Defense to patent infringement based on prior commercial use under AIA

Choice between patents or trade secrets

Inventions may be protected either through trade secret or patent.  Inventions that are accessible to the public and can be reversed engineered cannot be protected through trade secrets.  Trade secret protection requires that the information remain a secret.  In these cases, the invention must be protected through patents.  However, inventions for internal use only or are difficult to reverse engineer may be protected through trade secrets.  The benefit of trade secret protection is that as long as the information remains a secret, the trade secret may last indefinitely.  Think of the Coca-Cola formula.

Downside to trade secret protection

The downside to protecting one’s invention through trade secret is even though you are the first inventor, you can be sued at a later date for patent infringement by a second inventor that applies for and receives a patent on the invention.  Your use of your own trade secret will not bar the second inventor from receiving the patent.

Existing defense to infringement based on prior commercial use

Prior to the America Invents Act, the law limited protection in this situation to business method patents.  First inventors that secretly used the invention could raise a defense of patent infringement based on his/her use of the invention.

Enlargement of scope of defense under America Invents Act

The America Invents Act enlarges the scope of the defense to patent infringement to include any commercial use of any process or machine, manufacture, or composition of matter used in a manufacturing or other commercial process.  See § 273(a) below.

No significant impact because of potential penalties and limitations

Regardless of the expansive scope of this defense, it isn’t expected to have a significant impact on patent litigation.  The old and new version of the defense potentially opens the door for increased liability if the defense is raised.  The patentee could demand attorney fees from the defendant which may dwarf any damages award.  Under the AIA, if the defense is unreasonably raised, then the patentee may request that the case be made exception, thus opening the door for the attorney fees award.  See § 273(f) below.

Moreover, the defense has other significant limitations.  For example, the defense can only be raised by the person who performed or directed the performance of the commercial use.  See § 273(e)(1)(A) below. The person cannot transfer the defense to another except as part of a sale of a business. See § 273(e)(1)(B) below. If the person abandons the commercial use, then activities prior to the date of abandonment cannot be used to prove up the defense.  See § 273(e)(4) below. These limitations are significant.  The full text of the defense is shown below.

Preserving the status quo

This defense to infringement based on prior commercial use preserves the status quo.  If the defendant had been utilizing a particular method or device for more than one year prior to the filing date of the patent being asserted, then this defense allows the defendant to continue doing whatever the defendant was doing.

Effective date

Applies to any patent being asserted and matured into a patent on or after September 16, 2011.

Section 273

Click here for the text of Section 273.

I invite you to contact me with your patent questions at (949) 433-0900 or [email protected]. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.