Kind of a drag: Patent Reform Act VI

In previous articles I discussed the new filing deadlines for patent applications in the United States, as well as new filing priorities for inventors. I also addressed the consequences of a bogus application filed ahead of bona fide inventor, with respect to establishing the true ownership of the patent with enormous financial cost. Today we address a new concern after a successful patent prosecution: If a business owner has patented a commercially successful invention, he cannot commence an infringement lawsuit against all third parties who financially benefit from using it.

How can this be? Under the previous U.S. patent law, if an innocent third party used the patented invention commercially, but without a patent or other protection, than the rightful patentee could file an infringement lawsuit to prevent this stranger from further commercial use. Now, however, there are circumstances under which this prior commercial user can avoid liability. If the prior commercial user commenced this use more than one year before the effective filing date of the bona fide patent application this third party may state this fact in a defense to infringement. Another possible situation required for this defense is that the commercial use commenced before the date on which the patented invention was first exposed to the public. Whichever of these two dates is later will be the date of the first commercial use by the third party.

There are instances of commercial use in the statue that may surprise business people. For example, pre-marketing regulatory activities for particular patented inventions are also considered commercial use. Furthermore, use of a patented invention by a non-profit research laboratory, or other non–profit organizations (such as a hospital or university) is considered commercial use. Somewhat inconsistently perhaps, the hospital or university must continue to use the invention for a non–commercial purpose to qualify for this defense in court.

On the upside, the only third party that can avoid infringement penalties with this defense is the entity that actually used the patented invention for a commercial purpose. This actual user cannot transfer this prior commercial use defense, by itself, to a subsequent enterprise. Instead, this third party can only transfer the prior commercial use defense as (i) part of a transfer of an entire company or division thereof and (ii) under the appropriate deadlines.

Imagine that the business owner has transferred the defense to another entity under these circumstances. Let’s also imagine that this second entity has the means to use the patented invention commercial in locations across the United States and internationally. However, the new law restricts this commercial use, by the subsequent enterprise, to those locations where (i) the commercial use was originally implemented prior to transfer from (ii) the original actual enterprise which commercially used the patented invention under the appropriate timelines.

All these criteria for legitimate commercial use are not relevant if the third party misappropriated the invention from the rightful owner. The defense also does not apply to other parts of the patent that describes other inventions or variations thereof. If your company is the innocent business that commercially used the invention please be aware of this defense. If you are the owner of the patented invention, make sure that you do not invest in filing a lawsuit against a third party who qualifies for this new protection.

© 2011 Adrienne B. Naumann
Ms. Naumann does not endorse or sponsor the advertisements at adriennebnaumann.wordpress.com or linked in addresses.

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