Hidden Risks in Patent Portfolios: Obviousness-Type Double Patenting, Terminal Disclaimers & JRAs Explained

Patent portfolios often span multiple related entities – a parent corporation and its subsidiaries, spinouts, or partners. When patent applications share overlapping subject matter, a US Patent Examiner may raise an obviousness-type double patenting (ODP) rejection. The usual fix, a terminal disclaimer (TD) pursuant to common ownership, is not available when the patents are owned by different entities. This can have very real effects when a parent company assigns some patent applications in a portfolio, such as application-focused patents, to one wholly owned subsidiary, while other foundational patents remain with another wholly owned subsidiary.

Applicants are seeing more ODP rejections and are increasingly filing TDs both to address examiner rejections and to mitigate future enforceability risks, making proactive ODP planning more important than ever. See, for example, In re Cellect, which significantly changed how obviousness-type double patenting is evaluated by holding that, when Patent Term Adjustment (PTA) is awarded, ODP must be assessed using the PTA extended expiration date, or Ex parte Baurin and In Ex parte Baumeister, both of which dealt with what is a proper reference for an ODP rejection. PTA, which extends a patent’s term to compensate for certain USPTO delays, can push a patent’s expiration date beyond the standard 20-year term and allow PTA extended patents to expire later than later-filed related patents.

This alert highlights risk associated with TDs and offers safer alternatives.

1. What Is Obviousness-Type Double Patenting?

ODP is a rejection applied to a pending patent application, i.e., a “subject” application when a US Patent Examiner determines that its claims are not patentably distinct from a “reference” patent or patent application.

The policy behind ODP seeks to prevent:

1. Extending patent term by obtaining a later expiring patent on an obvious variant; and
2. Split ownership of overlapping claims, raising the risk of separate enforcement by different parties with similar claims.

2. What Is the “Reference” in an ODP Rejection?

The reference document is a patent or patent application where claims are patentably indistinct from the pending application. The reference need not be prior art; what matters is the similarity between the claims of the reference and the rejected claims.

3. Provisional vs. Non Provisional ODP Rejections

When the subject application and the reference application are still pending, i.e., the claims that may be overlapping are not finalized, the Examiner will issue a provisional ODP rejection. No terminal disclaimer is required at this stage. If the subject patent application is allowed first and the provisional ODP is the only remaining issue, the examiner should withdraw the rejection.

However, once the reference application is allowed, the claims become fixed, and the ODP rejection matures into a non-provisional ODP rejection.

4. The Standard Fix: Common Ownership Terminal Disclaimer

A TD can be used to overcome a non-provisional ODP rejection. In a terminal disclaimer, the applicant disclaims the later-expiring portion of a patent term so that any patent resulting from the subject application expires no later than the reference patent used for the ODP rejection. In the terminal disclaimer the applicant must attest that both the subject application and the reference application have been 100% commonly owned by the same entity since the effective filing date. Joint ownership is permitted if both the applications are owned by the same owners.

5. The Trap for Corporate Families

The USPTO will accept a terminal disclaimer when the subject and reference applications are owned by wholly owned subsidiaries of the same parent company. However, USPTO acceptance does not mean the legal requirement of common ownership is satisfied.

The Federal Circuit has not decided whether wholly owned subsidiaries qualify as ‘commonly owned’ for purposes of a terminal disclaimer. The only court to address the issue, a Nevada district court in Email Link Corp. v. Treasure Island, held they are not commonly owned. Relying on corporate law principles, the court found the TD invalid and the patent unenforceable.

Bottom line: A USPTO accepted TD between subsidiaries can still be struck down in litigation.

6. Safer Option: Joint Research Agreement Based Terminal Disclaimer

A Joint Research Agreement (JRA) can allow patent applications from different corporate subsidiaries to be treated as if they are commonly owned. Thus, where ongoing research and development occurs between wholly-owned subsidiaries of a parent corporation, having a JRA in place can avoid a sticky situation where a foundational patent held by one subsidiary is cited against an improvement patent application held by another subsidiary in an ODP rejection.

A JRA based TD requires:

1. A written JRA in place before the effective filing date.
2. The invention must result from activities within the scope of the JRA.
3. The patent application must identify all of the parties to the JRA.
4. The TD must include a waiver of separate enforcement.

Note that the USPTO does not require the JRA itself be submitted and made of record, but maintaining documentation is advisable because questions about the existence or timing of a JRA could lead to inequitable conduct allegations if litigated.

7. Licensing Can Avoid ODP Issues

A license does not transfer ownership and thus can be used to provide patent rights without breaking common ownership and eliminating the TD option. For example, if a company retains 100% ownership of both the foundational patent and the improvement application, and grants a subsidiary an exclusive license, the patents remain commonly owned. This preserves the ability to use a TD to overcome an ODP rejection.

Assignments to subsidiaries, by contrast, may break common ownership and eliminate the TD option.

8. Avoid the ODP Entirely: Restriction Practice

When an Examiner makes a Restriction Requirement, the Examiner groups the claims into distinct inventions and requires the Applicant to select one invention for examination. Claims to the other inventions can be pursued in one or more divisional applications.

Because the claims from the other inventions are patentably distinct, as evidenced by the Restriction Requirement, the same law that provides applicants the ability to file a divisional application in response to a Restriction Requirement also provides a refuge from an ODP rejection for applications in the same priority chain. Thus, presenting claims that the applicant expects will face a Restriction Requirement is one way to avoid the ODP rejection and need for a terminal disclaimer.

A properly issued Restriction Requirement thus creates a “safe harbor,” insulating true divisional applications from an ODP rejection.

Summary: Key Points for Corporate Patent Portfolios

• USPTO acceptance is not enough. A terminal disclaimer filed across subsidiaries may be litigated and the patent invalidated.
• No Federal Circuit precedent resolves whether sister subsidiaries count as “commonly owned.” The only case on point rejects common ownership TDs across subsidiaries.
• JRAs provide a safer path when ownership differs.
• Licensing avoids ownership transfer, preserving TD options.
• Restriction practice can prevent an ODP altogether.