A district court judge recently ruled that a single corporate entity must own all patents connected by a terminal disclaimer in order to enforce the patents. Having different subsidiaries own different, connected patents is not sufficient.
Patent applicants often file multiple patents covering different aspects of the same invention. When the Patent and Trademark Office (PTO) determines that different patent applications relate to obvious variants of the same invention, it will often reject the patents, essentially saying that the applicant is trying to patent the same invention twice. In order to overcome such a double patenting rejection, the applicant will often file a terminal disclaimer. A terminal disclaimer is a document that disclaims the end or terminal portion of the patent term of the later filed of the two patents, such that it will expire at the same time as the earlier of the two patents. This disclaimer has two practical effects. First, the disclaimer requires that both patents expire at the same time. Second, the disclaimer requires that both patents be "commonly owned" in order to be enforced.
In Email Link Corp. v. Treasure Island, LLC., 2012 WL 4482576 (D. Nev. Sept. 25, 2012), a district court judge interpreted the "commonly owned" requirement and dismissed a patent infringement lawsuit brought by Email Link against a number of defendants for infringement of U.S. Patent No. 7,840,176 (the '176 patent). In Email Link, a well-known patent holding company, Acacia Global Acquisition LLC, wholly owned two relevant subsidiaries: Email Link and Online News Link. Email Link owned the patent at issue, the '176 patent. Online News Link owned a different patent, U.S. Patent No. 7,508,789 (the ’789 patent). When the '176 patent's application was pending, the PTO rejected the application because it claimed an obvious variant the invention claimed in the '789 patent. Acacia overcame the rejection by filing a terminal disclaimer essentially connecting the '176 patent to the '789 patent by disclaiming the portion of the '176 patent term that would have extended beyond the '789 patent term.
The court granted the defendants' motion to dismiss. Although the two subsidiaries were owned by the same parent, the court held that the '176 patent was not enforceable because there had been filed a terminal disclaimer regarding the '789 patent, but the two patents were not "commonly owned." The court (quoting Dole Food Co. v. Patrickson, 538 U.S. 468 (2003)) stated that to ignore the corporate structure that Acacia chose would go against "a basic tenet of American corporate law…that the corporation and its shareholders are distinct entities." Furthermore, Acacia could not correct the problem by assigning both patents to one entity, as the patents "expire[d] immediately" as soon as they were not commonly owned.
The Email Link case has practical effects for both patent holders and defendants in patent lawsuits. Even before this case, patent holders had to carefully manage their patent portfolios to avoid problems with terminal disclaimers. The Email Link case clarifies that all patents connected by terminal disclaimers must be owned by the same subsidiary. This requirement may force patent holding companies to rethink their common practice of incorporating separate entities for holding ownership to different patents.
The Email Link case provides defendants with another relatively low-cost exit to litigation. The Email Link case was decided on a motion to dismiss, before discovery began. Patent ownership can be determined by searching information made publicly available by the PTO. Also, patent owners must assert ownership of patents when filing a lawsuit. Defendants should consider researching both the PTO's ownership records and lawsuits involving patents connected by a terminal disclaimer. A fruitful search may result in the lawsuit's dismissal.