AIA: Expanding "Prior User" Rights

          Under current law, an accused patent infringer may offer a “prior user” defense when the patent in question is related to doing or conducting business (i.e., “business methods”) and the accused infringer used the invention but never filed a patent application for it. If the same invention is later patented by another person, the accused infringer may not be liable for infringement to the new patent holder, although all others may be. In passing the America Invents Act (AIA), Congress found that the prior user provisions of the earlier law were particularly important to high-tech businesses that prefer not to patent every process or method that is part of their commercial operations. When the new law becomes effective, the prior user defense may be asserted in limited situations against any patent, not just method patents.

          According to the new law, 35 U.S.C. 273 (Defense to Infringement Based on Prior Commercial Use), the prior user defense may be raised by a defendant who reduced the subject matter of the patent to practice and commercially used the subject matter at least one year before the effective filing date of the patent or the date that the patentee publicly disclosed the invention and invoked the § 102(b) grace period, whichever is earlier.

          The law defines a commercial use as 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.

          To prevail, the defendant would have to produce clear and convincing evidence of his or her activities that demonstrate the invention was reduced to practice and was commercially used, which is a relatively high burden and would likely require corroborating evidence, particularly in the case of non-documented evidence of human activities.

          Subject matter for which commercial marketing or use is subject to a premarketing
regulatory review period (e.g., pharmaceuticals) during which the safety or efficacy of the subject matter is established, including during any patent term extension period, shall be deemed to be commercially used for purposes of the new law during such regulatory
review period.

          A use of subject matter by a nonprofit research laboratory or other nonprofit entity,
such as a university or hospital, for which the public is the intended beneficiary, shall be deemed to be a commercial use for purposes of the new law, except that a prior user defense may be asserted only for continued and noncommercial use by and in the laboratory or other nonprofit entity.

         The prior user defense cannot be asserted if the subject matter was derived from the patent holder or persons in privity with the patent holder.  Prior user rights may not be assigned, licensed, or transferred to another, except as part of an acquisition of an entire business enterprise (e.g., an asset acquisition, merger, etc.).

          Congress stated that the change to the existing law was a “narrow expansion of prior user rights [that] balances the interests of patent holders, including universities, against the legitimate concerns of businesses that want to avoid infringement suits relating to processes that they developed and used prior to another party acquiring related patents.” Notably, the use of the term "processes" in describing the new law appears to relates back to the old law that was limited to method patents.

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