Point – Counterpoint: The Debate Over Prior User Rights
|Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog
Zies, Widerman & Malek
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Posted: Oct 27, 2011 @ 2:48 pm
Since prior user rights first came up as an issue in the patent reform debate I have been opposed to the idea. Whether I like prior user rights or not, the reality is that prior user rights are now a part of U.S. patent law. Nevertheless, the debate goes on about whether prior user rights are a good idea. In fact, the United States Patent and Trademark Office is tasked through the America Invents Act with conducting a Prior User Rights Study. To facilitate this study a public hearing on prior user rights was held on October 25 in the Madison Auditorium at its Alexandria, Virginia campus of the USPTO.
With this in mind I thought I would once again revisit prior user rights. One of the arguments I have heard recently supporting prior user rights is that a corporation that is going to invest billions of dollars into a facility should know that their investment is safe and that the plant can’t be shut down by a later filed patent application. This argument is so specious as to be nearly laughable if you ask me. This strikes me as just more of corporate America wanting the government to save them from themselves.
Exactly who is to blame if a pharmaceutical company, say Eli Lilly, decides to invest billions of dollars and build a facility when they haven’t adequately protected their own intellectual property? Moreover, who is to blame if that company consciously chooses to resort to trade secret protection, which we all know is exceptionally fragile, as the foundation to build a multi-billion dollar investment? For crying out loud, the very premise that a patentee could force the closure of a manufacturing facility employing hundreds or thousands of people and interrupt the production and distribution of anything, let alone something as consequential as a pharmaceutical, is nothing more than fantasy. Talk about chicken little! Only someone unfamiliar with the evolution of the law relative to preliminary and permanent injunctions in patent litigation could with a straight face much such an argument. Indeed, the mother of all straw arguments!
Given that so many intimately involved in patent reform seem to have a vested interest in touting the America Invents Act as brilliantly written and a magnificent piece of legislation that will only simplify the patent process, where can you go for a legitimate debate of the pros and cons of something like prior user rights? We have to look abroad where folks have had real experience with prior user rights.
To jump start a fresh discussion of prior user rights I reached out to Justin Simpson, an Australian patent attorney and founder of Inovia — one of our sponsoring companies that has developed a foreign filing platform designed to streamline the PCT national stage and European validation processes. Given Inovia’s global footprint I figured it would be quite useful to get Simpson’s international perspective, particularly given that prior user rights have never be utilized in the United States but are commonplace overseas.
While I don’t want to rehash my writings on prior user rights, it is worth noting that until the enactment of the America Invents Act the United States did not really have any experience with prior user rights. It is true, of course, that prior user rights have been available as a defense to patent infringement with respect to business method patents since 1999, but there has never been a single case where the defense was raised, so this is very much a brave new world for the United States.
It is also worth noting, at least generally, the nature of prior user rights. In a world without prior user rights one can obtain a patent and then enforce that patent against others who are engaging in infringing activity even if they were practicing the invention before it was patented. The “prior user” could be ordered to stop what becomes infringing activity after a patent issues, which strikes some as unfair. The question arises: Why did the Patent Office issue a patent if someone was already using the invention? This entire issue comes to the forefront if and only if the prior use were secret, thus meaning that the prior user was not prior art to the patent application filed. So whenever we talk about a prior user rights regime we are discussing a defense to patent infringement that is given to a secret user who defeats the rights granted to the patentee.
Simpson explained the logic behind prior user rights:
From a first-to-file country point of view, prior user rights are perfectly normal. The logic is this: if I have been making/using some technology and someone else files a patent application for it after I have been doing so, why should I be stopped from continuing to use that technology?
It is, in effect, very similar to the first-to-invent position of the (now old) U.S. law. If I invented something first, and have been using it, I shouldn’t be punished if someone else files a patent application later for that same invention (that they have come up with independently).
At first glance it is hard not to like the simplicity and seeming fairness of a prior user rights regime, and Simpson certainly captures the essence of argument in favor of prior user rights and the prevailing international viewpoint. If someone else invented something first then why shouldn’t they be allowed to keep using the invention? In my mind, however, it all boils down to whether you want to encourage disclosure or whether you want to tolerate secrets potentially inhibiting the march of innovation. A prior user rights regime rewards those who hide innovation and keep it for themselves, which is antithetical to the purpose of the U.S. patent system as it has always been rationalized.
The fundamental purpose of the U.S. patent system has always been to foster disclosure, and that purpose is grounded within the U.S. Constitution. We tolerate the creation of exclusive rights in order to obtain disclosure that others can rely upon and build upon. Simply stated, you cannot stand on the shoulders of those who come before you if what they did was kept secret. Thus, a prior user rights system perverts the traditional rationale for the U.S. patent system as embedded in the U.S. Constitution and as understood and articulated by none other than Thomas Jefferson and James Madison. This being the case, I don’t know that the international experience with prior user rights can or should inform the United States on the issue. For more see The Constitutional Argument Against Prior User Rights.
Simpson acknowledges my argument that prior user rights provisions reward those who hide innovation, but doesn’t find this to be persuasive. Simpson explained:
It is partially true that prior user rights rewards hidden innovation because it does protect those innovators from being successfully sued by parties who come up with the same invention later. But it does not allow them to stop any other parties from copying the invention.
There is no doubt that Simpson is correct. Prior user rights is a defense, not an offense, and affords no exclusive rights. Thus, it can be argued that patenting innovation for the exclusive rights will still remain highly attractive.
Simpson also argues that innovators will still want patents. He explains:
Truly innovative companies will still want to patent their innovations because: (1) they will be able to stop their competitors from copying them; and (2) they won’t be content to simply let their innovations be “frozen in time” by relying on the prior use defense to allow them to keep doing what they’ve always done.
Remember, if the later-filed patent application protects further (new) inventions/aspects, the company that invented and used the invention first cannot adopt those additional advances. They can only keep doing what they were doing before the patent filing date.
Certainly innovative companies will, but what about the behemoths of the tech industry? I question whether large corporations will continue to seek patents, or at least whether they will seek patents in the same quantities. Not only would a decrease in patenting activity slow the march of innovation, but it could present unintended negative consequences for the funding of the USPTO, which relies on ever increasing levels of applications and fees to fund the Office moving forward.
Will large corporations still seek patents and disclose incremental innovation given the global corporate world we live in today? I can’t help but notice that the largest companies are larger in economic terms than many countries. Is this what it was like at the turn of the 20th century when President Theodore Roosevelt was famously trust busting? In such a corporate environment do exclusive rights play the same incentivizing role? I doubt it. When through size alone one can push around the competition why do you need exclusive rights? I, and many others, worry that the emergence of prior user rights in the U.S. will drive innovation underground, which would clearly frustrate the fundamental purpose of a patent system.
There are plenty of reasons, as Simpson indicates, for not relying on prior user rights and seeking the exclusive protection a patent can offer. But what will be the impact on incremental innovation and how many start-up companies will be ruined because they invested everything to disclose and protect but then couldn’t enforce against the one competitor that mattered?
Still further, it seems quite clear that a prior user rights regime does not jive with the underlying principles that have always supported the U.S. patent system, including from a Constitutional perspective. Will this give those in the anti-patent community a new opening to challenge the entire foundation, logic and need for a patent system? If infringement can be excused in the case of a prior use then surely it would have to be excused in the case of real societal need, right? And therein lies the slippery slope. I know slippery slope arguments are often overblown, but can you really say that given the anti-patent community challenging gene patents, the media embracing the ACLU position that patents are evil and the Supreme Court refusing to allow permanent injunctions as a matter of right and requiring the 4 part balancing test that requires consideration of the public good?
Time will tell what the ultimate verdict is on prior user rights, and I hope Simpson is right. As a small “c” conservative I am against change for the sake of change and without any reason. While a logical argument can be made to support prior user rights a logical argument can also be made against prior user rights. I also don’t see that type of factual findings that would support a departure from the underpinnings of U.S. patent law, and openly question whether the inclusion of prior user rights was merely to benefit certain corporations who lobbied heavily.
About the Author
Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.