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IP: Certain trade secrets are now exempt from patent infringement

New law expands prior commercial use defense

The recently enacted Leahy-Smith America Invents Act expands the “prior commercial use” defense to patent infringement to benefit companies that choose to keep key technologies used in manufacturing and other commercial processes as trade secrets instead of protecting them with patents. While the defense cannot be used to invalidate a patent, it prevents a new patentee from interfering in the continued practice of a technology developed well before the patentee invented it. Previously, the “commercial use” defense could only be asserted against business method patents.

Effective Sept. 16, 2011, any patent issued on or after that date is subject to the defense that an alleged infringer "commercially used” the subject matter of the patent in the United States more than one year prior to the earlier of the filing date of the patent or the date the claimed invention was publicly disclosed. The expanded defense covers all patent-eligible subject matter used in a manufacturing or other commercial process. The Act expands the definition of “commercial use” to include: (i) premarketing regulatory review during which the safety or efficacy of the subject matter is established, and (ii) use by a nonprofit entity for which the public is the intended beneficiary. Technology that is commercially used, abandoned, and then used again cannot claim the benefit of the earlier use.

Also, there is a significant “University Exception”—the defense does not apply if the patented invention was “made, owned or subject to an obligation of assignment to an institution of higher education” or to an affiliated technology transfer organization. Thus, if the technology is in a field where university research is active, it remains subject to potential jeopardy.

Although the defense is personal to the entity that performed or directed performance of the “commercial use,” it may also be asserted by any entity that controls, is controlled by, or under common control with that original entity. The defense also is transferable as part of a good-faith transfer with the whole line of business to which the defense relates. Proving the defense will necessarily depend upon accurate record-keeping. For a technology that is commercially used in secret, documenting the dates of use and the technical details of the technology actually used will be key. If the technology evolves over time, updated records will be needed to protect the new iterations. Given a patent damages window extending six years back in time (but not before the issue date of the patent), the retention period for those records should be carefully adjusted based on the particular circumstances. 

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