Prior user rights defence to patent infringement

Companies engaged in large-scale manufacturing must make the difficult choice between patenting or maintaining their process-improvement inventions as trade secrets. Historically, patenting was chosen when infringement of potential patent claims was susceptible to detection. If not, the likely alternative was protection by maintenance as a trade secret, so as to avoid teaching a competitor an improved process without an adequate enforcement recourse. When maintaining a process-improvement invention as a trade secret was chosen but a third party later patented the same improvement, there was concern as to whether continued practice of the process could be conducted free of infringement. In many countries, a prior user rights defence shields a party from a successful claim of patent infringement. In such cases, parties who have chosen to keep that process secret and used it as a commercial process can continue to use the process under a form of a defence to a charge of patent infringement (ie, the prior user right).

Prior to the America Invents Act (2011), the United States had a first-to-invent patent system, which rewarded not the first applicant to the USPTO, but rather the first to invent the subject matter of the claim. This was often resolved through a procedure called an interference. In addition, there was a limited defence to patent infringement under 35 USC 102(g)(2), under which the defendant would assert that it was the party who was the prior inventor and had not abandoned, suppressed or concealed the invention. With the enactment of the America Invents Act, the elimination of the first-to-invent system and the 102(g)(2) defence, the US Congress recognised that a robust prior user rights defence was necessary.

Prior user rights provisions

The prior user rights defence can be found in 35 USC 273:

                (a) A person shall be entitled to a defense under section 282(b) with respect to subject matter consisting of a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other process, that would otherwise infringe a claimed invention being asserted against the person if (1) such person, acting in good faith, commercially used the subject matter in the United States, 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 (2) such commercial use occurred at least 1 year before the earlier of either –

                                (A) the effective filing date of the claimed invention; or

                                (B) the date on which the claimed invention was disclosed to the public in a manner that qualified for the exception from prior art under section 102(b).

In order to qualify for the defence, the manufacturing process must have been used commercially for a year before the first filing of the subject patent anywhere or prior to certain grace period disclosures by the inventor. The party that asserts the defence has the burden of proof in establishing it by using the clear and convincing evidence standard. The same goes for an invalidity defence. Conversely, the patent owner need only prove infringement with a preponderance of evidence. Further, the defence is limited to the site of the manufacturing process. It is not available in cases where the ensuing patent was owned at the time that the invention was made by a university that utilises government funds, which would cover the vast majority of university patents.

While many in manufacturing have celebrated the creation of a robust prior user rights defence in the United States, it has been asserted a few times only and has not been successfully used as a defence all the way through trial and appeal. It is worth speculating upon why the defence has not been used more widely – perhaps many large manufacturing processes are simply too mature to be the continued focus of patenting or perhaps companies spend less time and effort on manufacturing process improvements today. Further, the standard for the use of the defence is the relatively high burden of clear and convincing evidence, on which many may be reluctant to rely. Another possibility is that the prior user rights defence may present the last line of defence when an opinion position of non-infringement, invalidity or unenforceability is unavailable or the option of a design-around or licence does not present a feasible alternative. In this fashion, a would-be infringer's reliance on the prior user rights defence is likely to be more prevalent than would appear from public pleadings as this would ordinarily be undertaken in secret – as part of the manufacturer's internal compliance procedures).