I'm posting this blog as an AUTM member and technology transfer professional. While I serve on the AUTM Board of Directors, this blog does not represent AUTM's position on prior user rights.
During the past six years, leaders in Congress have wisely rejected a variety of proposals to expand “prior user rights”—proposals that would have undermined U.S. innovation and diminished the public benefits of our nation’s research enterprise. Now, as patent reform legislation nears completion, an attempt by proponents of prior user rights has been made to turn back the clock and enact language that would benefit a few at the expense of society. See H.R. 1249. The authors of
Prior User Rights Expansion: Congress, the Courts, and Constitutional Considerations (
BNA’s Patent, Trademark & Copyright Journal, Sept. 2, 2011) make a strong case that prior user rights are unconstitutional.
Why would expansion of prior user rights create such lasting harm to scientific progress, public health and well-being, and constrain our nation’s capacity for innovation? The answer lies at the heart of the U.S. patent system, which is the envy of the world thanks to its inducements for public disclosure of discoveries. By establishing a system that rewards disclosure and creates incentives for investing in ideas, the U.S. patent system fosters dissemination of new ways of thinking and builds momentum for further advancement.
To understand why prior user rights run counter to the public interest, it is important to recognize the limiting nature of trade secrets and the lasting damage that results when those who infringe on patents do so without penalty.
Under current law, businesses may claim prior user rights as a limited defense against patent infringement when the patent in question involves a method of doing business and another party has invented the new method, but not yet filed a patent application for it. If that method of doing business is later patented, the prior user is not liable for infringement to the patent holder, although others will be. (See 35 U.S.C. § 273.)
However, starting in 2007, proponents of prior user rights relaunched a series of efforts to expand this common sense principle for a problematic area of patent law – business method patents – into a “free pass” for infringement on any patented product or process. Despite being rebuffed in the House and Senate in the past, several companies in the information technology industry continue to push for expansion of prior use rights through the Coalition for Patent Fairness, which succeeded in getting a prior user rights expansion proposal inserted in H.R. 1249. The provision erodes incentives for inventors, thwarts collaboration by rewarding secrecy and creates a significant burden for small businesses and startups that seek to protect investments in innovation.
The “free pass” not only allows trade secret owners to continue unabated use of their trade secret in the face of a patent that otherwise is infringed, it permits the trade secret owner to get a free ride on the patent owner’s monopoly. It also changes the “exclusive” rights of the patent owner to “nonexclusive” and gives the trade secret owner a continuing advantage over its competitors. The trade secret owner pays nothing for this advantage. It is a royalty-free license at the expense of the patent owner.
Any expansion of prior user rights would shift the constitutional principle of disclosure to a system favoring trade secrecy. By their very nature, trade secrets limit the dissemination of ideas, isolate scientific progress, and prevent society from sharing benefits that result from public investments in research.
- Secrecy clearly thwarts the underlying goals of publication and disclosure in patent law. Taken to its logical extreme, if large numbers of individuals and businesses opted for prior user rights, the strength of the U.S. patent system would be severely diminished.
- Secret prior user rights also would chill university technology transfer activities, one of the success stories in the American patent system, because transfer requires confidence between licensing parties.
- Because statutory change in this area would promote uncertainty, the expansion of prior user rights would spawn litigation. It also would create an environment ripe for abuse, fraud, delay and cost escalation.
- The expansion of prior user rights would disproportionately benefit multinational and foreign corporations that have the wherewithal to maintain trade secrets at the expense of universities, small businesses, startups and independent inventors.
- If enacted, H.R. 1249 will dilute the exclusive rights of inventors, decrease the value of patents, and increase the costs of patent enforcement.