America Invents Act: Prior Use Defense

One of the provisions of the America Invents Act was a newly expanded defense for prior use of an invention.  This defense applies to any patent issued on or after the Act’s effective date, September 16, 2011.

The previous version of the Patent Act contained a prior user defense, but the defense was limited to infringement of claims to business methods.  Now, the AIA has expanded the defense to all patents.

The New Statute (§ 273)

The defense applies to good faith commercial uses and arm’s length sales and commercial transfers that occurred at least one year before the earlier of (1) the effective filing date of the patent application, or (2) the inventor’s public disclosure that is an exception to prior art under the AIA’s limited grace period.  The party asserting the defense must prove the facts to establish the defense by clear and convincing evidence.

What is commercial use for purposes of the defense?  The statute does not specifically define commercial use so we won’t know exactly until the defense is tested in the courts.  The statute does provide several specific instances that would qualify as commercial use.  First, subject matter for which regulatory approval is required prior to commercial use would qualify during that period.  For example, FDA filings for drugs and medical devices would qualify as commercial uses even though not yet technically in the marketplace.

Second, use by a nonprofit research laboratory or other nonprofit entity, such as a university or hospital if the public is the intended beneficiary of the use would qualify as a commercial use.  The defense only applies to continued an noncommercial use by and in the laboratory or other nonprofit entity.  Thus, a university or hospital could not transfer the product or process to another entity that would commercially exploit the subject matter outside of the nonprofit entity.

The statute does restrict this defense to the first entity who is entitled to it.  This means the defense may not be transferred, assigned, or licensed to another entity, except as part of the good faith transfer of the entire entity or business line of the entity.  In such a case, the acquiring party may not expand use of the subject matter entitled to the defense beyond its original site.

The defense is limited to the specific claims that cover the subject matter to which it applies and not generally to the entire patent, except that changes may be made to quantity or volume, and improvements may be made to the subject matter provided that they are not specifically covered by other claims of the patent.

If the commercial activity that qualifies for the defense is abandoned, those activities that would otherwise qualify for the defense prior to the abandonment may no longer be relied upon for the defense.

Unless development of the subject matter of the patent utilized federal funding, the defense does not apply to patents that were made by, owned by, or subject to an obligation of assignment to a university or other entity of high education.

Finally, a patent may not be invalidated based on this defense and the unreasonable assertion of the defense would subject the entity raising the defense to a finding that the case was exceptional and an award of attorney’s fees to the patent owner.

Analysis

I previously covered the issues surrounding this defense, but they deserve to be reiterated here.  This defense is contrary to the purpose of the patent laws of “promoting the progress of science and the useful arts.”  The patent system promotes this progress by encouraging public disclosure of new inventions.  In exchange, the government grants the disclosing party a limited monopoly over the disclosed subject matter.  Once the patent expires, that knowledge and subject matter becomes a part of the public domain.

This defense rewards entities that keep innovations secret.  There is no longer a risk to keeping developments secret because you can always assert the prior use defense.  To be sure, trade secrets have their place, but the owner of a trade secret holds the technology in secret with the risk that it could be patented by someone else.  An expanded prior user rights defense would provide an incentive to keep new inventions secret.  Why bother with the patent system when you can simply practice your technology in secret and be shielded from liability for infringement of other parties’ patents?

I was wrong in my previous assertion that there would be a fight over this issue.  The statute does require a report on the issue, but it seems unlikely to go away.  This is another example of Congress whittling away the power of patents and the incentive to disclose new inventions to the public.

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15 Responses to “America Invents Act: Prior Use Defense”

  1. Hugh Neary Says:

    “This defense rewards entities that keep innovations secret. ” Yes, but it is necessitated by a flawed system that gives patents for things that are so obvious or non-innovative that they are currently part of the useful (and used) arts. Prior use, like prior art, should be a sufficient reason not to give someone else a patent on the process.

  2. Randy Says:

    Matt – I have heard that the holder of the Trade Secret will also be able to file for a patent at any point in the future (assuming another has not already done so). Is this correct?

    • Matt Osenga Says:

      Randy,

      Provided that the Trade Secret meets the requirements for patentability, yes it cold still be patented. The primary question will be whether the inventor or anyone else has disclosed the Trade Secret publicly prior to the patent application date.

      Matt

  3. Renee Marie Jones Says:

    Engineers never use patents in their work. Why? Because lawyers make sure that no useful technical information is disclosed in a patent. Modern patents do NOT disclose the invention, and the courts steadfastly refuse to enforce the disclosure requirement. If they did, no current patent would be valid.

    This is no change.

  4. Ramon Says:

    Matt, did you consider that patents are not the only means of disclosure? Not all inventors demand a monopoly for disclosing their ideas. That first-use defense allows inventors to disclose their innovations via other channels, without having to worry (as much) about someone dashing to the first-to-file patent office and appropriating their work. Incentivising patent applications is not necessarily equivalent to incentivising progress, and in a first-to-file system, you *must* have some mechanism for fairness to those who choose not to patent, for whatever reasons.

    • Matt Osenga Says:

      Ramon,

      You are absolutely correct, there are many other means of disclosing information and inventions. In some instances, some inventors, often academics or those of similar vent, are simply happy to add to the public’s knowledge-base. Generally, however, innovation costs money and other resources. Most innovation occurs as a means to give the innovator a competitive advantage in the marketplace. In some cases, this can be accomplished by trade secrets, in which case the public does not benefit from the disclosure of the innovation. In other cases, the patent grant provides incentive to disclose the invention. The purpose of the patent system is to facilitate this disclosure, to add to the public’s knowledge base so that others may “stand on the shoulders of giants.” There is nothing inherently unfair about the risk the patent system poses to those who choose not to participate in that system. It is simply a choice to be made.

      Matt

  5. Ramon Says:

    As I was reading this, the reply being composed in my head started with “Well, yeah, but…”, until I got to “There is nothing inherently unfair about the risk the patent system poses to those who choose not to participate in that system.”… at which point my head exploded.

    I may be taking liberties with the context of that assertion, but the victims of non-practicing entities, in addition to what I believe to be the majority of computer software engineers, would likely disagree. Vigorously.

    I’ve strayed pretty far off-topic, so feel free to moderate this away. I just felt compelled to comment.

    -Ramon

    • Matt Osenga Says:

      Ramon,

      Your comment is fine. We can certainly disagree on this issue. My point is simply that the prior use defense significantly weakens patents and encourages parties to keep their inventions confidential when we might otherwise have benefited from their disclosure.

      Matt

      • Ramon Says:

        I’ll counter with my position being that weakening patents isn’t necessarily a bad thing (that’s a soapbox for another day), and that the first-use defense does encourage disclosure… just not via the PTO.

        -Ramon

      • Jeff Green Says:

        Unfortunately the last time a patent genuinely disclosed an invention was about 100 years ago. Since then lawyers have systematically subverted the system.
        As a person “paid to invent” for many years I have written many draft patent specifications only to see them routinely gutted by company patent departments.
        Patent offices should look at an invention with a critical eye and if the examiner does not feel able to reproduce the disclosed steps after 2 readings reject the application.
        Incidentally having lived all my inventing life where first to file and prior use exemption were the rule I have to say neither ever put any company off from writing a patent.

  6. General Global Week in Review 26 September 2011 from IP Think Tank Says:

    [...] America Invents Act: Prior use defense (Inventive Step) [...]

  7. Randy L Says:

    Jeff – Regarding: “Lawyers have systematically subverted the system.” America Invents takes out the requirement for showing Best Mode. This is obviously the result of lawyers not wanting to be at risk for withholding information, and is more subversion of the system. Another example in America Invents is the seven places in Section 20 where the language that had protected against “intent to deceive” have been eliminated. I’d like to know what lawyers wrote this bill.

  8. America Invents Act: Other Provisions in Effect Now « INVENTIVE STEP Says:

    [...] have a number of provisions that have already gone into effect.  I have previously discussed the Prior Use Defense and the Fee Setting [...]

  9. Marvin Elder Says:

    As an inventor and software engineer who doesn’t like software patents in the first place, I’d like to respond to your question,
    “Why bother with the patent system when you can simply practice your technology in secret and be shielded from liability for infringement of other parties’ patents?”

    That is exactly the point that most software engineers make: Let me develop my software product and commercialize it, keeping the underlying technology and code as a trade secret.

    If I am indeed the “first to invent”, I need some shield from liability. And like many software engineers who build products and apps, I’m not greedy enough to pursue inventors of similar products as infringers through the patent courts.

    • Matt Osenga Says:

      Marvin,

      You are certainly permitted to make the choice of keeping your inventions secret; no one forces disclosure. The point of the patent system is, however, to PRMOTE public disclosure of inventions. If you choose to keep your invention as a trade secret, that is your right. You should also understand the risk that someone else may patent the invention in the meantime.

      Matt

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