Earlier today President Obama announced the nomination of John Bryson as the next Secretary of Commerce. Bryson, the former CEO of Edison International and co-founder of the Natural Resources Defense Council, will replace current Secretary of Commerce Gary Locke who has been tapped as the next United States Ambassador to China. Meanwhile, earlier in the day Secretary Locke continued to work patent reform, sending letters to Congressman Lamar Smith (R-TX), who is Chair of the House Judiciary Committee, and to Congressman John Conyers (D-MI), Ranking Member of the House Judiciary Committee, which set forth the Administration’s position on patent reform.
Notably, but not surprisingly, Secretary Locke explained: “The Administration continues to strongly support the bipartisan efforts of Congress to enact patent reform legislation that will accelerate innovation, and create new jobs, new industries and new economic opportunities for Americans.” Secretary Locke went on to elaborate more specifically about some of the specific provisions of the America Invent’s Act, explaining the Obama Administration supports first to file provisions, supports giving the Patent and Trademark Office the ability to set fees and keep the fees collected to be used to run the agency, supports post grant review and supports allowing individuals to submit prior art references to patent examiners. Unfortunately, however, Secretary Locke explained that the Administration generally supports prior user rights given that it is, on balance, a good policy. I respectfully dissent!
First to File versus First to Invent
I have been a supporter of moving from first to invent to first to file because it seems to me that we already have a de facto first to invent system. It is incredibly difficult, if not practically impossible, to demonstrate that you as the second filer are the first inventor and rightfully entitled to receive a patent.
There are valid concerns raised by some in the community about no longer being able to demonstrate a prior date of invention in order to overcome certain rejections, but it is undeniably correct that applicants, whether they be independent inventors, start-up businesses, small businesses, Universities or large corporations, are always better served under the patent laws by filing sooner rather than later. We say there is a 1 year grace period under 35 U.S.C. 102(b), but that clock can start running with unknown third-party activities so it is foolish to assume that you ever have a full 1 year grace period from the happening of a trigger event because you simply cannot control where someone else engaged in a public use or offer for sale, for example, that would start the clock running. Likewise, under 35 U.S.C. 102(e), a U.S. patent or U.S. patent application is considered prior art as of the date it is filed, even though there would be no way that anyone could ever know about such filing for a full 18 months due to the fact that the application remains secret, as required by law, for 18 months. So there is simply no advantage from a patentability perspective to wait to file. Business realities can dictate less than ideal behavior from a priority and filing date perspective, but there is no denying that filing earlier is better.
Prior User Rights
In his letter to Congressman Smith and Congressman Conyers, Secretary Locke explained:
[W]e believe that innovators who independently create and commercialize technology should not be penalized for, or deprived of, their investment. As a result, we believe that the availability of a prior user defense is, on balance, good policy.
But what about the innovators who independently create and invest, choosing to grow upon a patent? They couldn’t know about the secret held by the innovators the Obama Administration doesn’t want to penalize because it was precisely kept a secret. Those unsuspecting individuals, businesses, Universities and investors explain the innovation such that those of skill in the art will understand what the innovation is, how to make it, how to use it and what preferences exist, if any. They disclose this information to the public, bringing it out of the shadows of secrecy, invest and build upon this disclosure only to learn that their country appreciates bringing the invention out of the shadows by it cannot be enforced against those who covered up the innovation. That doesn’t sound fair to me, it doesn’t sound like good policy, and it seems that the party truly being penalize is the party that should be rewarded from outing the innovation so society benefits, as is the purpose of a patent system.
You see, a prior user rights defense prevents those who have previously used the patented invention from being infringers. In many parts of the world there are strong prior user rights, which allow those who keep innovation as a trade secret hidden away from the public to later use those trade secrets as a defense to a patent infringement lawsuit. You can’t sue me for patent infringement because I have been hiding, using that innovation you patented as a trade secret. So the party that disseminates the information for the benefit of the public loses in favor of the party that kept the innovation a closely guarded secret. This has never struck me as fair, nor a good idea nor in keeping with the Constitutional purpose for patents. In fact, if a prior user rights regime is put in place it would tip the balance in favor of patents and disclosure to favoring trade secrets. The entire Constitutional purpose for our patent system is to disseminate information and knowledge for the betterment of society. When trade secret uses can preempt patent owner rights that frustrates the Constitutional quid pro quo and is a detriment to the incentive created to disclose innovations.
So exactly how did this prior user rights emerge? That is a good question and one for which there is not really a satisfying answer. It was never mentioned by anyone in the Senate, and I had not heard anyone raise it as an issue until after the Senate passed patent reform by a vote of 95-5. Then all of the sudden it appeared in the House version of patent reform, and then those in the industry from the technology giants started explaining to the House Judiciary Committee that you absolutely have to have a prior user rights regime if you are going to have a first to file system. Every other country except for Greece that has a first to file system has prior user rights, and you don’t want to be like Greece, do you?
For the life of me I couldn’t understand why the technology giants supported a first to file system. Despite the cries of independent inventors and small businesses, a first to file system disproportionately will benefit individuals and small businesses. Corporate giants are like aircraft carriers. You simply cannot get them to turn on a dime. There is a widespread misconception that large corporations are nimble and move quickly and will change their ways and file everything instantly in a race to the Patent Office. That won’t happen. That mythology that says large corporations have their acts together obviously isn’t familiar with the large corporation ecosystem. There are still going to be just as many layers between idea and green light, all the red tape, and with diminishing financial resources the same (if not more) consideration will be needed because no corporation can afford to file on everything. Compare that with little or no red tape, the innovators being the ones who can give the green light to file and the simplicity of a first to file rule that everyone can understand. Those who will be nimble to the detriment of the large corporations are the individuals and small businesses.
So why would large companies be such supporters of first to file? What if first to file was the Trojan Horse that carried prior user rights? Prior user rights will not benefit the individual or the small business. Prior user rights unambiguously will benefit the large corporations who innovate and then shelf technology for one reason or another, or those who exploit the technology in secret. Perhaps they choose not to pursue a patent because it isn’t perceived to be a meaningful innovation, or worth the cost and time of pursuing a patent. Perhaps the innovation gets weeded out along the way, never getting green-lighted past a certain point. These trade secrets today are not prior art thanks to 102(g). Remove 102(g) and insert a prior user rights regime and all those secrets that large companies hide, fail to pursue or willfully keep from the public will allow them to ignore the patent rights of those who innovate and actually disseminate that information to the public.
Don’t get me wrong, everyone has the right to keep secrets, but today that right to keep secrets comes with consequences. Under a prior user rights regime keeping secrets not only won’t have consequences, it will have benefits, which strikes me as anything but good policy, despite what Secretary Locke wrote in his letter explaining the Obama Administration policy. Prior user rights is definitively a bad policy that favors large corporations. Since overwhelmingly job growth comes from small businesses it is a bad policy to advocate for a policy that will make innovating a greater risk for individuals, start-up businesses and small businesses.
While there is nothing wrong with first to file in concept, there is a lot wrong with prior user rights. We do not need prior user rights in a first to file system. In fact, a first to file system without prior user rights would without question promote the Constitutional objective of disseminating knowledge and information for the betterment of society.
While I largely think patent reform has devolved into nothing more than “patent change,” I remain largely supportive of the pending legislation. It is a huge spoon full of sugar to have the U.S. Patent and Trademark Office getting to set fees and keep the fees the collect, rather than having their user fees raided by the General Treasury for unrelated spending. That enhancement is likely the only reason this “patent change” legislation has made it this far, and don’t underestimate just how meaningful it will be to have a law in place that guarantees the Patent and Trademark Office the financial resources it so desperately needs to run as a going concern. Nevertheless, prior user rights is a terrible idea; a real debacle. They will weaken the patent system and place a burden on those most likely to create the jobs we need: technology based small businesses.