Double Patenting - Danger for Start-ups

Obvious-type double patenting is a judicially created doctrine combating two potential evils -- extension of patent term and division of ownership of the same invention.  The rules applied by the USPTO examiners when examining obvious-type double patenting issues are complex, esoteric, and generally difficult.  Fortunately, most double patent rejections are easily overcome by merely filing a Terminal Disclaimer (TD) and paying a small fee.  

However, there are specific instances when the filling of a TD is simply not possible.  These instances usually occur in the start-up context, particularly with regard to companies based on university spin-offs.  The inability to file a TD can sometimes be devastating to the IP portfolio of the start-up company, and can actually lead to significant funding issues (i.e., the loss of VC funding in particular). 

Consider the following example. A university researcher develops a new concept and the university files an initial patent application describing the new concept.  Then, the researcher works with the technology transfer office of the university to spin-off a new company.  The new company then takes the concepts and develops further practical applications of those concepts, extends the concepts to new markets, etc., and files a second patent application on the new developments.  The university owns the first application and licenses it to the new company.  The new company owns the second patent application.  The new company seeks investors and lists as one of its main assets the second application, covering specific commercial embodiments that will be the main revenue stream. During prosecution of the second application, the first application does not count as prior art for patentability, and the Examiner can find no other relevant prior art. However, the Examiner rejects the second application for double patenting based on the first application.   

One would think the solution is easy - file a TD.  However, TDs have a common ownership requirement, which is not present here.  Consider the sample language from the USPTO form: "The owner hereby agrees that any patent so granted on the instant application shall be enforceable only for and during such period that it and the prior patent are commonly owned."  Unless the university will transfer ownership of their first application to the new company, any investor doing their diligence will have serious questions as to whether the new company has any enforceable rights. Further, arguing against a double patenting rejection can be very difficult and time comsuming.  

So, start-ups should be very careful with their filing and licensing schemes and handle double patenting rejections with care.  Investors doing due diligence should be wary of any TD filed where there is not clear ownership of the application or patent to which the TD is tied.