Patents & Trade Secrets – Prior User Rights


Managing Director of Chawton Innovation Services Ltd

Company A holds a trade secret, that is used frequently by the company for a number of years, at which time another company, Company B, publishes a patent which describes the trade secret held by Company A.

How does this situation play out?

Company A can’t dispute the patent application publicly without divulging its use of the invention protected as the trade secret.

However, if Company A does not act, Company B will likely get a patent awarded on the invention. Should the patent application of Company B get granted and become an awarded patent to Company B, is there any recourse for Company A to dispute it?

Would Company A have to cease use of the trade secret, and/or license the patented invention from Company B who now holds the patent?

What options are available to protect Company A’s IP interests in this situation?

Well, existing patent law allows for this situation.

The applicable patent laws in most jurisdictions allow a third party to continue using a patented invention if that third party has used the invention for the purpose of his business in good faith before the filing date (or the priority date).

In most jurisdictions, the legal effect of patent protection is limited in the sense that it is impossible to enforce a patent in case of prior use.

In some jurisdictions, the prior use exception is formulated as a right, providing, for example, “the right, without hindrance and without paying any compensation to the patent owner, to continue independently using the subject matter.” In some other jurisdictions, the use of the patented invention by a prior user is not an exception to the patent rights, with their patent laws providing that such prior users “shall have a non-exclusive license on the patent right without any remuneration to be paid to the patentee.”

Some applicable laws provided clarification on which party has the burden of proof. In general, a person asserting a prior user rights defense under this section of patent law has the burden of establishing the defense by clear and convincing evidence. The burden of proof lies with the party invoking the prior use.

The onus is therefore on Company A to properly and professional manage its trade secrets, so that it is in a position to show clear and convincing evidence that it was using the invention and treating it as a trade secret prior to the filing of a patent application by Company B.

Donal O’Connell is the Managing Director of Chawton Innovation Services Ltd. His company offers trade secret management tools to companies as well as to Legal & IP Firms to help with the management of these important but fragile assets. More details on the Hazel Trade Secret Asset Management tool may be found here Meet Hazel.