innovation. New patient populations benefit from the same drug being used to treat a different condition, for example. But the expansive use of the patent system to build barriers to generic and biosimilar competition results in patients paying higher drug prices for longer.”
