Five Ways to Leverage

patent forms

Note: This is the fourth of a series of articles on the America Invents Act (AIA), the sweeping patent reform legislation signed into law in September 2011.

One of the most notable changes in the AIA provides companies accused of patent infringement with a new defense based on “prior user rights.” This might sound like a phrase that only a patent attorney could love, but in a world in which technology products are increasingly complex, the protections it provides can be vital. Here’s why:

Applying for patents on every one of the many inventions that go into today’s complex products isn’t practical. The costs and time commitments to actually write and file the applications would be prohibitive, and some of the resulting patents would be so specific that they would have limited commercial value. Some inventions are more effectively leveraged if they were held as trade secrets instead of being disclosed to the world through the patenting process.

What happens, however, if the invention that your company chooses to retain as a trade secret is independently replicated by a competitor who decides to patent it? If the competitor then sues your company for patent infringement, what can you do? This is where the new prior user rights defense can play a role.

If your company was commercially using the competitor’s patented invention by a sufficiently early date, that commercial use can inoculate your company against an infringement finding. This leaves your company free to continue using the invention without paying any royalties to the competitor who has patented it. The competitor can sue other people for infringement, but your company is off the hook.

Prior user rights aren’t new in US patent law; a provision covering business method patents has been in place since 1999. However, the AIA greatly expanded the scope of these rights. As Representative Lamar Smith (R-TX), one of the AIA’s sponsors, explained in a June 2011 speech in the House of Representatives:

The inclusion of prior user rights is essential to ensure that those who have invented and used a technology but choose not to disclose that technology–generally to ensure that they not disclose their trade secrets to foreign competitors–are provided a defense against someone who later patents the technology.

In effect, trade secrets just got a promotion: They retain the same advantages as before in terms of offering a competitive advantage, while one of their risks–the possibility of being held liable for practicing your own trade secret–has been lowered.

However, the AIA’s prior user rights provision doesn’t provide blanket immunity. For example, it can’t be used against patents that issued before September 16, 2011. In addition, prior user rights generally don’t apply if your company is accused of infringing a patent covering a university invention (the story of that exception and its implications may be worth a separate post of its own). And, if your company’s commercial use doesn’t occur early enough, the defense isn’t available.

What’s clear from the above is that if your company is sued for patent infringement, there’s a new defense that could be valuable. But does that mean there’s no need to give this aspect of patent reform any thought unless and until a patent lawsuit occurs? Absolutely not. Here are some things companies can do right now in light of this new provision:

  • In some respects, the shift from a first-to-invent to a first-to-file system decreases the protective power of internal documentation. However, that documentation can still be important for the prior user rights defense. The success of that defense will depend on the ability to show early commercial use of the invention–a task that will obviously be much easier if you’ve been careful with documentation.
  • In contrast with prior user rights provisions in many other countries, under the AIA those rights protect commercial use, but not preparation for commercial use. A trade secret that isn’t yet being commercially used can’t be used as a defense against infringement.
  • How do you handle an invention that isn’t valuable enough to patent, and isn’t likely to be particularly valuable as a trade secret either? If your company has no short term plans to commercially use the invention, but may want to do so in the future, it’s worth considering a pre-emptive public disclosure aimed at preventing anyone else from obtaining a patent that might later come back to bite you. (However, it’s important to be aware of the consequences of such a disclosure on your own company’s patent rights, particularly internationally.)
  • While it’s clear that the AIA’s prior user rights defense applies to a broad range of patents, the language of the AIA leaves some doubt regarding the precise breadth of that coverage. Companies should keep an eye out for case law or legislative actions that might clarify this issue in the future.
  • By increasing the value of trade secrets, the prior user rights defense alters the set of considerations involved in deciding how to handle new inventions.

While the full impact of the prior user rights defense on the American patent landscape won’t be known for many years, what’s clear now is that it can be an asset for the many companies that build today’s increasingly complex technology products.