Prior Use Defense

The prior use defense (also called the prior commercial use defense) under 35 U.S.C. § 273 is a statutory defense to patent infringement that permits a person to continue commercially using a subject matter that they were commercially using BEFORE the effective filing date of the patent — even if that prior use would otherwise infringe. HISTORY AND PURPOSE: the prior use defense was introduced in the American Inventors Protection Act of 1999 as a limited defense for business method patents; the Leahy-Smith America Invents Act (AIA, 2011) EXPANDED the defense to cover all subject matter (not just business methods); PURPOSE: prior use protects companies who kept trade secret processes or manufacturing methods and never sought patent protection; without § 273, a competitor could patent a similar process and then sue the prior user even though the prior user developed the technology independently and first; SUBJECT MATTER COVERED: the expanded AIA prior use defense covers: processes (manufacturing processes, methods of doing business, software-implemented processes); machines; manufactures; or any composition of matter; the defense does NOT cover 'research or experimental use'; POLICY BALANCE: § 273 balances the patent system's goal of disclosing inventions against the equitable interest of independent developers; without § 273, the secret prior user would be forced to either: disclose and lose trade secret protection; or stop using their own independently-developed technology to avoid patent infringement.

A successful § 273 prior use defense requires proving several elements: (1) COMMERCIAL USE BEFORE EFFECTIVE FILING DATE — AT LEAST 1 YEAR: the defendant must have commercially used the subject matter BEFORE the effective filing date of the claimed invention; the commercial use must have occurred at least 1 year before the effective filing date of the patent (i.e., not just before the priority date — before the effective filing date minus 1 year); this 1-year window is important: it is stricter than the AIA § 102 prior art grace period; the statutory language is clear: use must predate the filing date by at least 1 year; (2) GOOD FAITH: the prior use must have been in good faith; commercial exploitation of stolen or misappropriated technology does not qualify; the defendant must have independently developed or obtained the technology honestly; (3) COMMERCIAL USE — NOT EXPERIMENTAL: the prior use must be 'commercial use' — actual commercial exploitation of the subject matter; experimental use or pre-commercial testing does not constitute commercial use for § 273 purposes; the use must be genuine commercial activity: manufacturing products for sale using the process; providing services using the method; using the machine in a commercial production environment; (4) INTERNAL USE COUNTS: AIA expanded the definition to include 'uses in a pre-commercial or laboratory use' for the subject matter that is used in internal commercial activity — but the bar for what counts as 'commercial' is still meaningful; manufacturing a product for internal use (not for public sale) was clarified by Congress to qualify if it is part of genuine commercial activity; (5) BURDEN OF PROOF: the defendant bears the burden of proving the prior use defense by CLEAR AND CONVINCING evidence — a high standard.

The § 273 prior use defense has significant limitations that make it narrower than it might appear: (1) NON-ASSIGNABLE: the prior use defense is personal to the entity that performed the prior commercial use; § 273(e)(1)(C) provides that the defense 'may be asserted only by the person who performed the prior commercial use' and is not transferable unless transferred as part of 'the entire enterprise or line of business to which the defense relates'; this means: an acquirer of a business gets the defense only if the ENTIRE LINE OF BUSINESS is transferred; a company cannot sell or license the prior use right separately from the business; (2) SITE LIMITATION: the defense is limited to use at the same site where the prior use occurred (for internal commercial uses, at least initially); expanded use at new facilities may not be protected; (3) UNIVERSITY EXCEPTION: § 273(e)(5) provides that the prior use defense cannot be asserted against a patent owned by or exclusively licensed to a university; this protects university patent holders from companies who claim prior commercial use; (4) NO OFFENSIVE USE: the prior use defense is purely defensive — the prior user cannot use their § 273 prior use as the basis for challenging the patent's validity, as invalidating prior art; the prior use only shields the prior user from infringement; it does not negate the patent for third parties; this is a crucial limitation — prior commercial use that predates the patent is NOT prior art unless it was made 'otherwise available to the public' under § 102(a)(1).

The America Invents Act (AIA, effective September 16, 2012) substantially expanded the prior use defense from its limited 1999 form: PRE-AIA (1999) § 273: applied only to business method patents; provided a defense only to 'method' claims (not apparatus or composition claims); was used very rarely; AIA EXPANSION: expanded to ALL technology areas (not just business methods); expanded to cover machines, manufactures, and compositions of matter in addition to processes; expanded to cover internal commercial use (not just use in an actual commercial transaction); AIA SECTION 28 — EFFECTIVE DATE: the expanded defense applies to any action for infringement in which the infringer asserts the defense based on acts occurring on or after the date of enactment (September 16, 2012); WHY THE AIA EXPANSION MATTERS: in the AIA's first-to-file system, the prior user faces a risk that didn't exist under first-to-invent: under pre-AIA law, the prior user could argue they invented FIRST and challenge the patent under § 102(g); under AIA first-to-file, the prior user cannot argue first-to-invent; the expanded § 273 defense provides an alternative protection mechanism for trade secret holders who were operating commercially before a patent was filed; TRADE SECRET STRATEGY CONSIDERATION: companies using processes or methods as trade secrets should document and preserve evidence of commercial use dates carefully — this documentation is essential to a future § 273 defense; the 1-year pre-filing requirement means the clock started running before the competitor filed.

Because § 273 requires proof of commercial use by CLEAR AND CONVINCING evidence, documentation is critical: DOCUMENTATION BEST PRACTICES: (1) DATED RECORDS OF COMMERCIAL USE: manufacturing logs showing dates the process or machine was first used commercially; sales records showing products made using the process; invoices or purchase orders for equipment implementing the method; employee records and payroll for work done using the method; (2) TECHNICAL DOCUMENTATION: engineering drawings, specifications, or design documents with creation/revision dates; software code repositories with version control history showing dates; laboratory notebooks with proper dating and witnessing procedures; (3) THIRD-PARTY VERIFICATION: contemporaneous contracts with suppliers or customers that reference the method or process; third-party invoices, shipping records, or service agreements; witness affidavits from employees who participated in the commercial use; (4) CONTINUOUS USE RECORDS: document that the use was continuous (or at least not abandoned) through the litigation date; gaps in use can raise issues about whether the defense is still available; (5) LITIGATION HOLD: when a company learns of a potentially relevant patent (or receives a demand letter), immediately place a litigation hold on all records related to the prior use; do not delete or overwrite any records that could establish the prior use date; (6) TRADE SECRET PROTECTION: maintain the trade secret aspects of the process or machine that constituted the prior commercial use; the § 273 defense does not require public disclosure, and the trade secret status is compatible with the defense; PROACTIVE ADVICE: companies relying on trade secret processes as their competitive advantage should document their commercial use date regularly and systematically — even before any patent dispute arises — as insurance against future infringement claims.