Prior Use Rights v. Patent Protection

By Julie Shursky

Before the enactment of the Leahy-Smith America Invents Act (“AIA”), the prior user rights defense was limited to business method patents.  35 U.S.C. § 273 (2006) (restricting the defense to patent claims for “a method of doing or conducting business”), amended by Leahy-Smith America Invents Act, Pub. L. No. 112-29, sec. 5(a), 125 Stat. at 297.  The AIA, however, amended the language of Section 273, such that the defense is now applicable to any “process” or any “machine, manufacture, or composition of matter used in manufacturing or other commercial process.”  35 U.S.C. § 273(a) (2011).  Further, Section 273 states that an accused infringer must prove, by clear and convincing evidence, that the patented subject matter was “commercially used” in the United States at least a year prior to the effective filing date of the claimed invention.  35 U.S.C. § 273(a)(2).  This expanded prior user rights defense under the AIA applies to any patent issued on or after September 16, 2011.  Pub. L. No. 112-29, sec. 5(c), 125 Stat. 284, 299 (2011).  To qualify for the defense, the accused infringer must establish strict requirements that limit the defense’s applicability to very rare situations:

  • The use must be a good faith commercial use in the United States. Since the commercial use must be in the United States, some foreign commercial activity will not qualify.
  • The use must occur at least one year before the earlier of (1) the effective filing date of the asserted patent; or (2) the date on which the claimed invention was disclosed to the public in a manner that qualified for the prior art exception from under AIA. 35 U.S.C. 102(b); 35 U.S.C. 273(a), (e)(2) & (4).
  • The use must be in connection with (i) an “internal commercial use” or (ii) an arm’s length sale or transfer of a useful end result of the internal commercial use. 35 U.S.C. § 273(a)(1).

The AIA also sets forth several important limitations to the defense:

  • The prior commercial use defense is “personal,” which means it cannot be separately licensed, transferred, or assigned to a third party, except that the defense can be transferred as part of a good faith transfer of an entire business or relevant line of business.
  • In the event that the defense is transferred as part of such a good faith transfer, the defense may only be asserted for use at sites where the use occurred prior to the later of the date of the transfer or the effective filing date of the claimed invention. If the purchaser begins practicing the commercial use at the new sites after the effective filing date and after the transfer takes place, those uses will not qualify for the defense.
  • The defense is not a “general license,” which means that it does not provide a general license to all the claims of the asserted patent. For example, if a party qualifies for the defense, but only has practiced claims 1-5 of a patent, that does not mean the party can also practice claims 6-10 of the same patent without being liable for infringement.
  • The defense is not available if the commercial use is derived from the patentee or persons in privity with the patentee.
  • If the commercial use is abandoned, the defense may not be relied upon with respect to activities that occur before the abandonment. Certain legislative history, however, suggests that processes that are used periodically or seasonally may still qualify for the defense (i.e., the periodic or seasonal use does not render them abandoned), even though they are not continuous.

Although the prior user rights defense under the AIA is a powerful tool to defend against patent infringement claims, there is a caveat to the defense, which is that the accused infringer must maintain sufficient records of its prior use.  The records should be detailed enough to preserve the defense with respect to each claim that may be asserted.

 

Since the law is new, there is a lack of clarity on limitations, such as the ability of the prior user to expand the capacity of the use, the ability to implement improvements, the requirements of the continuousness of the use, and what constitutes a “commercial use” as required under the statute.  The intention behind the prior user defense, however, is not only to provide for fairness to a prior inventor, but also to boost the rights of a trade secret holder against the rights of a later patent holder.  See 157 Cong. Rec. S5319 (daily ed. Sept. 16, 2011) (statement of Rep. Smith).  Specifically, the sponsors of the AIA intended to broaden the amendment in order to insulate businesses from having to disclose their internal processes or manufacturing materials.  See, e.g., 157 Cong. Rec. H4483 (daily ed. June 23, 2011) (statement of Rep. Smith) (“The prior-use defense is not overly expansive and will protect American manufacturers from having to patent the hundreds or thousands of processes they already use in their plants.”); 157 Cong. Rec. S5426 (daily ed. Sept. 8, 2011) (statements of Sen. Blunt and Sen. Leahy) (discussing that “the prior user rights provided under section 5 of H.R. 1249 will allow developers of innovative technologies to keep internally used technologies in-house without publication in a patent”).  Therefore, a major driving factor behind broadening the prior-user defense was to shield manufacturers who owned trade secrets from subsequent patent-infringement claims.

 

 

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