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america invents act, IP, Patent

House Patent Reform Bill Broadens Prior User Defense

I received a copy of what appears to be the House version of the Patent Reform bill (also dubbed the “America Invents Act”).  Just like S.23, the house version includes the poorly drafted first-to-file provisions and the post-grant review procedures.  The House also appears to be catering to the tax and financial industries by maintaining the ridiculous tax strategy ban and the “transitional” post-grant procedure for patents affecting the financial sector only.   Missing from the House version is the removal of the residency requirement for CAFC judges (although the Senate gutted this provision right before passage).

The bill also includes a section proposing to raise filing fees by about 10%, comparing the current fee statute at 35 USC 41.  However, if you look at the actual fee schedule that the patent office is using, you’ll notice that the House bill just raises fees to the levels that the office is already charging.

The most interesting difference in the House bill is a provision making dramatic changes to the prior user defense in 35 USC 273.  Essentially, the new bill would expand the defense in two significant ways. First, the defense would apply to all patents, instead of just methods. Second, the defense would apply regardless of where the prior use occurred, whereas the current defense only applies if the prior use occurred in the United States.

Interestingly, the prior user defense is also restricted in a peculiar way.  Under the House bill, the defense would not apply if the patent being asserted was developed under a funding agreement with the federal government, or by a university or university technology transfer office (as long as funding from a private business enterprise was also received.

The changes proposed in the House bill are below:

35 U.S.C. 273 Defense to infringement based on earlier inventor.

(a) DEFINITIONS.- For purposes of this section-

(1) the terms “commercially used” and “commercial use” mean use of a method in use of the subject matter of a patent in or outside the United States, so long as such use is in connection with an internal commercial use or an actual arm’s-length sale or other arm’s-length commercial transfer of a useful end result, whether or not the subject matter at issue is accessible to or otherwise known to the public, except that the subject matter for which commercial marketing or use is subject to a premarketing regulatory review period during which the safety or efficacy of the subject matter is established, including any period specified in section 156(g), shall be deemed “commercially used” and in “commercial use” during such regulatory review period;

(3) the term “method” means a method of doing or conducting business; and

(4)(3) the “effective filing date” of a patent is the earlier of the actual filing date of the application for the patent or the filing date of any earlier United States, foreign, or international application to which the subject matter at issue is entitled under section 119, 120, or 365 of this title.


(1) IN GENERAL.- It shall be a defense to an action for infringement under section 271 of this title with respect to any subject matter that would otherwise infringe one or more claims for a method in the patent being asserted against a person, if such person had, acting in good faith, actually reduced the subject matter to practice at least 1 year before the effective filing date of such patent, and commercially used the subject matter before the effective filing date of such patent.

(2) EXHAUSTION OF RIGHT.- The sale or other disposition of a useful end product produced by a patented methodprocess, by a person entitled to assert a defense under this section with respect to that useful end result shall exhaust the patent owner’s rights under the patent to the extent such rights would have been exhausted had such sale or other disposition been made by the patent owner.

(3) LIMITATIONS AND QUALIFICATIONS OF DEFENSE.- The defense to infringement under this section is subject to the following:

(A) PATENT.- A person may not assert the defense under this section unless the invention for which the defense is asserted is for a method.

(B) (A) DERIVATION.- A person may not assert the defense under this section if the subject matter on which the defense is based was derived from the patentee or persons in privity with the patentee.

(C) NOT A GENERAL LICENSE.- The defense asserted by a person under this section is not a general license under all claims of the patent at issue, but extends only to the specific subject matter claimed in the patent with respect to which the person can assert a defense under this chapter, except that the defense shall also extend to variations in the quantity or volume of use of the claimed subject matter, and to improvements in the claimed subject matter that do not infringe additional specifically claimed subject matter of the patent.


(i) Defense not available in certain cases-A person may not assert the defense under this section if the subject matter of the patent or which the defense is based was developed pursuant to a funding agreement under chapter 18 of this title  or by a non profit institution of higher education, or a technology transfer institution affiliated with such an institution, that did not  receive funding from a private business enterprise in support of that development.

(ii) DEFINITIONS.–In this subparagraph–

(I) the term ‘institution of higher education’ has the meaning given that term in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a); and

(II) the term ‘technology transfer organization’ means an organization the primary purpose of which is to facilitate the commercialization of technologies developed by one or more institutions of higher education.




4 thoughts on “House Patent Reform Bill Broadens Prior User Defense

  1. I would be disappointed, though not at all surprised, if the House passed a version of patent reform without provisions ending fee diversion. Perhaps the matter will be resolved in committee, and patent law can finally be rid of the albatross of fee diversion. Otherwise, likely we can all anticipate significantly higher fees from the USPTO, resulting from its new fee-setting authority.

    Posted by patent litigation | March 29, 2011, 2:02 pm


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