Cellect: Unveiling the Potential Impact on Patent Term Adjustment

by Dennis Crouch

Many have been thinking of the potentially large impact of Cellect v. Vidal, which is now pending before the Supreme Court.  This week I uncovered striking data that a very large number of patents have been impacted.

Some background: Many patentees divide their patents into multiple filings all based on the same original priority application.  This strategy has a number of reasons, but the basic idea is that the USPTO fee structure strongly encourages smaller claim-sets, and many applicants have found it to be both cost-effective and a quality improvement to sequentially obtain these bite-size patents.  Historically, this sequential approach was seen as problematic (inequitable) by courts because the later issued claim sets would also extend the patent-term beyond the 17-years per invention promised at the time.  The judge-made doctrine of obviousness-type-double-patenting (ODP) took care of this type of patent misuse by nullifying later-expiring patents absent a “terminal disclaimer” filed by the patentee that disclaims any extra patent term.   Historically though patent term was measured from the issue date. In 1995, this was changed so that the patent term starts running as of the priority filing date (not counting provisional or original foreign filings).  What this means is that a sequentially filed family of patents will all presumptively have the same expiration date.  But, Congress recognized that starting the clock as of the filing date could be harmful to patentees in situations where the USPTO is slow to examine  the applications.  And, this is a real concern since over the years the USPTO backlog has risen and fallen, and the USPTO has issued many rejections that it later withdrew. In response to the USPTO-delay concern, Congress created Patent Term Adjustments (PTA) that award additional patent term due to USPTO delays.

Importantly, as shown in the figure above, the Congressional scheme treats each patent separately and creates the possibility that each patent in a family will again have a different expiration date. Note, the figure comes from the PhRMA amicus brief in support of Cellect’s petition.  The figure shows a family of three patents each claiming priority to Patent #1’s original filing date. Note that in this situation, the originally-filed patent is the last to expire. I have found this first-is-last situation to be quite common.

In Cellect, the Federal Circuit found that the statutory required PTA was an improper extension of patent term in a situation where another family member had a different expiration date (due to less or no PTA) and the two included at least one obvious variant claim pair.

Recognize here that we have a strong obviousness statute — although it uses similar nomenclature, ODP is not based upon Section 103. Family-member patents are typically not prior art against one another because they each have the same effective filing date.  Rather, courts created ODP after recognizing the historic possibility of bad behavior by the patentee to extend the patent term via follow-on patent.

The data: I wanted to identify patents that were potentially at risk under the Cellect standard. To do this, I created a database of patents issued over the past 20 years – January 2005-June 2024, and queried for what I call “at risk” patents.  I defined an “at risk” patent in this context a patent awarded PTA extending beyond that of a family-member US patent (excluding divisionals). And, where the later-expiring patent is not subject to a terminal disclaimer.

  1. I expected to find a good number of patents, but was surprised to find over 700,000 parent-child dyads creating an at risk patent — where one of the pair has PTA extending beyond their linked-pair PTA adjusted expiration date, and without a terminal disclaimer on the later-expiring patent.)
  2. This translates to 425,000 unique patents at risk, with most of those at-risk involving the situation shown in the chart above. In particular, 75% of the at risk patents involved a parent patent being awarded PTA and a subsequent child being awarded less or no PTA.  In that situation, the examiner typically will not go back and ask the patentee to file a terminal disclaimer in the original case.
  3. Overall, this is about 9% of patents issued during this time, recognizing that this is an undercount, since some already issued patents will become at risk when their pending child applications issue.
  4. I added up the PTA days, and the total PTA amounts to more than 100 million days caused by USPTO delays that would be cut-off if everyone in this situation  filed terminal disclaimers.
  5. We recognize also that a much large percentage of patents have a terminal disclaimer on file — having already given up any statutory right to PTA.

Although the at-risk patents are more concentrated in certain areas, you can find examples in every area of technology and for every type of applicant. All this highlights that the outcome of Cellect has (and will have) a significant impact on the patent system.

These patents were granted additional term due to USPTO delays, as guaranteed by statute, but they now face potential invalidation under the judge-made doctrine of OTP if later deemed obvious variants of their related patents.

11 thoughts on “Cellect: Unveiling the Potential Impact on Patent Term Adjustment

  1. 6

    >We recognize also that a much large percentage of patents have a terminal disclaimer on file — having already given up any statutory right to PTA.

    Retroactivity will be an interesting issue if SCOTUS actually terminates OTDP i.e., on pure equitable/fairness grounds, shouldn’t those TD’s be voided b/c they were only made to avoid a now-defunct equitable rule? Maybe a new terminal disclaimer disclaimer form/fee??

  2. 5

    Dennis, would it be possible for you to provide a breakdown of how this affects the different art units? I strongly suspect it is heavy in the chemistry and (especially) pharmaceutical space, but that it just a gut feeling.

  3. 4

    In my view, we need to talk about something that has been contributing to the TD mess, and that is how the USPTO has been demanding that TD fees be filed (and paid for) at the time a provisional OTDP rejection is made. The USPTO used to allow you to defer filing a TD when the OTDP rejection was provisional. Then, they got cute and realized they could get TD fees earlier on (and guaranteed) in not just one case, but ALL the related cases if they demanded that TD fees be paid when the rejection was made in all the related applications. So, for example, in the old days, if there were two related applications, and you received a provisional OTDP rejection in both cases, you only needed to file a TD in the second application once the first application was allowed. Now, you have to file a TD in ALL related applications, even if NONE of the cases are eventually allowed.
    Is there a difference between an applicant getting squeezed for cash or just your everyday shakedown?

    1. 4.1

      I suspect the PTO has other motives for requiring earlier TD payments. [But the present $170 TD fee is so cheap compared to other patenting expenses as to not really impact budgets.] Also note a reportly proposed new fee structure for terminal disclaimers of a May 10, 2024 PTO NPRM would have a tiered-higher fee based on when the disclaimer is filed: Before a first Office Action $200; Before a Final Office Action $500; After a Final Office Action or Allowance $800; After a Notice of Appeal $1,100; After patent grant $1,400.
      [But still cheap compared to the costs that can be added to patent litigation to defend against an OPDP allegation.]

      1. 4.1.1

        “still cheap”

        It’s not a fair comparison. Clients weigh costs quite differently in prosecution and litigation. In litigation, clients accepts costs in tens of thousands, if not hundreds of thousands of dollars. In prosecution, every penny, nickel, and dime is counted by the client in a manner that would make Ebenezer Scrooge jealous.

  4. 3

    Just to be clear, the 700,000 include some (many?) patents that are protected by the §121 safe harbor? That is to ask, did you do anything to screen out true divisionals?

    1. 3.1

      No, I excluded divisional applications.

    2. 3.2

      “n”…

      Yglesias….

      ¯\_(ツ)_/¯

  5. 2

    Is the chart is an average for PTO handling of plural continuation or divisional application prosecution terms based on the same original priority application, or just 3 examples?
    The chart clearly illustrates that the real problem is PTO docket control. In particular, apparently still falsely treating continuation or divisional applications as “new” applications. Thus, not taking them up promptly with the docketing and case handling priority their true, original, filing date would require in a rational judicial system. That is what leads to their PTA and OTDP / terminal-disclaimer issues.

    1. 2.1

      The chart in the brief was just a hypothetical example.

  6. 1

    Gilead changed the determination of relevance of a patent for ODP from the issue date to the expiration date. We need to go back to the issue date, IMO.

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