U.S. GATT Legislation Changes Patent Term

I. Introduction

In adopting the World Trade Organization implementing legislation under GATT¹, the United States has changed its patent laws in fundamental respects. The changes to U.S. patent law will affect owners of existing patents, as well as pending and future patent applications. It will be necessary for patent owners and applicants to undertake a comprehensive review of pending applications, to plan a strategy that will ensure the maximum term of patents that will issue under the new law, and to prevent serious loss of patent term. For many domestic and foreign corporations, it will be essential to complete this review and to file large numbers of new patent applications before June 8, 1995, in order to preserve the term of patent protection that had been ensured prior to the GATT legislation.²

Industries such as biotechnology, in which applications are routinely subject to extended delay in prosecution, and pharmaceuticals, in which the last years of the patent term are often the most commercially important, will be particularly affected by the changes in U.S. law, and should immediately begin to review, plan, and consult with patent counsel to avoid unexpected adverse consequences.³

The United States has now changed the patent term from the former period of 17 years from the date of patent grant, to 20 years from the date of filing an original application, beginning on the date the patent issues. The 20-year term under amended 35 U.S.C. §154(a)(2) is measured from the date of filing of the first application in a series of continuation, divisional or continuation-in-part applications.

The patent term provisions take effect on June 8, 1995,⁴ and will apply to all U.S. applications filed on or after that date, including continuations, divisionals and continuations-in-part of applications currently pending.⁵

The new legislation extends the term of already-issued U.S. patents to the greater of 17 years from the date of grant, or 20 years from the date of filing the original application.⁶ In any patent in which prosecution took less than 3 years from the date of original filing to issuance, an automatic extension of the patent term results.

The statute thus provides a windfall for industries in which average pendency is short, and particularly for applications subject to first-action allowance. Patent owners should review their portfolios to determine if patents issued on or after June 8, 1978, are subject to the extension provision, and whether existing licenses are affected by the new legislation.⁷

The term extension provides intervening rights for persons whose acts become infringing as a result of the patent term extension,⁸ but requires payment of "equitable remuneration" to the patent owner if such acts are "continued."⁹ The statute thus establishes a compulsory license with respect to the extended patent right. The difference, if any, between "equitable remuneration" and a "reasonable royalty" is not specified.¹⁰

In any pending case in which prosecution in an original application or a series of applications has taken more than 3 years, filing a further continuation or divisional application will result in a patent term that is shorter than the former 17-year patent term, if benefit of the earlier application under 35 U.S.C. §§120, 121 or 365(c) is claimed.¹¹

A claim to benefit of a foreign application under 35 U.S.C. §§119, 365(a) or 365(b) is not taken into account in determining patent term, and does not reduce the U.S. patent term.¹²

The reduction of patent term will affect industries, such as the chemical, pharmaceutical, and biotechnology industries, in which pendency of applications is long, restriction requirements are frequent, and regulatory delay in other agencies reduces the effective patent term. Other industries, in which technological advance and obsolescence are rapid, may not be as seriously affected by the loss of patent term.

This change in patent term will significantly change U.S. prosecution practice in a number of basic respects. For example, extensions of time for responding to an office action will typically be at the expense of the term of the issued patent, placing a much higher premium on early response to rejections during prosecution. It is evident that traditional continuation practice will be curtailed if not abandoned, to preserve patent term under the 20-year limit.

The strategy conventionally pursued in applications by corporate patent departments may be fundamentally changed, as illustrated by the following examples.

When a restriction requirement under 35 U.S.C. §121 is issued by the examiner, applicants should consider filing all required divisional applications at the time of initial response, in order to avoid potential loss of patent term.

The disparate impact of the legislation will be most acute in the pharmaceuticals field, where claims to a family of new compounds, methods for making them, and one or more therapeutic uses may be subject to multiple restriction requirements. Until now, it was possible to obtain successive patents each having a 17-year term from the date of grant, for nonelected compounds and therapeutic methods, effectively extending the term of the patent to compensate for regulatory delay. This option will no longer exist, and a new strategy must be devised to avoid loss of critical patent term.

The simultaneous prosecution of multiple divisional applications will be essential to preserve patent term, in contrast to the traditional prosecution system, in which consecutive prosecution of applications directed to nonelected subject matter has been the rule.

If a double patenting rejection is issued by the examiner, applicants must also consider the effect of filing a terminal disclaimer, where the rejection is based on a patent having a reduced patent term. Where the double patenting rejection is based on an issued U.S. patent, it will be possible to determine the effect of a terminal disclaimer. In this case, where the cited patent issues on an application filed prior to the statutory effective date, the patent that limits the term of the application by a terminal disclaimer will have at least a 17-year term from date of grant. Where the cited patent issues on an application filed on or after the effective date, the patent will be limited to an effective term of 20 years from the earliest U.S. application for which benefit is sought, and any terminal disclaimer will similarly limit the patent term of the affected application.

However, where the PTO issues a "provisional" double patenting rejection, based only on a pending application, if a terminal disclaimer is filed, the term of the patent cannot be determined until the cited application issues as a patent. If the cited application is refiled as a continuation application after the effective date, its term will be limited to 20 years from the earliest U.S. filing date relied upon in the continuation application.

Until an application cited in a "provisional" double patenting rejection issues, it should be assumed that a terminal disclaimer could have the effect of limiting the term of the patent issuing in an application rejected for double patenting to the abbreviated term of any patent issuing on the cited application.

The problem will be most acute where improvement patents are rejected for obviousness double patenting over basic patents offering broad coverage that have been pending through many continuation applications. If such basic patent applications are refiled after the effective date of the new legislation, their term will be severely limited, and terminal disclaimers of improvements on the basic technology will be similarly affected.

In many cases, it will be necessary to amend the claims or to contest an obviousness-type double patenting rejection on the merits, to avoid significant loss of patent term that would not have occurred under former terminal disclaimer practice.

In many cases, it will be advantageous to obtain narrow claims to a preferred commercial embodiment early in prosecution to enjoy benefit of the extended term. It will be increasingly important to file narrow claims that may be allowed in a first office action.

The patentability of broader claims can be pursued in a divisional or continuation application, which preferably will be filed after an appeal to overcome the rejection of broader original claims. The advantage of this procedure is that an extension of the patent term up to 5 years results from the period of appeal to the Board or to a federal court, including the Federal Circuit, as discussed in the next section.

A highly significant provision of the patent term legislation, that will fundamentally alter the course of prosecution in many U.S. applications, is the term extension provided by 35 U.S.C. §154(b). Under this section, if the issue of a patent is delayed due to appellate review by the Board of Patent Appeals and Interferences, or by a federal court, and the patent is issued pursuant to a decision in the review reversing an adverse determination of patentability, the term of the patent shall be extended for a period up to 5 years.¹³

The period of extension includes any period beginning on the date on which an appeal is filed under 35 U.S.C. §§134 or 141, or on which a district court action is commenced under 35 U.S.C. §145, and ending on the date of a final decision in favor of the applicant.¹⁴

An important limitation that will determine the time for filing such an appeal is that the extension will be reduced by any time attributable to appellate review before the expiration of 3 years from the filing date of the application for patent.¹⁵

For this reason, an appeal to the Board or to the Federal Circuit will become essential in order to preserve a 17-year patent term, when prosecution extends beyond 3 years in any application. After the expiration of 3 years, the time up to 5 years spent urging patentability before the Board and the Federal Circuit (or a district court) will not be subtracted from the patent term. In contrast, the same period spent urging the same points in prosecution before the examiner will reduce the term of the patent.

This exception from the patent term limitation resulting from extended prosecution will greatly increase applicants' incentive to appeal immediately in order to resolve the issue of patentability of broad claims. The former practice of extending prosecution through a series of continuation applications to present additional evidence and arguments will result in an automatic loss of patent term.

Appeal to the Board and the Federal Circuit will be the only area where applicants will retain some discretion and effective control over the loss of patent term resulting from delay in the PTO.

Because of the increased importance of appeals, it will be important to submit any contemplated amendments, including amendments presenting claims of broader or narrower scope to be argued on appeal, and any declaration evidence, in response to a first rejection. An immediate notice of appeal from a final rejection will toll the running of the patent term, and permit consideration of broader claims argued separately on appeal.

A most important provision of the GATT legislation is that the change to a 20-year term from date of original filing does not become mandatory until June 8, 1995.58 After that date, all applications filed in the United States (whether original applications, or continuations, divisionals or continuations-in-part of pending applications) will be subject to the 20-year term.¹⁶

However any application that is filed before June 8, 1995 will be entitled to the longer term of (1) 17 years from the date of grant or (2) 20 years from the date of filing of the original application.¹⁷

Applicants should immediately review all pending patent applications to determine if any applications should be filed or refiled before the June 8, 1995 date, in order to obtain the benefit of the 17-year term. Comprehensive review of corporate patent filings is essential to ensure that patent term is preserved.

A. Divisional Applications

In particular, applicants should consider whether to file divisional applications resulting from earlier restriction requirements. Any divisional applications that are filed before June 8, 1995 will have a 17-year term from the date of grant, even where the restriction requirement was made in a parent, grandparent, or earlier related U.S. application. If such divisional applications are filed on or after June 8, 1995, they will be limited to a term that is 20 years from the filing date of the earliest application for which benefit is claimed. This could result in a severe loss of patent term, where prosecution has extended over a number of continuation or divisional applications.

B. Continuation Applications

Also, if prosecution has extended significantly beyond 3 years in any chain of continuation applications claiming benefit under 35 U.S.C. §120, it would be beneficial to consider whether these applications could be refiled or divided into separate applications prior to the effective date.

If any pending application (including an original application) is finally rejected prior to the effective date, it would be advantageous to file an immediate continuation application to ensure the maximum patent term, submitting a later supplemental response, amendment or declaration after the effective date where necessary.

C. New U.S. Filings under 35 U.S.C. §119

Where possible, all new U.S. patent application filings should be made before June 8, 1995, including applications claiming priority from earlier foreign-filed applications under 35 U.S.C. §119. The eventual loss of patent term resulting from the U.S. legislation in many cases will greatly exceed the loss of priority term, and applicants should make every effort to file their U.S. applications before the new term becomes mandatory.

The patent term provisions of the U.S. GATT legislation will fundamentally change U.S. prosecution practice. It is essential for applicants to review their pending applications, and to make any necessary filings before June 8, 1995, in order to preserve the 17-year patent term afforded to these applications under current law. This review is expected to result in the unanticipated filing of large numbers of patent applications prior to the effective date, with unexpected pressure on corporate patent departments and budgets, that require immediate consideration.

After the effective date of the term provisions, it will be necessary to devise a new strategy for prosecution in many important applications, that will be effective to obtain the maximum patent protection and avoid unnecessary loss of patent term.

1) Uruguay Round Agreements Act, Pub. L. No. 103Ð465, tit. v, subtit. c, 108 Stat. 4809, enacted on December 8, 1994.

2) See infra §IV discussing the transitional provisions.

3) The impact of the legislation on the biotechnology industry is discussed in the author's forthcoming book, Biotechnology and the Federal Circuit §16.7 (1995), to be published by the Bureau of National Affairs.

4) Pub. L. No. 103Ð465, tit. v, subtit. c, §534(b)(1). The remaining changes to U.S. patent law effected by the Uruguay Round implementing legislation take effect one year after the date on which the World Trade Organization Agreement enters into force with respect to the United States. Id. §534(a).

5) Id. §534(b)(1); 35 U.S.C. §154(a)(2) (1995).

6) 35 U.S.C. §154(c)(1), reproduced infra note . This term is a maximum, and is subject to limitation by terminal disclaimer, as under current law. Id.

7) Such patents are "in force on" the effective date under 35 U.S.C. §154(c)(1), and are therefore automatically subject to the new term provision. The status of patents filed on or after June 8, 1975, and issued before June 8, 1978, is unclear. These patents will expire before the effective date of the new legislation, but may be revived beginning on the effective date, because they resulted from applications filed before the effective date. Id.

8) 35 U.S.C. §154(c)(2).

9) 35 U.S.C. §154(c)(3).

10) The damages remedy of 35 U.S.C. §284 is excluded by §154(c)(2), along with injunctive relief under §283 and attorney fees under §285.

11) 35 U.S.C. §154(a)(2).

12) 35 U.S.C. §154(a)(3).

13) A similar extension of term is afforded if the issue of an original patent is delayed due to an interference under 35 U.S.C. §135(a) or because the application is placed under a secrecy order pursuant to 35 U.S.C. §181. 35 U.S.C. §154(b)(1). The total duration of all extensions under §154(b) may not exceed 5 years. Id. §154(b)(4).

14) 35 U.S.C. §154(b)(3)(A).

15) 35 U.S.C. §154(b)(3)(B). The statute further provides that the extension shall be reduced for the period of time during which the applicant for patent did not act with due diligence, as determined by the Commissioner. Id. §154(b)(3)(C).

16) The patent term provisions of §532 of the GATT legislation (except for §154(a)(1), which expands the infringement remedy to include offering for sale or importing the invention into the United States) take effect on the date that is 6 months after the date of enactment (December 8, 1994) and apply to all patent applications filed in the United States on or after the effective date. Pub. L. No. 103Ð465, tit. v., subtit. c, §534(a)(1).

17) Pub. L. No. 103Ð465, tit. v, subtit. c, §534(b)(1). The statute establishes two different effective dates for the patent term changes. The statute first clearly states that the patent term amendments made by §532 take effect on the date that is 6 months after the date of enactment, and "shall apply to all patent applications filed in the United States on or after the effective date." Id. §534(b)(1). However, §534(b)(3) further provides that the term of a patent granted on an application that is filed on or after the effective date "described in subsection (a)" (which is the date one year after the date on which the WTO Agreement enters into force with respect to the United States), will be measured from the filing date of the earliest filed application where the application contains a reference to an earlier application filed under 35 U.S.C. §§120, 121, or 365(c). This bizarre conflict appears to result from a typographical error in §154(b)(3), but could be interpreted by the courts to provide an additional 6Ðmonth period for filing continuation or divisional applications without application of the 20Ðyear term provision.

60) 35 U.S.C. §154(c)(1) provides: DETERMINATION.§The term of a patent that is in force on or that results from an application filed before the date that is 6 months after the date of the enactment of the Uruguay Round Agreements Act shall be the greater of the 20Ðyear term as provided in subsection (a), or 17 years from grant, subject to any terminal disclaimers.