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The America Invents Act’s Repeal of Secret Commercial Use Bar is Constitutionally Infirm


Written by Ron Katznelson, Ph.D.
President, Bi-Level Technologies
Posted: May 31, 2011 @ 7:01 pm

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The “America Invents Act,” H.R. 1249, contains several provisions that raise substantial questions of constitutionality. Discussed in this article is an important aspect of the “first-inventor-to-file” provision that received no prior public attention because its drafters have concealed its meaning ever since its introduction in previous sessions of Congress.  A day after the Senate voted to pass the bill (S. 23), a “clarification” for this poorly drafted section was entered into the Congressional Record as a fabricated “colloquy” that never actually took place on the Senate floor.  The colloquy substantially changes the ordinary meaning of the bill to a meaning that had never been discussed publically – Senators had no opportunity to either learn of the “intended” construction or to debate it.  While it is uncertain whether the courts would actually interpret the new statute as the colloquy intends, this paper analyzes H.R. 1249 under a construction which the bill’s drafters and the colloquy purport to achieve.

In an effort to “harmonize” U.S. priority laws with what the Europeans call “absolute novelty” laws of foreign countries, H.R. 1249 would enable companies to extend their commercial monopoly indefinitely by exploiting and profiting secretly from certain technologies for years and then taking out patents on these technologies.  It would delay disclosure and retard the progress of the useful arts.  If enacted, H.R. 1249 would abolish an essential pillar of the patent bargain established under the U.S. Constitution.

To begin, the Constitution empowers Congress with the authority to grant patents on inventions, but that authority is bounded, by Article I, Section 8, Clause 8:

The Congress shall have power … To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.

That is, Congress may not amend the patent laws to retard the progress of the useful arts and may not secure exclusive rights that are not of “limited times.”  As shown below, features of H.R. 1249 violate these Constitutional limits on Congress’ power.

The repeal of the “forfeiture” bar violates the “limited times” and “progress” limits on Congress’ authority

Under current law, an inventor has one year from any public or commercial use to file an application, else the right to patent is forfeited.  Over nearly two centuries of American jurisprudence, the terms “public use” and “on sale,” now incorporated in 35 U.S.C. 102(b)’s bar, have gained well-defined meanings, which were developed to address virtually all imaginable pertinent fact patterns with more than 640 key precedential court decisions.  Under current law, a company cannot use an invention in secret for more than a year, and when commercial circumstances change, or when a leak of its secret is imminent reconsider and seek a delayed patent right to sue competitors.  The foremost purpose of this bar is to prevent an inventor from exploiting the commercial value of an invention, while delaying unduly the beginning of the patent term and thereby prolonging the exclusive period.

The “forfeiture” rule of current law is Constitutionally mandated

This limit on the time to file a patent application after its first commercial exploitation is grounded in the Constitution.  From the Patent Act of 1790 to the present day, any sale or public use of an article, if not closely followed by filing a patent application, has acted as a forfeiture of patent protection for any idea embodied in the article or its manufacture.  The U.S. Supreme Court recognized that Art. I, Sec. 8, Cl. 8 of the Constitution vests in Congress authority, “unlike the power often exercised in the sixteenth and seventeenth centuries by the English Crown… It was written against the backdrop of the practices … of the Crown in granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public.”  Graham v. John Deere Co., 383 U.S. 1, 5 (1966) (emphasis added).  The Court articulated these principles and the grounds for the “public use” and “on sale” bar 180 years ago in Pennock v. Dialogue 27 U.S. 1 (1829):

“As long as an inventor keeps to himself the subject of his discovery, the public cannot be injured: and even if it be made public, but accompanied by an assertion of the inventor’s claim to the discovery, those who should make or use the subject of the invention would at least be put upon their guard. But if the public, with the knowledge and the tacit consent of the inventor, is permitted to use the invention without opposition, it is a fraud upon the public afterwards to take out a patent.”

27 U.S. at 4 (emphasis added).  The Pennock decision was anchored to constitutional grounds as follows:

“If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make, and sell his invention publicly, and thus gather the whole profits of it, … and then .. he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it during [the patent term,] it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries.”

27 U.S. at 19 (emphasis added).

Nearly 30 years after the Pennock decision, the Supreme Court reiterated the constitutional grounds to the “public use” and “on sale” bar in Kendall v. Winsor, 62 U.S. 322 (1858):

“The true policy and ends of the patent laws enacted under this government are disclosed in that article of the Constitution, the source of all these laws, viz., “to promote the progress of science and the useful arts,” contemplating and necessarily implying their extension, and increasing adaptation to the uses of society.  By correct induction from these truths, it follows that the inventor who designedly, and with the view of applying it indefinitely and exclusively for his own profit, withholds his invention from the public comes not within the policy or objects of the Constitution or acts of Congress. He does not promote, and, if aided in his design, would impede, the progress of science and the useful arts.”

62 U. S. at 328 (citing U.S. Constitution, Art. I, Sec. 8, Clause 8; emphasis added).

H.R. 1249 violates the Constitution by giving inventors an indefinite right to use an invention before seeking a patent

H.R. 1249 would repeal the meaning of the terms “public use” and “on sale” as set forth in more than 640 federal cases and enable companies to extend their commercial monopoly indefinitely by exclusively exploiting and profiting from certain technologies for years and then taking out patents on these technologies.  It would delay disclosure and retard the progress of the useful arts.  By its nature, this provision is retroactive; upon enactment it would also permit established incumbent companies to immediately “evergreen” old secret technologies into a windfall of patents on subject matter for which patent protection had been previously forfeited.  H.R. 1249 proposes in pertinent part the following (emphasis added):

102 (a) NOVELTY; PRIOR ART.—

A person shall be entitled to a patent unless—

(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention;”

To be sure, the reader who cannot discern in this language an exemption for secret commercial exploitation and for products that are in “public use” or offered for sale but that do not readily reveal the invention for “reverse engineering” is by no means alone.  It is the ambiguity in this language, the meaning of the new statutory term “or otherwise available to the public” and the resultant redefinition of the terms “public use” and “on sale” that led to a clarifying Senate “colloquy.” Senator Leahy explained in the “colloquy” that the legislation does intend to “do away with current law,” so that secret commercial use and non-disclosing public uses and sales more than one year before filing an application would no longer be a bar to obtaining a patent.  157 Cong. Rec. S1496 (March 9, 2011).

With the clarification of this Senate colloquy and the House Judiciary Committee effort to incorporate it by attempting to amend the proposed provision quoted above, it becomes clear that the proposed statute exceeds the authority granted to Congress under the Constitution.  Any attempt to allow inventors to commercially exploit an invention for an indefinite time, and to then seek a patent and the right to sue others for infringement years later, exceeds the congressional authority for “securing for limited times to … inventors the exclusive right to their … discoveries” and retards “the progress of science and the useful arts” set in Art. I, Sec. 8, Cl. 8 of the U.S. Constitution.

Conclusion

The effort to shoehorn foreign patent priority concepts and torture a well-developed 200 year-old American patent system that has a proven record as the best in the world into foreign structures that are inconsistent with the American Constitution and its laws is a futile effort that would likely be met with successful challenge on constitutional grounds.  The illusory “harmonization” goal with no demonstrated tangible benefits compared to the existing system does not justify embarking on a risky legal adventure that will destabilize the American patent system and will doom it to decades of economically taxing legal uncertainty.

———-

See http://bit.ly/Absolute-Novelty for the text of the full paper including an appendix listing 640 cases that define the current meaning of the terms “public use” and “on sale.”


15 comments
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  1. “Under current law, an inventor has one year from any public or commercial use to file an application, else the right to patent is forfeited. Over nearly two centuries of American jurisprudence, the terms “public use” and “on sale,” now incorporated in 35 U.S.C. 102(b)’s bar, have gained well-defined meanings, which were developed to address virtually all imaginable pertinent fact patterns with more than 640 key precedential court decisions. Under current law, a company cannot use an invention in secret for more than a year, and when commercial circumstances change, or when a leak of its secret is imminent reconsider and seek a delayed patent right to sue competitors.”

    Ron, I don’t follow this. Can you cite me a specific case that holds only secret use (i.e., the use is non-public and the use is not discoverable/reverse-engineerable by the public) of an invention is a 102(b) bar to a claim on that invention filed over a year after the secret use commenced? All the cases you cite involve a public sale or non-experimental public use. (Certainly, 102(g) priority may be lost by any secret use (suppression / concealment).) My understanding is that 102(b) is triggered by only those uses that were available to the public – like sales, public demonstrations, and manufacturing processes of sold goods that could be reverse engineered – such that the current law would not change much. (Although query whether the current “otherwise available to the public” might actually be stricter by failing to retain the enablement requirement of 102(b).)

  2. It’s sort of late in the game to start actually reading the words of the bill and started analyzing those words.

    All the same, here are a few mor tid bits from the Thomas version of 1249:

    `Sec. 291. Derived Patents
    `(a) In General- The owner of a patent may have relief by civil action against the owner of another patent that claims the same invention and has an earlier effective filing date if the invention claimed in such other patent was derived from the inventor of the invention claimed in the patent owned by the person seeking relief under this section.

    SEC. 2. FIRST INVENTOR TO FILE.
    (a) Definitions- Section 100 of title 35, United States Code, is amended by adding at the end the following:
    `(i)(1) The term `effective filing date’ for a claimed invention in a patent or application for patent means–
    `(A) if subparagraph (B) does not apply, the actual filing date of the patent or the application for the patent containing a claim to the invention; or …
    `(j) The term `claimed invention’ means the subject matter defined by a claim in a patent or an application for a patent.’.

  3. Thank you. It’s a nice strategy. I think I’ll try it.

  4. “Under current law, a company cannot use an invention in secret for more than a year, and when commercial circumstances change, or when a leak of its secret is imminent reconsider and seek a delayed patent right to sue competitors.”

    This is bad. I am personally amazed that you misunderstand 102(b) that badly when you quoted the statute. The statute says “public use,” and this is distinct from “in secret” use. If it is not available to the public, then 102 (b) simply does not apply. Period. See Invitrogen v. Biocrest 424 F.3d 1374, 76 USPQ2d 1741 (Fed. Cir. 2005) for the court’s test as to whether a particular use was “public” or not public. Pennock as you quoted also clearly applies to public use, not secret use. The “fraud upon the public” comes after the public has used the invention already and the inventor seeks to patent it. This is more like a “submarine patent” as opposed to a trade secret.

    Published dissertations that were never catalogued or advertised have been disqualified by the courts as prior art because they were not “available to the public.” In other words, something that was used and even published, but not publicly available, is not prior art under 102 (b). See also Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1265, 229 USPQ 805, 809 (Fed. Cir. 1986), in which an inventor showed off his invention to friends and coworkers, and this was not a “public use” and thus not a bar.

    Maybe you are confusing the public use clause with the on sale clause? A sale would be a bar even if it was a secret sale.

  5. Confused Practitioner and Chris have identified a potential semantic inaccuracy in my terminology. Indeed, even the opinion in Metallizing Engineering uses the term ‘use’ when it probably means ‘on sale’:

    “Coming now to our own decisions (the opinions in all of which I wrote), the first was Grasselli Chemical Co. v. National Aniline & Chemical Co., 2 Cir., 26 F.2d 305, in which the patent was for a process which had been kept *secret*, but the product had been sold upon the market for more than two years. We held that, although the process could not have been discovered from the product, the sales constituted a ‘prior use,’ relying upon Egbert v. Lippmann, supra, 104 U.S. 333, 26 L.Ed. 755, and Hall v. Macneale, supra, 107 U.S. 90, 2 S.Ct. 73, 27 L.Ed. 367. There was nothing in this inconsistent with what we are now holding.” Metallizing Engineering, 153 F.2d at 519.

    Similarly, I used the terms “commercial use” and “use” interchangeably, where I meant *commercial* (for economic gain) use – namely ‘on sale.’ A clarifying correction in the paper will be made. That said, the fact remains that it is the indefinite secret *commercial* exploitation of an invention that would be permitted by HR 1249 under the interpretation of the Senate colloquy that raises the constitutional and public policy concerns. Current 102(b) bars a patent under such circumstances.

  6. Ron,

    I prefer to call it commercial “exploitation”.

    When you commercially “exploit” your invention in secret for more than a year and the experimental use exception does not apply, then the on-sale bar comes into effect. :-)

  7. “Confused Practitioner and Chris have identified a potential semantic inaccuracy in my terminology. Indeed, even the opinion in Metallizing Engineering uses the term ‘use’ when it probably means ‘on sale’”

    Ok, now I follow you. I always understood the “secret commercial exploitation” exception of Metallizing to be a narrow corner case that didn’t jive well with the language of 102(b). I say “narrow” because very similar secret use cases like Invitrogen v. Biocrest, 424 F.3d 1374 (Fed. Cir. 2005) have found no 102(b) bar for extensive prior secret use (because of the lack of palpable commercial advantage in the use). Moreover, the precedential value of Metallizing is suspect, as it is a 2d Circuit case pre-dating the 1952 act, cited only in dicta in Pfaff v. Wells. I can’t find a subsequent case with the same predating secret commercial exploitation as Metallizing (everything else is either an experimental use or non-commercial like Invitrogen). This is further shows just how rare the situation is where a plaintiff or USPTO can prove prior secret commercial exploitation over a year prior to filing.

    So, if the patent reform act removes this little anomalous judicial interpretation of 102(b) from practice… well… ::yawn::

  8. Ron,

    if you read what the court says in the Invitrogen decision, “Commercial exploitation is a clear indication of public use.” 424 F.3d 1374, 1380, 76 USPQ2d 1741, 1744 (Fed. Cir. 2005). In other words, if they’ve generally sold it, or used it to make money on the market, they’re specifically not keeping it a secret, and public use exists. If you’d said “commercially exploit an invention for over a year” then that would be more consistent, but the court explicitly says that that is a public use, not “in secret” use.

    If that statement that I quoted were true prima facie, then a company could not work on something in secret and just tweak and fine tune that patentable invention until it became profitable, and only seek a patent after it became profitable. But of course an inventor has every right to keep their invention a secret, practice it in secret, and seek a patent later if the market conditions change to make the invention profitable. Your statement implied otherwise, prima facie.

  9. Confused Practitioner:
    First, try to keep your self-proclaimed confusion to a minimum. In response to your first comment, I noted that the bar I am referring to is “COMMERCIAL use” – indeed an “on sale” bar. However, you refer to a Federal Circuit case which had secret use but not a secret COMMERCIAL use – no “on sale” activity. In this case, the court found that “Invitrogen did not sell the claimed process or any products made with it.” Invitrogen Corp. v. Biocrest Mfg., L.P. 424 F.3d 1374, 1379 (Fed. Cir. 2005). No inconsistency here, and no decision that “didn’t jive well with the language of 102(b).”

    Second, Metallizing Engineering is clearly the law and it has been cited by the Supreme Court not only in Pfaff but also later with direct approval in Bonito Boats v. Thunder Craft Boats, 489 U.S. 141, 149 (1989). In this case, the Supreme Court’s direct connection of Metallizing Engineering to Section 102(b) cannot be called an “anomalous judicial interpretation of 102(b).” How much more clarification of “precedential value” for Metallizing Engineering do you need?

    Third, the fact that court or USPTO cases wherein secret ‘on sale’ activity took place more than one year before the application date may be rare UNDER CURRENT LAW does not mean that they would be rare if the law changes. Would you advise your client under current law to spend any resources on filing and prosecuting patent applications if the invention was secretly on sale more than one year before the application date? Your observation on rarity under current law is clearly irrelevant.

  10. Ron,

    You say “if the invention was secretly on sale more than one year before the application date” but I thought we had agreed that your new language of “prior secret commercial exploitation” did not include sales? Any sale, secret or otherwise, will be a bar under 102(a)(1) in the AIA.

    The only thing the AIA may do is allow secret commercial use of an invention that cannot be reverse engineered from public activity/sales – i.e., the facts of Metallizing (secret use for commercial gain that cannot be discovered through reverse engineering) would not be a bar. So I’m not sure why you say “sales” above and still cite cases about taking something from the public domain (through a sale over a year before filing) and obtaining patent rights on it. Metallizing concerns only getting patent rights on what the public, by definition, did not have prior possession of.

    Now, you think Metallizing is good law. I agree with you, but I voice suspicion. Metallizing is cited with approval by the Supreme Court in Bonito for the generic proposition that exploiting an invention competitively *following public disclosure* is a 102(b) bar (“Once an inventor has decided to lift the veil of secrecy from his work…” followed by Metallizing cite). But since there is no 1952+ case with the more specific facts of Metallizing, I suspect the Court could distinguish this proposition from secret use for commercial gain.

    You think my observation on rarity of Metallizing’s facts is irrelevant, because the AIA would give carte blanche to the behavior – making it much more prevalent. I disagree, because trade secret protection will remain the same pre- and post-AIA. Parties already have significant incentives to secretly commercially exploit inventions that can’t be discovered by the public (i.e., there are situations now when keeping a trade secret is the best option). The AIA won’t change trade secret law. The fact that parties now rarely seek patent protection after maintaining a trade secret won’t change either. Under the “dangerous” AIA effect you’ve identified, patent protection could be sought/useful following significant trade secret usage. But patent protection would likely be sought/useful only once trade secret applicability was defeated, when another party reverse engineers your invention or independently comes up with your invention and beats you to the patent office with it. The AIA would prevent you from getting a patent in these situations. So I think the rarity of Metallizing’s fact’s, where a trade secret is kept and secretly used and after more than a year patented by the same party, would continue under the AIA.

    Lastly, putting aside all our above debate about whether the prior secret use for commercial gain is a big deal or not, you really think the courts will discard all caselaw interpreting “on sale” in 102(b) for a new interpretation of the exact same language “on sale” in the AIA, based on a mere Senate colloquy alone? I do not. (…perhaps, because, in the words of a wise man, it would be “constitutionally infirm.”)

  11. Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 was followed in D.L. Auld v. Chroma Graphics, 714 F2d.1144 (Fed. Cir. 1983). Judge Markey characterizes the governing law as follows:

    “The “forfeiture” theory expressed in Metallizing parallels the statutory scheme of 35 U.S.C. § 102(b), the intent of which is to preclude attempts by the inventor or his assignee to profit from commercial use of an invention for more than a year before an application for patent is filed. The record includes testimonial and documentary evidence establishing that the claimed method was employed in preparing a number of sample emblems and that Auld attempted to profit from use of that method by offering some of those samples for sale to a number of potential buyers well before the critical date. Those facts operate to create a forfeiture of any right to the grant of a valid patent on the method to Auld.”

    Thus the Federal Circuit recognized a non-statutory forfeiture doctrine which may well survive any change in the statutory language not specifically directed at this judicial doctrine.

  12. This is complete nonsense if not an out and out lie. Feinstein had an opportunity to debate this. No one was interested because it’s a red herring. The benefits of first to file accrue to everyone with an inventive concept, except patent litigators.

  13. President Obama has identified patent reform as a top priority of his administration. This legislation could very well pass and be signed into law. Please call GOP Leadership and urge them NOT to bring H.R.1249 to the House Floor!

  14. Hi All,

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