Interpreting 35 U.S.C. § 102 under the America Invents Act

By Kevin E. Noonan --

The Leahy-Smith America Invents Act ("AIA") changes U.S. patent law in many ways, notably by converting our patent system to a "first inventor to file" system.  However, the language of the new statute is not always "pelucidly clear" in achieving this change; one of the areas of murkiness involves the meaning of "public use" and "on sale" under  § 102(a)(1):

§ 102. Conditions for Patentability; Novelty

(a)  A person shall be entitled to a patent unless --

(1)  the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention;

(2)  the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

One issue with this statutory language is whether "public use" or "on sale" encompasses uses that are in fact secret but are involved in producing a commercial product.  Such a "secret" use has precluded patent eligibility since Metallizing Engineering Co. v. Kenyon Bearing and Auto Parts Co., 153 F.2d 516 (2d Cir. 1946) (Hand, J.), where the Court's opinion set forth the rationale for precluding patenting under these circumstances:

[I]t is a condition upon an inventor's right to a patent that he shall not exploit his discovery competitively after it is ready for patenting; he must content himself with either secrecy, or legal monopoly.

This reasoning has proven persuasive to the Federal Circuit, which has held that secret commercial exploitation of an invention begins the one-year deadline for filing an application under current § 102(b).  Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1382 (Fed. Cir. 2005).

There are ways of parsing the statute that can construe the language of new § 102(a)(1) to eliminate this effect of secret commercial practice of products or processes:

§ 102. Conditions for Patentability; Novelty

(a) A person shall be entitled to a patent unless --

(1) the claimed invention was

(i) patented,

(ii) described in a printed publication, or

(iii) in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; . . .

Under this reading, the "public use" must be public, and the sale must also be something that is not kept as a trade secret (which would permit processes and intermediates that are not sold to be patented even after extensive commercial exploitation).  Alternatively, there are canons of statutory construction that support the countervailing position, that the statute does not eliminate forfeiture of patent-eligibility by secret commercial use, including the concept that when Congress intends such a dramatic shift in the law it does so explicitly (one of the grounds used by the Supreme Court in interpreting the metes and bounds of university's patent rights under the Bayh-Dole Act in Stanford v. Roche).

The problem is that there is precious little in the record to support either view.  For example, Senator Leahy addressed the question in the Congressional Record as follows:

One of the implications of the point we are making is that subsection 102(a) was drafted in part to do away with precedent under current law that private offers for sale or private uses or secret processes practiced in the United States that result in a product or service that is then made public may be deemed patent-defeating prior art.  That will no longer be the case.  In effect, the new paragraph 102(a)(1) imposes an overarching requirement for availability to the public, that is a public disclosure, which will limit paragraph 102(a)(1) prior art to subject matter meeting the public accessibility standard that is well-settled in current law, especially case law of the Federal Circuit.

Unfortunately, these remarks were made one day after the enactment of S. 23, making it difficult to argue that the Senate intended the outcome advanced by Senator Leahy.  Senator Kyl is on record (on the date of enactment of the AIA) in supporting this position (albeit less clearly than Senator Leahy):

When the committee included the words "or otherwise available to the public" in section 102(a), the word "otherwise" made clear that the preceding items are things that are of the same quality or nature.  As a result, the preceding events and things are limited to those that make the invention "available to the public."  The public use or sale of an invention remains prior art, thus making clear that an invention embodied in a product that has been sold to the public more than a year before an application was filed, for example, can no longer be patented . . . .  But public uses and sales are prior art only if they make the invention available to the public.

How this portion of the statute is interpreted will be particularly important to the biotechnology and pharmaceutical industries because the processes involved in making their products may not be patented (or at least not comprehensively so) and there are advantages in keeping some of these processes as trade secrets.  However, there is also the risk that another will file for patent protection for a method that will be infringed by such a process kept as a trade secret; indeed, fear of this outcome (in industries in addition to pharma and biotech) was a driving force behind the prior user rights provisions (Section 5 of the Act, codified as 35 U.S.C. § 273).  Recognition of the relationship between these two sections of the AIA, however, provides a clue for whether new § 102(a)(1) maintains or eliminates the traditional forfeiture of patent eligibility by secret use of a commercial process or product.

The prior user rights provisions of the AIA reads (in relevant part) as follows:

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

(a)  IN GENERAL.–A person shall be entitled to a defense under section 282(b) with respect to subject matter consisting of a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process, that would otherwise infringe a claimed invention being asserted against the person if—

(1)  such person, acting in good faith, commercially used the subject matter in the United States, either 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 of such commercial use; and

(2)  such commercial use occurred at least 1 year before the earlier of either—

(A)  the effective filing date of the claimed invention; or

(B)  the date on which the claimed invention was disclosed to the public in a manner that qualified for the exception from prior art under section 102(b). . . .

Thus, the prior user right cannot be asserted if the commercial use was less than one year prior to the effective filing date of the claimed invention.  This provision makes sense if "secret" use of a product or process has the same consequences under new § 102(a)(1) as it did under old § 102(b):  to create a bar against patenting such a process or use against the inventor who decides to keep the process or product as a trade secret rather than seeking patent protection.  Under this interpretation, the one-year limit is needed to prevent such an inventor from attempting to patent and thus defeat the rights of the second inventor who files, since after one year that right (as to the prior user) has been forfeited.  This implies that if the prior user files within one year the "secret" use may be deemed a public disclosure that would defeat a later filer (just as disclosure of an invention on a public website would be deemed a prior public disclosure that would bar a later filer provided that the first to disclose filed for patent protection within one year of the disclosure).  This construction comports with another canon of statutory construction, that the several provisions of the Act are intended to be consistent and to be read to produce consistent results.  This reading is also in line with statements in the recently published Report from the Patent and Trademark Office on the prior user rights defense that the changes in the AIA regarding the "first inventor to file" regime created an unfairness to prior users (see "USPTO Issues Report on Prior User Rights").  While the record is unclear and the expectation is that these questions must be decided in litigation (unless Congress passes technical amendments to expressly set forth their intent), the interpretation set forth here is at least a starting point for considering the consequences of deciding to keep commercially valuable processes or products as trade secrets rather than protecting them by patenting under the AIA.

Hat tip to Steven Lendaris of Baker Botts.  Adapted from his talk, "The America Invents Act: Are Secret Uses/Sales Still Prior Art" given at ACI's Comprehensive Guide to Patent Reform for Life Sciences Companies, New York, January 31, 2012.

Comments

[EG]

"This provision makes sense if 'secret' use of a product or process has the same consequences under new § 102(a)(1) as it did under old § 102(b): to create a bar against patenting such a process or use against the inventor who decides to keep the process or product as a trade secret rather than seeking patent protection."

Kevin,

Not necessarily. I could also read the new PURD provision as providing a personal defense only to the prior user (and its privies). That means those who aren't privies to the prior user can't assert such use as a patent invaidating event under new 102(a)(1) if such use is deemed not to make the invention "available to the public," e.g., because such use is "secret."

I could also read the "otherwise available to the public" as being consistent with Metallized Engineering. For example, if the process is practiced in secret, but the product obtained from that process is made "available to the public" (e.g., through sale of the product), that satisifies the requirement of the invention being "available to the public." Again, new 102(a)(1) does not explicitly say that "secret use" can't be invalidating, and the fact that new 102(a)(1) again uses the phrase "public use" as being invalidating which is what Metallized Engineering is based on suggests this former case law precedent remains alive and well.

It is an understatement to say that Section 3 of the AIA (the Abominable Inane Act) is inartfully drafted, of which new 102(a)(1) which you discuss is one glaring example of this problem. As you correctly point out, the "legislative intent" on what 102(a)(1) means isn't clear at all. And for some judges and especially justices like Scalia, "legislative intent" is completely IRRELEVANT in construing statutes, including the AIA. That's what Ron Katznelson and others pointed out as the problem with this inartful drafting, but were simply ignored by Congress.

With language landmines such as these in new 102(a)(1), anyone who views the AIA as being "patent law reform" is simply delusional in my opinion.

[Skeptical]

There are other remarks by Sen. Kyl that have been advanced. Unfortunately for that advancement, those comments were made in a session that had failed quorum.

(note, this was divulged in an exchange on Patently-O last fall).

[Moocow]

Dear Kevin,
very interesting post - but I'm not sure I understand the part about the prior commercial use defense. That defense is a non- patent-defeating defense that creates no bar against another inventor's patent. Actually, I think the prior user defense bolsters the interpretation that all prior art must from now on be "publically available." So, if a prior commercial user uses his invention openly, it is "available to the public" and constitutes prior art that prevents a subsequent inventor from getting a patent. No PUR defense is needed in that situation because the prior user can assert an invalidity defense against such a patentee. But if the prior user kept his activities secret, he can invoke PURs as a personal exemption from infringement liability, and the patentee still has a valid patent that it can enforce against others.
Don't the prior art and PUR provisions fit together best if public availability is interpreted as explained by Sens. Leahy and Kyl? What am I missing?

[Anon]

PUR MUST involve a commercial use.

A commercial use is a use in commerce - a use that involves the public. However, such a use in public serves expressly not to void the patent, even though such a use in public seems to expressly prevent the grant of a patent had that use been known to the Office prior to the grant of the patent.

[Skeptical]

I have three items that I would invite the author to further develop.

1) The tie between sections, "[r]ecognition of the relationship between these two sections of the AIA" left out the biggest clue of that section 5: (g) Invalidity. - A patent shall not be deemed to be invalid under section 102 or 103 solely because a defense is raised or established under this section."

Why write "deemed" and not "otherwise deemed"? 102 and 103 in their entirity are excused for the establishment of the defense can plainly be taken as the actions that provide the defense CANNOT rise to the level of preventing a later patenting, and without any such proscription, this would include a later patenting by those who raise the defense.

and

2) the concept that when Congress intends such a dramatic shift in the law it does so explicitly.

But such dramatic shift was announced throughouot the AIA process. This bill was sharply contrasted with the 1952 bill and was directed to be a major overhaul. Indeed, without any indication that the sections in question were not to be deemed an overhaul, one must assume inthis instance that it WAS a major overhaul.

and finally

3) The tie to case law. The case law ties cannot be takenin a vacuum. As the Golan case can attest, COngress has broad and sweeping leeway in writing the laws that it wants. Given for arguments sake that 2) above applies, there is no stare decisis from any case law that belongs ina different chapter of the patent law history. There is no compelling rationale for assuming that the previous law must still hold sway.

It's a brave new world.

[mike]

Commercial use does not equal public use. Public use invalidates the patent, prior user rights are only for a specific location and do not invalidate the patent. Not every patent is directed to a public product. Some patents are to methods, equipment, software, business procedures, etc. that are never disclosed to the public. The PUR are an extension of the existing PUR that were previously only available to business methods. A business method could be used for years but never disclosed, suddenly "NPE" gets a patent and sues "BIG CO" for a business method that already existed and may or may not be a protected trade secret. Either way, BIG CO never publicly disclosed it's business method, thus the patent is valid, but BIG CO may continue without infringement to use it's business method. As long as it is continuous use at the same geographic location.

[EG]

Your points 1-3 are well-taken, Skeptical, but I would be careful.

Regarding point 1, section (g) only says that establishment of the PURD, by itself, won't constitute invaldity, but it might not take much more beyond establishment of the PURD to constitute such invalidity, for example, making product "available to the public" from a "secretly" practiced process.

Regarding point 2, 35 USC 271(f) should have been taken as Congress expressly overruling Deepsouth Packing v. Laitrim in its entirety and doing away with the concept of that any "extraterritorial effects" are relevant. But SCOTUS, in Microsoft v. AT&T, still referred to "extraterritorial effects" as being relevant to enforcement under 35 USC 271(f).

Regarding point 3, I refer to my comment above regarding the continued validity of Metallized Engineering which is based on the phrase "public use" in current 102(b) and which phrase is repeated in new 102(a)

[Skeptical]

EG,

I appreciate the dialogue. What do you think about the PUR requirement in §273(a)(1): "...or other arm’s length commercial transfer of a useful end result of such commercial use"

Does this not sound like your "not much more" and "available to the public"? If not, then would Congress pass such a razor thin protection? It would be akin to protection that has no effect on your business dealings with the outside world, and what business is so self-contained that it need not interact with the outside world?

mike,

I will quibble with your "commercial does not equal public" stance, if only on the basis (we do drop into semantics) that a private sale is an action in commerce and does involve "the public" insofar as divulged information goes - the divulgment is outside of a first entity. In this sense, "private" is not the antonym of "public." Commerce, by definition, involves the world outside of an entity.

Further, the geographic limitation is largely meaningless for the purposes of the legal discussion. All that does is go to the "personal nature" of the sui generis right (but the whole concept of the sui generis right is being questioned).

[Skeptical]

And EG, my point two was not geared to the 271 item you bring up, but rather, to the immediate point of discussion.

The record is clear that this act was an extensive reform - including 102. Looking for a section by section clear statement misses the forest for the trees.

And regarding point three - the whole point of my point was that ANY blanket assumption that prior case law (tied to a particular scheme put in force by Congress) is suspect when a new scheme is put in force by Congress. I alluded to Golan for a reason: Congress is simply more powerful than the courts when it comes to such a substantial changing of the system. I think that merely assuming that prior case law flows through (especially as it touches on one the changed aspects of patent law) is not a safe assumption. In other words, you CANNOT assume a continued validity of Metallized Engineering, because that case was grounded in a statutory scheme that no longer exists. You cannot bootstrap that the new system is just like the old system based on a case law tied to the old system.

[Kevin E. Noonan]

Dear Moo:

I'm not sure I have explained it very well (I am responsible for the last paragraph, and thus Mr. Lendaris should not be held responsible for any lack of clarity). Here is what I had in mind.

The question is whether, under the new law, secret use of an invention raises a statutory bar to patent-eligibility. Under the new law, as under the old, public disclosure (by publication, use or sale) starts the one-year grace period, and under the old law (Metallized Engineering) commercial use of an invention, even in secret, had the same effect, even if what was patented was not used in public, publicly disclosed or sold. (The treatment of such conmmercial use of inventions in secret thus was a legal fiction, as if such secret use became "public" based on its use in commerce.) The current statute is less clear, since the phrase "otherwise available to the public" can be interpreted either way (as Mr. Lendaris noted in his talk).

My point is that the prior user rights defense provisions have a requirement that the invention be used "more than one year before the effective filing date" of a patent that is being asserted, and the analysis of the relevance of this provision is as follows. IF secret use of an invention has the same effect under the new law as under the old, then use in secret would raise the same one-year bar to patenting as under the old law. Once that time period has expired, a third party can file a patent application on the same invention without any prior art effect of the first secret use (since that party would be the first to file). Under these circumstances, the only right the "first to invent" party has left in the invention is the prior user right (which is akin to a shop right to use the invention) and only as a defense against infringement of the patent.

This may be trying to find a pattern where one does not exist (for example, the at-least-one-year rule for PUR might be derived merely from how Section 273 read after passage of the American Inventor Protection Act more than a decade ago). However, since the new 102 provisions suffer from a lack of clarity and consistency of language that is one of the hallmarks of the Act, it may be that these provisions when read together shed light on the topic.

I will completely understand if this argument is not thoroughly convincing.

Thanks for the comment.