As discussed in our previous blog (here), the United States Patent and Trademark Office’s (USPTO) has proposed substantial surcharges for filing continuing applications, depending on the timing of filing. The USPTO is also proposing substantial increases for an applicant to file a terminal disclaimer. As we discuss below, these increases are likely to affect strategies for prosecuting patent applications.

Background

Continuing applications often require the filing of terminal disclaimers, because the claims of the continuing applications can be similar to the claims in the parent or another previously filed related application. Terminal disclaimers are intended to ensure that the limited monopoly that a patentee enjoys does not get extended through similar claims that have later expiration dates. But terminal disclaimers also provide a mechanism for refining the claims to an applicant’s invention.

The USPTO Proposals

In an April 3, 2024 Notice of Proposed Rulemaking (NPRM), the USPTO set forth a new, steeply graduated fee structure for terminal disclaimers. The lowest cost of a regular terminal disclaimer will go up approximately 18 percent. The timing of filing the terminal disclaimer would change the required fee quite radically, however.

The “regular” terminal disclaimer fee would apply only if an applicant voluntarily files a terminal disclaimer, before an examiner first examines the application. Normally, patent applicants wait for a patent examiner to require a terminal disclaimer before filing one. Applicants also often wait until near the end of prosecution, when the claims are in condition for allowance, to file the required terminal disclaimers.

Currently, there is no additional cost to waiting for the examiner to act. Under the USPTO proposal, if an applicant waits for the examiner to require a terminal disclaimer, or even if the applicant files a terminal disclaimer voluntarily after the Examiner issues an office action on the merits in the application, the cost would jump significantly:

• If the applicant waits until the application receives a first office action on the merits, the cost is almost three times the current fee (194 percent increase).
• If the applicant waits until the application receives either a final office action or an allowance, the cost jumps to over four and a half times the current fee (371 percent increase).
• If the applicant waits until after appealing to the Patent Trial and Appeal Board, the cost jumps to over six and a half times the current fee (547 percent increase).
• If the applicant waits until after the patent issues, the cost jumps to over eight times the current fee (724 percent increase).

This proposed tiered, steeply graduated fee structure is designed to encourage applicants to address double patenting issues that can arise during prosecution before an examiner has to deal with them. The USPTO’s thinking is that this will promote more efficient patent examination by reducing examination costs and providing greater public certainty as to when the patent term will end. If an applicant waits for the examiner to require a terminal disclaimer, according to the USPTO, the examiner will have to do a lot more work, the cost of which is not covered by the filing, search, and examination fees that applicants pay.

Under the proposed fee structure, the USPTO is trying to help the examiner avoid time intensive double patenting claim-by-claim analysis that would otherwise be required. For example, if an applicant does not file a terminal disclaimer after the examiner’s first office action on the merits, but changes the claims one or more times, the examiner will have to repeat the analysis one or more times, depending on the claim amendments in each response. Repeating the analysis would detract from the total time available to examine the application for other substantive issues such as patentability over prior art.

Unlike many other USPTO fees, including application filing fees and proposed surcharges, there is no discount on terminal disclaimer fees for micro entity (normally an 80 percent reduction) or small entity (normally 40 percent reduction) applicants. The Office acknowledges, “[B]ecause about 80% of continuation applications have a patented parent, in general they may be more likely than non-continuing applications to raise double patenting issues requiring filing of a terminal disclaimer. Thus, it is reasonable to expect that terminal disclaimer filings would be somewhat proportional to continuation filings….”

Consequences for Applicants

A terminal disclaimer filed after a patent issues incurs the highest fee. The Office believes that charging the highest fee after a patent issues will encourage earlier filing of terminal disclaimers, so that the public has more certainty as to when a patent term ends. The Office’s reasoning appears to be somewhat logical at first glance. The higher fee justification, however, seems to assume that in all cases, a patent owner should have filed the terminal disclaimer as soon as possible, but waited. The reality often is more complicated. For example, other later-filed patents in the same family might have claims that the Examiner considers sufficiently similar to the earlier patent to warrant terminal disclaimers. A patent owner could not know that until it was time to prosecute the later-filed patents.

One issue not mentioned in the Federal Register notice is that patents with terminal disclaimers are enforceable only so long as the patents are commonly assigned. If a patentee wants to sell part, but not all of a patent portfolio, the patentee has to be careful not to split up patents that have terminal disclaimers, to avoid those patents becoming unenforceable (and therefore useless). Where two companies in a joint venture, co-owning a patent family, want to split up the family because different patents in the family cover different things, early voluntary filing of terminal disclaimers throughout the family could prevent that split.

Takeaways

The proposed terminal disclaimer fee structure will not discourage applicants from creating patent families, whether through continuing applications or through simultaneous filings. It is important, however, for patent applicants to think about the possible consequences of voluntary early filing of terminal disclaimers in a patent family. There may be a significant initial cost saving, but if/when a patent owner wants to sell part, but not all of the family, the whole family could become unenforceable.

The Federal Circuit has held consistently that filing a terminal disclaimer is not an admission regarding patentable distinctness of issued claims from claims of other patents in a family. Consequently, it may be cheaper not to argue with examiners about the need for a terminal disclaimer in an application, and to file the terminal disclaimer after a first office action on the merits, in order to avoid the very substantial fees required for filing it later on. This is particularly so with larger patent families and portfolios, subject to the concern about unenforceability from splitting up those families.