By Benjamin R. Imhoff and Thomas R. Knight
Within recent years, Congress has dramatically changed the substantive patent laws. While "First to File" and "Inter Partes Review" have grabbed headlines, the changes also include an expanded "Prior Commercial Use" defense to patent infringement.
Patents provide exclusive rights to make, use, sell, and import an invention in the country granting the patent. However, these exclusionary rights come at a price. In exchange for patent protection, the inventor must fully-disclose how to make and use the invention to the public at large. Once the patent expires or becomes abandoned, all rights in the invention cease and the invention becomes free to the public. In most cases, the same is true of applications for inventions that never mature into granted patents.
In contrast, trade secrets never expire, potentially providing rights into perpetuity. However, electing to protect an invention as a trade secret also comes at a price. Aside from preventing theft, there is no protection against a third party independently developing the same invention, even by intentional reverse engineering. Furthermore, there is nothing to prevent this third party from subsequently patenting the invention, which would technically render the prior user an infringer.
Thus, strategic decisions must be made as to whether to avail oneself of patent or trade secret protection for an intellectual property asset. The peculiarities of trade secrets in mind, Congress enacted the "Prior Commercial Use" defense under 35 USC §273. The defense generally provides an affirmative defense to a patent infringement assertion against a party who has already been using a process, machine, manufacture, or composition that later becomes the subject of another’s patent. The use to support the defense need not rise to the level of a trade secret, though non-secretive use typically precludes later patent protection by another under the novelty and obviousness standard, rendering this defense moot. In the case where a patent covering this use does later issue, the prior commercial use does not form a basis to invalidate the later patent, but merely serves as an infringement defense for the prior user. (See, 5 Donald S. Chisum, Chisum on Patents, §16.03[a] (Matthew Bender) (quoting H.R. No. 106-287(I), 106th Cong., 1st Sess. (1999)).)
A Precise and Limited Defense
While the Prior Commercial Use defense is intended to protect prior users from patent infringement claims asserted by later users, its protection is limited to very narrow circumstances.
§273 Prior Commercial Use Requirements:
1. The original user acted in good faith in conjunction with:
2. The commercial use occurred at least 1 year before the earlier of:
Essentially, the defense is limited to only those uses actually practiced, and only those uses practiced at least one year before the later party disclosed the invention. Furthermore, this "actual use" must be more than a mere fleeting, preparation for use and is only a defense while the use remains uninterrupted. In other words, the defense only applies to otherwise-infringing acts through the date that the commercial use becomes abandoned.
Similarly, the defense requires proving prior commercial use for all elements claimed in the later party’s patent. Therefore, in addition to the ambiguity surrounding "use," there is appreciable risk that even a sufficient use may vary from the patent claims enough to preclude the defense altogether.
The University and Technology Transfer Organization Exception provides a further limitation to the "Prior Commercial Use" defense. Under §273(5), the defense does not apply to an invention that was made, owned, or subject to assignment to an institute of higher education or technology transfer organization at the time the invention was made. In other words, the defense is inapplicable against patent infringement claims asserted by a university or technology transfer organization. Therefore, under this exception, electing trade secret protection not only prevents the prior user from asserting claims against others, but also risks infringement liability to this special class of subsequent applicants.
Unfortunately, Congress did not define "commercial use," making it difficult to assess the strength of a particular use as a defense against future patent infringement claims. It appears that "use" in the prior commercial use defense is a lower standard than the "use" requirement for patent validity under §102, but it remains unclear precisely how much use is necessary. If trade secret protection is elected, preserving this defense likely requires concurrently maintaining detailed, uninterrupted records of every aspect of use until the defense is no longer required. This is particularly true while the courts further develop the definition and standards for this defense.
Perhaps due to this uncertainty, the defense has rarely been asserted—by one measure only in 0.5% of applicable cases. (Coby Nixon, ‘Prior User’ Defense Still Unpopular with Accused Infringers, Law360, Sept. 3, 2015.) In fact, the same report found that the defense had never been successful on the merits, despite existing in some form for the last 19 years. Based on the unknown burden of proving sufficient prior commercial use, attacking the validity of an asserted patent may be preferred to the cost and disruption of discovery of asserting a prior commercial use defense.
While obtaining a patent precludes the risk of liability to later-filing inventors when practicing that same invention, trade secret protection may provide the best protection for a particular invention or industry. In these cases, prior commercial use can provide a defense to later infringement assertions and thus, detailed records should be maintained to prove continuous use as required. However, one should not overestimate the strength of a prior commercial use defense and should assess the risk of subsequent patents by third parties when determining a strategy for intellectual property protection. Although the effectiveness of the "Prior Commercial Use" defense remains to be seen, it is nonetheless worth considering when developing business practices in the context of intellectual property.
Andrus attorneys Bill Adolfsen, Aaron Olejniczak, Scott McBride and Tammy VanHeyningen will present a program entitled "Creating, Protecting, and Promoting Biotech in a Global Marketplace" in conjunction with our colleague, Matt Spencer of Boult Wade Tennant, at the 2016 Biotech and the Law Global Conference and Expo, to be held in Madison, Wisconsin in May. The program with discuss several issues surrounding the development of a successful global patent strategy, including the factors biotech companies should consider when deciding to file foreign patent applications, specific issues surrounding the procurement of patent rights to biotech inventions in individual countries, and enforcement considerations such as the use of the newly forming Unified Patent Court in Europe.
Chris Scherer attended the 2015 AIPPI World Congress in Rio in October 2015. While there, Chris participated in the annual meeting of the AIPPI Q222 Special Committee on Standards and Patents. AIPPI (International Association for the Protection of Intellectual Property) is the world's leading international organization dedicated to the development and improvement of legal regimes for the protection of intellectual property. These annual meetings are meant to engage members in discussions to achieve consensus positions regarding IP issues in various jurisdictions. In addition to the Q222 Special Committee, Chris currently serves on the National Steering Committee of the AIPPI-US Division.
Ben Imhoff attended the 2015 Leadership Meeting of the International Trademark Association (INTA), held in Panama City, Panama in November 2015. Ben and trademark practitioners from around the globe gathered for meetings of INTA's Harmonization of Trademark Law and Practice Committe and Classification Sub-Committee, for which Ben was appointed to a second two-year term. INTA is a global association of trademark owners and IP professionals dedicated to supporting trademarks and related intellectual property in order to protect consumers and to promote fair and effective commerce.
These events provide excellent opportunities for education in the field of IP, promote discussions regarding global IP issues, and allow us to foster strong working relationships with other IP attorneys in foreign jurisdictions.
On November 11, 2015, Aaron Olejniczak was sworn-in as a newly-appointed member of the Board of Directors for the Milwaukee Bar Association (MBA). The thirteen-member Board is responsible for management of the MBA. Since 1858, the MBA has been working to promote the professional interests of the local bench and bar; encourage collegiality, public service and professionalism among local attorneys; improve access to justic for community members; support the courts of Milwaukee County in the administration of justice; and increase public awareness regarding the role of law in the local community.
Chris Scherer has been appointed Programming Chair of the Wisconsin Intellectual Property Law Association (WIPLA). WIPLA is an organization of leading IP professionals throughout the state, and offers excellent opportunities for networking and fostering collegiality within the profession; provides regular educational opportunities for its members; and develops and recognizes leadership within the IP community.
We are pleased to announce that Aaron Olejniczak and George Solveson have been selected to the 2015 Wisconsin Super Lawyers list and Ryann Beck was named a Rising Star in the State of Wisconsin. This is an exclusive list, recognizing no more than five percent of attorneys in the state. Further, Aaron was listed in the top 50 attorneys in the State of Wisconsin through the nomination, research and review process.
In addition, several of our attorneys, Mike Taken, Ed Williams, Joe Kuborn, Aaron Olejniczak, George Solveson and Gary Essmann, were selected by their peers for inclusion in The Best Lawyers in America 2016 and Andrus Intellectual Property Law was ranked as a "Tier 1" patent litigation and trademark law firm in the Milwaukee metropolitan area.