One significant change to the patent laws introduced by the America Invents Act (AIA) is the so-called prior user rights defence, codified at 35 USC, section 273, which applies to patents issued on or after September 16 2011. The defence is a potentially important tool for businesses seeking to limit patent litigation risks, particularly regarding non-public aspects of manufacturing processes.
The prior user rights defence is available to a person who commercially uses an invention, but does not patent it, and is sued for infringement by someone who later obtains a patent on the same subject matter. Subject to various statutory limitations, the prior user is then entitled to a defence against infringement liability.
Key issues for understanding the defence include: (a) limitations on the defence; (b) how the prior user rights defence relates to invalidity arguments; and (c) required record-keeping. Although judicial opinions have not yet addressed the AIA’s prior user rights defence, the statutory text and legislative history, the USPTO’s “Report on the Prior User Rights Defense” (January 2012), a congressional subcommittee hearing held in February 2012, and ongoing commentary provide the following practice pointers regarding the defence and potential future developments.
Key limitations on the prior user rights defence include the following:
One-year use requirement: The prior use must occur at least one year before the earlier of the patent’s effective filing date, or date of the inventor’s public disclosure. According to the USPTO’s Report and testimony at the recent congressional hearing, the one-year requirement is not typical of analogous provisions in other countries, and it may potentially be amended in the future.
Geographic and site-specific limitations: The defence will only apply if that prior use is within the United States. Moreover, if one acquires the right through assignment or transfer, the defence will typically only apply to thespecific sites of use on the later of the patent's effective filing date, or the assignment or transfer date.
Commercial use and commercial process limitations: The prior use must constitute “commercial use, either in connection with an internal commercial use or an actual arm’s length sale or other arm’s length commercial transfer of a useful end result of such commercial use”; and involve processes or products “used in a manufacturing or other commercial process”.
Transfer limitations: Except for transfer to the patent owner, licence or transfer of the defense may only occur as part of a good-faith assignment “for other reasons of the entire enterprise or line of business to which the defense relates.”
Limitation on subject matter scope: The defence only applies to the specific subject matter of prior commercial use, and to “variations in the quantity or volume of use of the claimed subject matter, and to improvements in the claimed subject matter that do not infringe additional specifically claimed subject matter of the patent.” It is not a general licence under the patent.
No-abandonment requirement: The defence will not apply where the prior user abandoned commercial use in the United States.
Exception for university-owned patents: The defence cannot be asserted against many patents owned or under an obligation of assignment to a university or university technology transfer organisation. As noted at the recent congressional hearing, any further statutory expansion of the prior user rights defence will likely require an accommodation for universities’ concerns.
Prior user rights and invalidity
In assessing risk exposure, the prior user rights defence should be assessed in tandem with invalidity considerations. This is because a prior use could potentially support a prior user rights defence and/or an invalidity defence (either one of which will suffice to defend against liability). The differing effective dates for the AIA's prior user rights defence and the AIA's amended definition of prior art complicate analysis. For patents with effective filing dates before March 16 2013 and issue dates on or after September 16 2011, the AIA's prior user rights provision, but pre-AIA definitions of prior art will apply to invalidity determinations.
The table below lists potential scenarios involving prior use (by someone other than the inventor) and the potential utility of a prior user rights versus an invalidity defence, under both pre- and post-AIA definitions of prior art:
Prior use Will prior user rights Will prior use invalidate the patent?
Will prior user rights defence apply?
Will prior use invalidate the patent?
1. Prior use began less than one year before filing date.
Pre-AIA: Potentially yes (for example, if publicly used within the United States or previously invented within the United States)
AIA: Potentially yes (if in public use or on sale anywhere in world)
2. Prior use was outside the United States.
AIA: Potentially yes (for example, if in public use or on sale anywhere in the world)
3. Prior use was public.
Potentially yes, assuming other requirements are met.
Pre-AIA: Potentially yes (for example, if publicly used or on sale within the United States, or previously invented within the United States)
4. Prior use was secret process used to create product on sale.
Potentially yes, assuming other requirements are met
Pre-AIA: Likely no
As shown in row 4, prior user rights are independently significant where the prior use is secret and commercial. The prior user defence is also significant on the border between public and secret use (rows 3 and 4). Whereas invalidity may depend on the precise meaning of public use, this inquiry should be irrelevant to the prior user rights defence. Thus, the defence allows reduction of litigation risks accompanying use that may or may not be sufficiently public to constitute invalidating prior art. This may be particularly helpful concerning technology not valuable enough to protect as a trade secret, but that could nevertheless be accused of infringement.
It is critical to maintain appropriate records that will enable one to prove entitlement to the defence by clear and convincing evidence, including documentation of the following:
· Technical details of the particular process or product at issue.
· Date(s) of first use within the United States.
· If there has been any transfer of the product or process to a new entity, records regarding specific sites where the invention was used and the business to which the invention related.
· Continuing usage (sufficient to avoid abandonment)
For the above reasons, when seeking to preserve a prior user rights defence, the practitioner should understand the defence’s multiple restrictions, recognise the interrelationship between the prior user rights defence and invalidity arguments, and keep careful records.
Monica Bhattacharyya is a partner with Kasowitz Benson Torres & Friedman in New York.
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