Boring Holes in the Patent Thicket: FTC Supports USPTO’s Proposed Rule Requiring All Terminally-Disclaimed Patents to Fall Together

The USPTO has proposed a rule rendering a patent unenforceable if it is disclaimed over another patent that is subsequently found invalid.  The FTC filed a comment letter in support of the USPTO’s proposed rule, noting that “the proposed rule would reduce the costs incurred by potential competitors challenging weak patents or defending against assertions of patent claims that are obvious variants of a single invention.”

Current Practice

Patent holders frequently file multiple applications for the same invention, which include different but similar patent claims. This enables patent holders to obtain increased claim coverage for their inventions. However, the USPTO often rejects the additional claim because it is an obvious variation of the parent patent, although not identical. To overcome this, patent holders file a terminal disclaimer, stating that the patent term of any patent from the current application will expire at the same time as the patent term of the parent patent. And, while a terminal disclaimer effectively causes the subject patent to have a shorter patent term, patent holders often pursue this route as opposed to arguing against the rejection because it saves time and resources. Furthermore, this allows a patent holder to file suits against infringers based on any of the patents.

Proposed Rule

The USPTO’s new proposed rule will add an additional implied agreement for terminal disclaimer filers. Filers will now agree that any patent the USPTO grants will be unenforceable if the patent is connected via a terminal disclosure to another patent that has been deemed unpatentable or invalid. Thus, if someone challenges an existing patent, a successful challenge could effectively invalidate several patents across multiple families in one fell swoop.

FTC’s Advocacy

The FTC’s impetus behind this letter is to support the USPTO’s proposed rule because it believes it will minimize anticompetitive effects surrounding patents and terminal disclosures. The FTC notes that “the Commission has long been mindful of the potential anticompetitive effects of patent thickets,” and that these patent thickets “erected by incumbents can delay and frustrate the entry of new biosimilars and generic drugs, increasing prescription drug costs and limiting patients’ access to more affordable options.” Overall, the FTC thinks the proposed rule will “reduce[] gamesmanship by patent holders, as well as the number, size, and impact of patent thickets,” promote competition, and that new market entrants will promote innovation and lower prices.

This is also not the first time the FTC has taken aim at patent issues within the biotechnology and drug development world. As they note in their letter, in early 2024, the FTC submitted a comment to the National Institute of Standards and Technology regarding the draft interagency guidance framework “for considering the exercise of march-in rights [] which included a description of the harmful impact that patent thickets can have on the market entry of generic drugs and biosimilars.” In this comment to the NIST, the FTC noted that patent thickets in the biotechnology sector often include large numbers of secondary patents. The FTC believes that while these secondary patents are often invalidated, they can potentially delay generic or biosimilar competition.

Takeaways

If the proposed rule is implemented, patent filers may need to reevaluate their strategies regarding terminal disclaimers and filling of multiple similar patents.

• It may not be advisable to file a terminal disclaimer because it risks the enforceability of the parent patent
• It may result in competitors having a lower bar of entry into the market occupied by the patent holders because they will only need to pursue the invalidation of one patent.
• By attacking the patent referenced by terminal disclaimers, challengers can invalidate all the connected patents without attempting to challenge each individual patent.
• Patentees should consider filing one application that includes a broad scope of claims, rather than filing multiple patents.

Additionally, the FTC’s increased focus on the biotechnology and pharmaceutical industry, including its recent campaign against pharmaceutical manufacturers' Orange Book listings, means that patent filers should remain abreast of the FTC’s challenges, comments, and proposed rules.

Crowell & Moring LLP will continue to monitor developments regarding terminal disclaimers, FTC public comments, and the USPTO’s proposed rule changes, and will provide updates as appropriate.  Please reach out to your Crowell & Moring contact, or any of the authors below, for additional information on these matters.